Miami Condo Index – Brickell – November 2008
November 22, 2008
by: Lucas Lechuga
It’s been three months since I last released the Brickell Condo Index. The last update for Brickell condos was published in August 2008. The data used to create the statistics below was collected on November 18, 2008 from the MLS. You may want to also compare the statistics below to those published a year ago in November 2007. It really helps to put into perspective how inflated prices were a year ago in some of the condo developments in Brickell.
The Brickell Condo Index now stands at an average price of $429.52 per square foot. This represents a 2.28 percent drop in the average asking prices of the 18 condo developments that comprise the Brickell Condo Index over the past three months.
Average price per square foot of Brickell condos currently listed on the MLS:
The average price of Brickell condos sold over the past six months has dropped 7.13 percent to $291.59 per square foot from August’s average of $313.97. As with the last update, the average would normally be higher had a sale occurred in the MLS within the past six months at Four Seasons Residences, which sells at the highest price per square foot of the 18 condo developments comprising the Brickell Condo Index.
Average price per square foot of Brickell condos sold in the MLS within the past six months:
- Atlantis – 2025 Brickell Ave | 33129 | $250.71
- Brickell on the River – 31 SE 5 St | 33131 | $264.63
- Bristol Tower – 2127 Brickell Ave | 33129 | $364.86
- Emerald at Brickell – 218 SE 14 St | 33131 | $238.88
- Four Seasons Residences – 1425 Brickell Ave | 33131 | N/A
- Imperial at Brickell – 1627 Brickell Ave | 33129 | $316.83
- Jade – 1331 Brickell Bay Dr | 33131 | $385.81
- Latitude on the River – 185 SW 7 St | 33130 | N/A
- Neo Vertika – 690 SW 1 Ct | 33130 | $228.00
- One Miami – 325 & 335 S Biscayne Blvd | 33131 | $296.13
- Santa Maria – 1643 Brickell Ave | 33129 | $661.70
- Skyline on Brickell – 2101 Brickell Ave | 33129 | $298.68
- Solaris at Brickell – 186 SE 12 Ter | 33131 | $200.00
- The Club at Brickell Bay – 1200 Brickell Bay Dr | 33131 | $201.44
- The Mark on Brickell – 1155 Brickell Bay Dr | 33131 | $289.18
- The Palace – 1541 Brickell Ave | 33129 | $260.14
- Villa Regina – 1581 Brickell Ave | 33129 | $249.88
- Vue at Brickell – 1250 S Miami Ave | 33131 | $158.55
Below you will find some additional statistics:
The first column to the right of each condo development’s name is the difference in the average sales price and list price for this month, expressed as a percentage. An “N/A” is found next to Four Seasons Residences and Latitude on the River since this percentage could not be computed as each building failed to have a closed sale within the past six months through the MLS. A high percentage indicates that there is a large discrepancy between the average asking price for condos currently on the market and what has actually sold within the past six months.
The second column is the number of active listings in each condo development currently in the MLS. The third column shows the percentage that these listings represent over the total number of condo units in each development. The cells highlighted in green reveal those condo developments that have active listings that represent less than 10 percent of the the overall units in the building. To me, this is one indication of a sound condo development. Atlantis, Bristol Tower, Four Seasons Residences, Imperial at Brickell, The Palace and Villa Regina are the condo buildings highlighted in green. The ones highlighted in red reveal those condo developments that have active listings that represent over 20 percent of the overall units in the building. There’s definitely underlying risk in buying in these condo developments and I’d only advise buying in one of these if the price justifies the risk. This month, Solaris at Brickell is the only condo developments highlighted in red. This is usually a good indication that prices will fall further in future months. The condo developments with active listings less than 10 percent are considered safe, in my opinion, and anything in the 10-15 percent range is considered normal, even in a healthy market.
