This is a follow-up post to one I wrote a few weeks ago entitled “Advice to Miami Condo Sellers“. That post has become one of my most widely read posts.
I’ve always been more of a buyer’s agent than a seller’s agent. It’s been that way ever since I started in this business. I’ve never been much of a salesman though. In fact, I initially didn’t even want to become a real estate agent because I always analogized the phrase “real estate agent” to “sales person”. The latter always made me cringe. Thoughts of “selling somebody” or “making a sale happen” didn’t favor well with me.
I finally realized, however, that people will always have a need to buy housing and finding buyers the best deals is a niche within itself. I figured that with my financial background I could provide a unique perspective and a more in-depth analysis of the market than most agents. This blog is a natural extension of that mindset years ago.
Nowadays, it seems like everyone is looking for a deal and the right opportunity to buy in Miami. The million dollar question that I get from the people who contact me each day is “When will be the best time to buy a condo in Miami?”.
The answer to that question depends on your objectives and knowledge of the Miami condo market. If you’re an investor “looking to buy a condo in a good neighborhood of Miami at a significant discount” then the answer to that question is as vague as your objective – “Nobody knows!”. That’s like saying that you want to buy the best stock at the bottom of a bear market. Good luck!
Some of the people who contact me have only been to Miami once or twice in their life. Some haven’t ever visited Miami, but have read about Miami and have seen the gorgeous palm trees and majestic waters in movies. For those of you, the opportunity to buy a Miami condo at the “best” time won’t ever come. You need to have knowledge of what you want before you can ascertain the best time to buy it. A knowledgeable Realtor can’t even point you in the right direction without first knowing which direction that might be.
Having an objective like wanting to buy a two bedroom condo at Ten Museum Park with a direct bay view on a high floor at a 20 percent discount of 2004 prices is much better. An opportunity like that may or may not present itself but at least you know what you want and a local Realtor will be much better equipped to help you find it.
Keep in mind that the “market bottom” for the Miami condo market might not necessarily be the best time to buy for people with such a pinpoint objective as the one above. These people might miss out on better opportunities that will have passed them by. For example, take the 2 bedroom condo going up for auction at Villa Regina that I mentioned in yesterday’s post. That condo may very well sell for the best price per square foot of any condo at Villa Regina from here on out. Someone looking to buy a condo at Villa Regina, but is waiting for the condo market to bottom in Miami, might miss out on a fantastic opportunity. It may or may not end up being the best deal at Villa Regina but keep in mind that only one person will buy the bottom. Wouldn’t you be happy though knowing that you bought at a 20 percent or 30 percent discount or whatever it may be?
My advice for those buyers who will be end-users is the same. Know what you want and the price point that will make you happy. Opportunities to buy condos in Miami at a discount with built-in equity are already present. Foreclosures, auctions and short sales all offer these opportunities. Being happy with the condo in which you will live should be the primary concern for end-users, not price. Having a cushion to weather the storm that lies ahead is an added bonus.
There is no doubt that condo prices will correct themselves from the highs that we experienced in 2005 and beginning of 2006. In my opinion, they already have. I feel that we’re already back at 2004 prices. Every week I get a number of calls and emails from people who bought preconstruction condos as resales in 2005 and beginning of 2006. They want to know if there is any chance to break-even if they close on their preconstruction condo contracts and sell at current market prices. The answer is overwhelmingly “NO”. The current market price is usually at or slightly below the amount of their deposit money, which the majority of the time is 20 percent. This tells me that we are already at least 20 percent off the highs.
The inventory problems of the Miami condo market is old news. Demand dried up over a year ago as a result of this news. The real estate market, however, is not as liquid and as efficient as the financial markets. Buyers have already processed the news about the Miami condo market. Sellers have begun to process the news but can’t simply hit the best bid to get themselves out. Those selling existing condos can, however, lower their prices.
The fate of the preconstruction condo market is different though. The news came out over a year ago but we’re all waiting for the condos to close to see where they will get priced. Nobody knows! It’s like trading has been halted, due to news, and we’re all standing around waiting for the market to reopen.
As a side-note to investors and second home buyers unfamiliar with Brickell, if you’re looking to buy a newly constructed condo in a bayfront building within the next 7 months then you won’t find any. Of the five developments scheduled for completion within the next 7 months in Brickell, none of them are bayfront buildings. Only two, Latitude on the River (which has begun closings) and Brickell on the River South, are waterfront buildings. They both, as their name implies, reside on the Miami River. Of the four developments scheduled for completion in 2009, only two, Icon Brickell and Epic, are bayfront developments. After those are completed only one bayfront parcel will be left in Brickell. Villa Magna was planned for development on that parcel but the project was recently canceled and the fate of that land is still up in the air.