The fourth column shows the number of pending sales while the fifth column displays the number of closed sales within the past six months. There are a total of 94 total pending sales in the 18 condo buildings represented in the Brickell Condo Index. In August, there were a total of 79 pending sales at the time. Once again, The Club at Brickell Bay, Vue at Brickell and Jade each have pending sales in the double digits. The same goes for closed sales within the past six months in each of these condo developments. Skyline on Brickell also hit the double digit mark with a totla of 13 closed sales in the MLS within the past six months. In August, there were a total of 123 closed sales within the past six months. This figure has gone up almost 32 percent since the August update. The 18 Brickell condo developments had a total of 164 closed sales within the past six months.The vast majority of these closings occurred in just a handful of the condo developments, however. 8 of the condo developments had three or less closings within the past six months.
The sixth column shows the difference in the average list prices from this month’s and August’s, expressed as a percentage. Those highlighted in red reveal those condo developments which had a drop in their average list price while those highlighted in green show those that had an increase. Emerald at Brickell saw asking prices drop a little over 10.5 percent while Solaris at Brickell shed about 9.8 percent from its average asking price in August. An increase in average asking prices occurred in 8 of the condo developments in the Brickell Condo Index.
The seventh column reveals the difference in average sales prices from this month’s and August’s, expressed as a percentage. Vue at Brickell saw the largest drop with a 15.94 percent decline. Jade, Neo Vertika, The Club at Brickell Bay and Villa Regina also had double digits drops. It should be noted that Villa Regina only had one closed sale within the past six months to calculate its new average. Atlantis, Santa Maria, Skyline on Brickell and The Palace each experienced an increase in their average sales prices for the previous six months.
Vue at Brickell is very, very close to hitting the $150 average per square foot mark for closed sales over the previous six months. In August, the condos available on the market at Vue at Brickell represented about 28 percent of the overall units in the building. This figure now resides at around 17 percent. It will be interesting to see how much lower the average price per square foot of condos sold at Vue at Brickell will go if inventory levels continue to improve. As I mentioned earlier, the 10-15 percent range is normal even in a healthy market. Perhaps some sort of stability is right around the corner for Vue at Brickell. The same can be said for Jade and The Club at Brickell which have also continued to show progress in reaching normal inventory levels.
There appears to be a very substantial disconnect between asking price and actual sales price…. AJ should note that since he seems to be hung up on asking prices, or perhaps Suzanne researched this for him?
http://www.youtube.com/watch?v=Ubsd-tWYmZw
Hey RT,
Suzanne has a way with wives… convincing them to buy homes.
So I’m now into sunny isles due to the low crime rate. Does anyone use collins to drive south to work in the mid-miami beach area? Is there traffic at 8 am and going north at 4-5 pm??? If so, is it severe?
I’m renting and one thing I noticed about some of the sunny isles units, is that they have been on the market for 4-8 months with no bids. When I make an offer I usually subtract the amount that they have lost by not filling the rental and then make a bit better of an offer:
for example: Someone asks 2400/month but empty for 4 months. They are asking for 28800 over the course of a year. Subtract 4×2400 = 9600 from 28800 and that comes out to 19200/12 = 1600/month.
I will then offer 1700/month. I say take it or leave it. Would you rather have a year of income or risk keeping your unit empty for another 4 months without a tenant and then having to cut the price….
This strategy works in south beach because you do this to all 30 people per building all desperate for a tenant. One will take the offer. You people are forgetting. Even if there are lots of suckers willing to pay asking price there just aren’t enough human beings that even need a unit. The speculation resulted in 33% too many units. There is no one to even fill them.
Its like being at a party with 70 girls and 30 guys….
Or 30 girls and 70 guys 😉
…where 60 of the guys are gay….
Wow, only 162 units closed in the past 6 months in Brickell. Obviously that does not include units closed in a new building. But if you have nearly 6000 units on the market, and only move 160 in six months, things are ugly. Especially when many of those units were purchased as investments to flip, and were never intended to be lived in or rented by the original owner.
The average list price is still absurd. The average sale price is still higher than i imagined, probably a ramification of so few units moving on the market getting skewed by mortgage fraud which still seemed to be occurring even this summer. I see Emerald, which is a bit more luxury than many others (although not by a great amount) is selling at $240 sq ft, approaching the $200 sq ft i imagine for such buildings in the future. I can still imagine another 20% drop on these prices before we start to see a bottom.
Lucas, any chance we could get a few numbers for sales and prices which occurred in October and November only? Would be very interested to see how badly the recent financial events affected sales. This would be an indicator of activity to be seen over the next 6 months.
sunny isles
collins, starting at about 165th st, is a pain in the morning down to bal harbour. clears up from there. in the evening, it’s not as bad.
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“Its like being at a party with 70 girls and 30 guys….”
—
And, your gay.
SunnyIsles – I got almost 25% off the asking rental price, but I was going to do a full year…..I think the owner thought that they’d only be able to rent it in short term stretches…. Anyway, I am a perfect tenant and I take care of everything without the landlord needing to be bothered at all. The condo manager has told me more than once that the owner is lucky to have me as a tenant….I think I pay a fair price but will offer a lower amount on renewal basically just removing the commission….the owner will net the same amount. I could probably get another similar unit for even 10% or more less, but then I would have to decorate and furnish it….
RT,
How can that be??!!!
I mean, look what AJ posted in the last thread:
“I am not offering my tenants 1 penny discount when their leases come up for renewal in July and Sept next year. In fact I will decide by April if I should raise the rent. The most I am willing to give is to keep the rent the same. If they want to leave, I will show them the door.”
SI:
I live south of Surfside in MB and work in Brickell. It takes me 25 minutes Door to Door in the mornings, 25-30 at night, using the 61st, Alton, 112 route. Tack on at least another 10-15 minutes for SIB b/c even with 826 and 922 routes available, the 61st option is still the fastest to I-95. There are a ton of “non-smart” lights on Collins in that area and to the south that are not synch’d or coordinated with sensors (i.e., they will turn red without any cross traffic).
I think there are great deals to be had in SIB (with even greater deals in the future) and I like the area, but as of now, it’s still too pedestrian un-friendly and commuter un-friendly.
As far as your plan to to offer an undercutting of rent to reflect the opportunity loss of a non-occupied unit, this is perfectly valid on paper – after the fact. The simple practicality of convincing the owner is the trick. This is extremely difficult to do, as almost all owners suffer from some disconnect as to value vs. opportunity cost. No owner thinks THEIR unit will remain unoccupied for 4-8 months even confronted with historical and anecdotal information to the contrary. Personally, I feel completely rational, am well-educated and keep tabs on RE via this blog and other means, and I still succumb to this owner mentality with my two rental units. At the same time, there is a price point wherein an owner would rather hold than invite the type of tenants that the particular price point generates. In other words, if the owner of one of your SIB nominal units adverts for $1700 a month, he will attract beachies, roomies and transients as potential tenants. Legitimate tenants like yourself will be extremely skeptical of an owner with such a low price (is going to insist on a large deposit and default, is he the real owner, etc.).
If you’re still looking for SIB, I recommend keeping tabs on RT’s cues on the markets, esp. rentals by word of mouth; his embedded point of view is very good. Likewise, look at marketing what you have to offer at the lower price point: stability and a single professional tenant (i.e. little wear and tear). Good luck.
Muir – AJ will show his tenants the door and the tenants will show him what an empty place looks like feels like month after month after month…. When you have lousy cards and you bluff, you have to live with your bluff if the other side calls you on it. In this market, it is best to be reasonable and helpful to tenants with a proven track record….a nightmare tenant could very well put you under. Somehow I think AJ is all show on this and would capitulate if push came to shove esp. as a landlord that already is having to supplement the holding costs of four rental properties each month. Once bad tenant could cost a bundle….and the domino effect could cause all four to go.
Renter Tom,
What is your profession ?
Are you a retired highschool teacher ? It seems you cannot refrain from teaching.
In this market, you are always going to see asking prices way above selling prices. When people ask why don’t sellers get realistic in their asking prices, you have to understand the financial situation of a lot of would-be flippers that own these units.
ie. Flipper 1 has $20,000 in assets. He has a loan for $400,000 on a condo that he might be able to sell for $300,000 and that he feels is going lower. He can’t contemplate offering or selling at $300K unless he has the extra $100K to give to the bank.