As for the four buildings being developed in the Downtown Miami neighborhood known as Park West, none are bayfront but they might as well be. Ten Museum Park, Marina Blue, 900 Biscayne and Marquis each reside directly behind Biscayne Boulevard and what was formerly known as Bicentennial Park, both of which won’t obstruct views of the bay as long as they are owned by the city of Miami.
Two Brickell Condos up for Auction This Month
Two Brickell condos will hit the auction block later this month. The first is a 2 bedroom + den/2 bath loft residing on the 29th and 30th floors at Neo Vertika. The loft has 1,255 square feet of interior space on tw0-levels with 20-foot ceilings. Neo Vertika is located along the Miami River, west of Brickell Avenue at 690 SW 1 Ct. Neo Vertika is a recent addition to Miami. Closings began in August of 2006.
The loft will go up for auction at 11:30am on August 20, 2007 with an opening bid of $125,000. The July Brickell Condo Index revealed that the average price per square foot of units sold at Neo Vertika over the past six months was $375.53.
The second condo up for auction is a 2 bedroom/2 bath at Villa Regina. The condo has 1,895 square feet of interior space, three separate balconies and offers partial bay views from a low floor. Villa Regina had a recent special assessment to update the lobby, hallways, marina and landscaping. Villa Regina is located at the southern end of Brickell Avenue at 1581 Brickell Avenue.
The condo at Villa Regina will go up for auction at 4:45pm on August 21, 2007 with an opening bid of $100,000. According to the July Brickell Condo Index, condos sold over the previous six months at Villa Regina had an average price per square foot of $316.62.
Don’t miss out on either of these exciting auctions. Contact me today for more information!
Credit Crunch Impact on the Miami Condo Market
Many of you have probably already heard about what happened on Wall Street on Friday. For those of you who didn’t, the Dow Jones Industrial Average posted its third-biggest drop of 2007. Much of the drop occurred in the final two hours of trading. The Blue Chip index dropped 281.42 points. Much of the sell-off was attributed to the credit squeeze that Wall Street is feeling as a direct result of lousy lending practices in the housing market that occurred in recent years.
There were 3 major stories that unraveled throughout the day on Wall Street. The primary story in the morning was that of Bear Stearns. The S&P downgraded Bear Stearns’ rating from stable to negative. That sent shares of Bear Stearns plummeting. It recovered by mid-afternoon but once again sold off as a Bear Stearns conference call began. The CFO of Bear Stearns, Sam Molinaro, was quoted as saying “It’s (speaking of the recent credit crunch) been as bad as I’ve seen it in 22 years. The fixed-income market environment we’ve seen in the last eight weeks has been pretty extreme”. Shares of BSC once again sold off.
The second story to emerge was the reduction of Alt-A loans by major lenders. For those of you who don’t know what Alt-A is, it is a category of lending that resides between prime and subprime lending. Wells Fargo announced on Friday that they would curtail Alt-A lending. Other large banks followed suit. Wachovia announced that it would discontinue Alt-A loans altogether.
A large portion of mortgage loans are categorized as Alt-A. The suspension of Alt-A loans by major lenders means that a bulk of the demand for housing could become nonexistent. A hedge fund representative in New York told me on Friday that subprime and Alt-A represented 40% of the loans in 2006. A local, reputable mortgage broker feels that this number could be as high as 60% in South Florida. The following chart from Credit Suisse illustrates the growth in Alt-A and subprime lending from 2002 to 2006. In 2002, Alt-A represented 5% of loan originations while sub-prime represented 6%. By 2006, Alt-A and subprime loans each represented 20% of the overall loan originations.
The third major story to hit PR newswires was that Wells Fargo would increase their prime 30-year Jumbo rate to 8 percent. Other major lenders followed suit. Last week, a 30-year Jumbo rate could be acquired for 6.875%. That’s a huge increase. Potential home buyers could be priced out of the market.
So why am I reporting this you may wonder. The impact on the Miami condo market is inevitable. Many of the speculators who acquired preconstruction condos 2-3 years ago fall into the Alt-A category. Even if these speculators plan to close on their preconstruction condo units, they may not be afforded that opportunity. Major banks have begun to shut off the valve to extend credit to even the most credit-worthy. If this happens then the fall-out on Miami condos could be grim at best. These practices, however, will return full circle to the banks who loaned money to developers. If banks shut off Alt-A loans then investors will be unable to close on condo units which will mean that developers will get back a larger percentage of the total units in the building. Developers will then be unable to make payments on the loan and they’ll eventually go bust. Banks who shut off the valves will push the pain onto the banks who made these loans. I know that Corus Bank, a publicly traded company, was a major lender to condo developers in Miami. (You’re welcome for that information).