So he lists it at $400K because he’s got no other option besides to do that and hope for a miracle. You see this over and over. A slow bleed to foreclosure with their hands tied knowing the inevitable is coming
Visionary – Too funny….nope. But there is a lot of ignorance out there so a lot of teaching needs to go on now…the ignorance led to this mess. If they would just learn. Class at 8:00 a.m.
By the way, I would be qualified to teach at the graduate level in several areas….and of course 1st grade too since only 1st graders and graduate students are really eager to learn….
Muir #10: AJ is out of his mind. I’ve been there too, so have sympathy for the “arse” hole. (Are you British, AJ, or is that an affectation?)
I thought because my for-rent condo fetched $1650/mo in 2007, that $1,550/mo was an insult. Result: empty condo for four months, eventually rented to not-my-dream-tenant (bounced a check) for $1500.
Do the math.
Seriously. I rent in a nice, recent building south of Fifth on South Beach. The ads on, say, apartment.com or realtor.com suggest that the apartment I’m renting is asking an average $1900/mo.
Then I go to Craigslist and there are three of the same units asking (via brokers, pity the landlord) $1699.
Moving is not a hassle, especially if you are moving to another vacant unit in the building and are already condo-approved. The maintenance staff will gladly take my pictures off the wall and move my stuff for $15/hour cash. They’ll even re-hang the pictures while they are at it and take control of the valet trolleys for free.
So here is my landlord’s position: I am an excellent tenant, no late or bounced checks, and he knows I have assets. (Down 40%, but still assets). He is currently charging me $1700. If I leave, he will face the very real risk of several months with no rent, and will use a broker to get a tenant.
Even if he gets $1700/mo instead of the $1,540 I intend to offer, after the broker, it’s still $1,530 for the first year – and he has no idea if the new tenant will clear the board, lose his job, be a pain in the ass, etc.
I changed my mind. I am going to offer $1,500. As an amateur at the landlord game, I have learned the rules quickly. A vacant apartment is a disaster.
jamie said: “A vacant apartment is a disaster.”
– I would add, and a bad tenant can be financial Armageddon in this market. Imagine having to try and evict a non-paying deadbeat that trashes the place? Not only are you out the rent $$$, but the legal costs, delays, and repairs are costs you will never recoop. I know people who made bad residential rental choices, they were in shock at what happened…too trusting and hard to be a landlord from a distance. A lot of these new floplords will learn a very hard leason as this thing continues. Take notes at tomorrow’s 8:00 a.m. class, it starts promptly and doors locked at 8:00:01.
Lucas, I really like your statistics (and am so glad you incorporated my suggestions). However, all your stats are pulled from the MLS. I believe they do not include apartments sold w/o a broker, foreclosures, and so on.
Since those sales are the real test of the market, don’t you think you should haircut 10% off the average price in your data? Or at least advise folks that your statistics skew to the over-priced as a result of omitting FSBO deals or foreclosures?
@RenterTom comment 19
100% agree. My tenant bounced a check on me. The $60 charge for that did not begin to cover the damage she could have done. I have individual health insurance with BC and if you miss a single payment they call you and cancel the contract. The last time that happened, my premium went up $100 a month – forever – to be reinlisted.
Tom, you have just given me a headache. No offense. Good blog, always interesting, but I feel like a steerage passenger on the Titanic at the moment.
jamie – There might not be any life boats on this ship, but if you were prepared, had your life jacket on hand, knew how to swim etc. you’re much better off to pull through. This market is one that exposes all flaws….it is as if some turned on the lights at 2:00 a.m. at a dim singles bar and everyone became sober…. it is ugly. Or what WB said that when the tide goes out you see who isn’t wearing a swimsuit. Well the tide is more than out….there is a global credit draught and those that were over leveraged or used short term loans for long term needs are getting slaughtered… The inability to refi is killing people who even made modest debt decisions and they are forced to dip into other assets…and stocks are down. We are in a very bad place and the wealth destruction will continue for some time. I don’t think the pessimism has reached its bottom yet… It is time to get your financial house in order and simplify, simplify, simplify…… All hope is not lost yet, when it is then we’ll know we’ve hit the bottom.
Renter Tom,
I am going to enroll with you for postgraduation ( I already have a master degree).
What is the tuition fee ? Harvard level ?
Oh and the durable goods numbers will be out soon. If they are anything like auto sales, or even half as bad, scare talk of a recession will come back into the news….don’t fall for it, it is just a scare tactic to push through a socialist agenda. Now if retail sales for 4Q 2008 are off by more than 25%, then we can start talking depression…. Maybe this will really just end as the Great Recession….or my preferred Refi Madness.
Visionary – I got one of those things too plus another one…. Anyway, there is no charge as long as you pass on the help to others…
#24 I meant “scare talk of a depression”
there are alot of amateur landlords entering the business lately. they really have no idea what is going to hit them. renting out an underwater property is truly a last resort effort-and they will find this out quickly. you no longer have a choice of tenants, so you take who will sign a lease and check today. problem is many of these folks are also in financial trouble, and will become a disaster for the landlord financially. the latest scam i am seeing involves landlords who keep security deposits claiming damage when none existed. hard to overcome this challenge. anybody have insight on this? not enough money to take to court, but losing the cash for no reason can hurt.
i am also seeing more college students and other youngsters who are now rooming together in a luxury building which was never intended for that lifestyle. these buildings will become frat houses in the near term, because HOA are not conducting appropriate screening measures on the new residents. curious whether this will spread out to all buildings, or really concentrate on the ones with least oversight.
jamie /Nov 23, 2008 at 3:23 pm Vote:
“Seriously. I rent in a nice, recent building south of Fifth on South Beach. The ads on, say, apartment.com or realtor.com suggest that the apartment I’m renting is asking an average $1900/mo.
Then I go to Craigslist and there are three of the same units asking (via brokers, pity the landlord) $1699.
Moving is not a hassle, especially if you are moving to another vacant unit in the building and are already condo-approved. The maintenance staff will gladly take my pictures off the wall and move my stuff for $15/hour cash. They’ll even re-hang the pictures while they are at it and take control of the valet trolleys for free.
So here is my landlord’s position: I am an excellent tenant, no late or bounced checks, and he knows I have assets. (Down 40%, but still assets). He is currently charging me $1700. If I leave, he will face the very real risk of several months with no rent, and will use a broker to get a tenant.
Even if he gets $1700/mo instead of the $1,540 I intend to offer, after the broker, it’s still $1,530 for the first year – and he has no idea if the new tenant will clear the board, lose his job, be a pain in the ass, etc.
I changed my mind. I am going to offer $1,500. As an amateur at the landlord game, I have learned the rules quickly. A vacant apartment is a disaster.”
——
——
Awesome post!!!
Gables,
1. I plan to use my security deposit as my last month’s rent.
My next to last month, I will be my “last months’ rent.”
However, mid way through my next to “last months’ rent” (which I will be paying with
“last month’s rent) I will ask the landlord to inspect for damages (which, of course, I
would fix if there were any.)
2. On “i am also seeing more college students and other youngsters who are now rooming together in a luxury building which was never intended for that lifestyle. these buildings will become frat houses in the near term, because HOA are not conducting appropriate screening measures on the new residents. curious whether this will spread out to all buildings, or really concentrate on the ones with least oversight.”
Yeap, I’m seeing that too.
3. Gables condo with most problems will be 55Merrick which has a sister project on 1300 Ponce that is not yet finished and 1805 Ponce. There will be the same problems in those as in the building you mentioned earlier (I’m aware of the problems in that building very well.)
2 good books on the market you guys should consider, enjoyed them both.
Ascent of money by Niall Ferguson
Hot Flat and Crowded by Thomas Friedman
Cut all of those numbers in half and then you’ll have something resembling a bottom.
Better Days /Nov 23, 2008 at 9:28 pm Vote:
“Cut all of those numbers in half and then you’ll have something resembling a bottom.”
–
Only half?
I was examining some of the property records this evening in some of the newer condo buildings on the beach. I am always surprised to find a fair number owned in LLC or Inc. names. Seems like those are the ones that go into foreclosure too. More to some I am sure. Moreover, assessed values for 2008 are significantly below what people actually paid just two years ago.