The good news is that smaller banks will fill in the gap to lend money to Alt-A borrowers. The bad news is that interest rates quoted to home buyers will be higher. The higher rates will price out potential condo contracts holders who plan to close or will lead to higher foreclosure rates down the road. If I were closing on a condo within the next 60 days then I would definitely contact a reputable mortgage broker ASAP to have them lock you in at a good rate. Who knows where rates will be in upcoming weeks. I can definitely point you in the right direction if anyone needs guidance in this matter.
Many feel that a rate cut by the Fed is inevitable. We should see one very soon.
Follow-up: A late story emerged on Friday, after the markets closed, that Option One Mortgage Corporation is ceasing all loans “secured by condos in Florida”. Option One is a top-10 non-prime lender and subsidiary of H&R Block. I don’t even want to think about what will happen to the Miami condo market if other major lenders follow their lead. I’ll leave it at that.
Marina Blue – Closings to Begin Towards the End of September 2007
I was notified today that closings at Marina Blue are scheduled to begin towards the end of September. Marina Blue is a 60-story luxury high-rise building going up in the neighborhood known as Park West. The fantastic thing about Marina Blue is that every unit has a beautiful view of Biscayne Bay.
As closing dates approach, there are some great opportunities to own a condo at Marina Blue. As in other developments, there are investors who purchased condos at Marina Blue in hopes to flip them prior to closing. As everyone knows, the market has changed dramatically in the past two years and many of these speculators are content to accept a loss on their deposit to avoid having to close.
I received a phone call last weekend from someone who placed a one bedroom condo under contract at Marina Blue for $296,000 as a resale. The condo is on the 15th floor and has 845 square feet of interior space. He was still in his 15-day rescission period and wanted to know if I felt that he got a good price. I told him that he got a great price. In my opinion, anything under $300,000 is a solid buy at Marina Blue. The long-term prospects for that neighborhood are great. I feel that one bedroom condos at Marina Blue will easily rent for $1,700 per month.
Currently, there’s a one bedroom for sale at Marina Blue that is on the 17th floor. It is listed at $320,000. The condo has 845 square feet. I think this unit can be acquired for under $300,000.
There’s also a 2 bedroom at Marina Blue on the 9th floor that is listed for $455,000. This condo has 1,327 square feet of interior space. If you can get this condo for around $430,000 then I think that your long-term prospects are bright.
In the upcoming years, I feel that Park West will be the best condo neighborhood in all of Miami. It was developed to be Miami’s equivalent to Manhattan’s Park Avenue.
At the beginning of July, I published a post about the neighborhood of Park West and the four luxury high-rise buildings being developed in that neighborhood. The post was entitled “Pictorial & Video Review of The Fantastic Four in Miami“. Take a look at that post for more information about the Downtown Miami neighborhood of Park West and what it has to offer. You will also see some pictures and a video of Marina Blue as it stood towards the beginning of July.
Miami Condo Auction – Platinum Condominium – 20 Units Up for Auction in September
I was notified tonight that twenty condo units at Platinum Condominium will be auctioned off on September 20, 2007. Eight of those units will be auctioned “absolute”. This means that the condo(s) will be sold to the highest bidder. There are no minimums and no reserves.
This is major news! The 20 units up for auction at Platinum Condominium represent 16.8% of the overall units in the building. The are a total of 119 units in the building with 7 units per floor. I think 20%-30% default rates in other developments is not out of the question.
A few months ago, after Platinum Condominium began closings, I did a pictorial and video review of the building. You can view it by clicking on the following link: pictorial and video review of Platinum Condominium. Any information that you seek regarding this development will be found there. If for some chance, you have a question that isn’t answered there, then feel free to contact me.
For you Miami condo vultures, this might be a great opportunity to own a bulk of units at a really good price. If they can be acquired at a good price, you may even be able to rent them out with positive cash flow until the neighborhood turns around and sell them for a nice profit.
Those looking to buy a single condo at an auction at a good price, this may be your opportunity. I am very knowledgeable in the various floor plans at Platinum Condominium. My services are available to you to act as your representative at the auction. I will be attending the auction regardless. I will act in your best interests. If I walk out of that auction without one of my clients acquiring one condo then you can be assured that the prices offered were too high. I am completely comfortable walking away from that auction without one sale being made. The people who know me well know that I am not a tough or pushy salesman.