@Aj (#30) I recommend The Snowball, the authorized bio of Warren Buffet.
I also recommend that you look up the buildings you have invested in on Craigslist.
I’m simply astounded that you have any idea of raising your rents. You are either an idiot or have idiot tenants.
Two observations:
1. There are properties where you see that prices did not change for decades.
This is worth repeating, certain condos/houses you see the same prices paid for in the
early 80s is the same as that paid in the mid 90s.
2. Up until about 1997, you could actually get a decent return on rental investments.
–
I bring this up because a broker just called me on a condo that was supposed to close today in Palm Beach and the buyer is walking away.
Older building with HOAs of $800/month, gated community etc.
Original asking price in 07 of 220K
Can have it today for 65K.
Comps from 1982 and 1994: 55-65k in 1982 & 45-75K in 1994.
I passed.
That would have been interesting Muir because of the really low price!! The HOA rates are high though I suppose it is because it is gated.
Muir – You’ll be able to pick some of these up for the price of a luxury car, er, what was the price of a luxury car. I have seen similar and heard of stories…..condo hotels and apartment to condo conversions seem to get hammered. I guess why not take a $35K-$50K apartment unit, spend $20K to upgrade it and sell for $200K? Well, now those people are holding $65K apartments (if that). The secret here is to take something worth $100, put a price on it of $200 then sell off 100 pieces at $2 to make it palatable since NO ONE absolutely no one would buy the whole thing at $200 but perhaps 100 would at $2 each….. Well, not anymore. People made bad purchasing decisions.
This was not a conversion.
Established high-rise (25 floors) gated community of similar buildings plus golf course.
No HOA issues of many units in foreclosure.
It’s actually a nice planned community of high-rises and some low rises with lots of green areas.
–
My point was that it was returning to its Historical price.
Although I did not write why I passed, it should be obvious.
What I imply is that Miami will follow.
–
Thanks for the insights Muir
AJ
in these times…everyone should read (or re-read) mr. benjamin graham’s intelligent investor. it’s lessons are particularly relevant in these difficult days whether investing in real estate or securities.
as for thoma friedman, he’s a hack, although a popular one at that.
Muir – Mine was just a general comment, not implying that was a conversion. I think I have been too optimistic. Things are going to get ugly. I keep hearing that the govt will fix things, etc. from people. My answer is what can the govt really do??? Price fixing? That never works in the long run…or mid run etc. People don’t realize that the govt can’t waive a wand and make things better or that they govt is just being mean by not bailing people out of bad mortgages….unreal. I am now actually thinking a dollar collapse is within the realm of possibilities and not just some nutcase scenario…
RT
don’t think you’ll see a dollar collapse (i’m assuming you’re referring to the dollar v. world currencies). whatever the underlying reasons for such a collapse would also then be relevant to the dollar’s competitors. everything would go in the crapper and the dollar will be no uglier than its other currency brethren.
jcrimes….not compared to other currencies, just worth less (or worthless). That is bad enough.
jamie,
just started seeing your name on this list a couple of days ago. You must be a new guy (or girl?) or an old hag who just changed the name. I am still watching if you fall in the same category as the “arse” hole Mark etc, with your propensity to insult people and hurl abuses at them.
If you are someone new, let me tell you, things don’t work like that on this blog. Lucas may not censor you, but you will get marginalized if you attack people personally and call them names.
I have all the answers to the questions you posed but I will respond when you change your tone and language. If not I don’t give a shit about your posts or your comments.
looks like people are coming around to my comments on the other post about our dollar inflating like crazy in the next 2 years.
AJ – Being terse with newbie isn’t going to increase the value of your real estate, sorry to inform you. I hope though that you get one or more sold since that would probably be best since you got way too real estate heavy as part of your portfolio. With that said, I looked at the photos, and quite frankly, I am shocked at the decor….old 80’s throwback stuff (or was that a 1970’s bubble screen TV?) for al yur high falootin’ ways and talk, I don’t think they’d even sell that decor in Wal-Mart in the clearance aisles….maybe Big Lots or Dollar General. Seriously, the decor is yuck vomit. Particle board shelving and furniture? That is just wrong. Other then that dig….that I just HAD to do….hope the sale goes well.
Raffi,
I guess you never clicked my name. 😉
Tom,
Got it. Thought it was interesting story this morning.
Kelly,
Welcome
AJ,
The problem is that you lose all credibility when you post something like this:
“I am not offering my tenants 1 penny discount when their leases come up for renewal in July and Sept next year. In fact I will decide by April if I should raise the rent. The most I am willing to give is to keep the rent the same. If they want to leave, I will show them the door.”
ALL credibility.
enough with the AJ bashing. now that i know AJ’s career choice…i’m envious (seriously). AJ – any chance i can convince you to let me have the booth for a night in exchange for my office?
Muir, actually I had but I never read through the 21 pages of pdf, sorry. I guess we agree then. By the way did you write that?
Raffi,
Dollar is inflating. That is why people around the world are wondering in amazement how banks in America are still writing fixed rate 30 year mortgages. I usually payoff all my mortgages in 4 years. The only mortgage I have left is the new downtown condo. But for once I decided to hold off on that strategy for my downtown dig. I owe 320 more to the bank and in 2-5 years, If the predictions are true, that debt will be worth only a fraction to the bank while my asset has a good chance of being worth more than the outstanding loan. I can always retire the debt by liquidating some of my foriegn assets which might hold off better than the US assets.
If you believe some on this blog, where they are predicting inflation will not cause corresponding increase in wages, then we are heading towards Third Worldization of America. There will be two classes of people. One holding the assets and the commodities and the other holding the bag.
jcrimes,
I had my share of office life too. I was a marine engineer and sailed on ships and been to every country around the World since I was 20 years old. Then for 2 years I was an operations manager for an Israeli container shipping company in the now fallen Twin Towers and another 2 years as the Port Manager for the P & O ports in NJ (and Miami). In fact I only changed my carrer and my life about 7 years ago and never regretted ever since. I am also one of the first Video DJ’s (VJ) in this country. I work 3 days a week and make more than What I ever did working for someone else. What surprises me the most is that my business is booming in these hard times. People are actually partying more than they ever did. I don’t know why but I have no complaints.
If you ever come to New York, you are most welcome to spin some music in my club!
Raffi,
First day I joined this forum.
—-
Everybody,
p.s.
No more AJ bashing.
Seriously, the meds are not working,
And by the way, bring all the bashing you want. Jealous losers will be Jealous Losers.
And maybe I should charge a surcharge to my tenants for their bad decor and lack of taste. Anyway, who cares! When an old tenant leaves and the new one come along, he/she will bring a new style and new furniture to the flat. Meanwhile, I am laughing all the way to the bank.
AJ, saw the pics of your miami condo. nice views. dont want to be nosey and give away your location, but what line is that in? or at least a line with a similar view?
i was curious about the activity of business you had lately. nice to see you are still healthy in the biz. please let us know if/when it slows. not that i wish that on you, but would certainly be an indicator that luxury spending is slowing down. till then i will keep my eye on the sales of all those flat screens.
gables,
I think I Inadvertently let the cat out of the bag. No point in hiding anymore. My downtown 2/2 is in the 1800 Club. It is a high floor in the lines of 5 and 7. Both have a 1222 sf under A/c and 250 Sf of Terrace. Lines 3 and 9 are also 2/2’s with similar views but are 100 sf less than lines 5 and 7.
Apart from being a DJ, my interests also extend into bar and night club business. One interesting observation is that restaurant business is falling. People can eat a tuna sandwich at home and fill up their stomach. But if you want to meet and mingle with people or just be among people, there is absolutely no other way other than going out to have some nightlife. If one is lonely or single or even depressed or stressed out due to this economy, they might skimp out on a few things but going out has not been affected. They might drink 2 drinks instead of the usual 4 but they are still going out. Even the bartenders tips have not been affected. It was talked about many times before – The recession effect on bars and nightclubs. It affects us less. Love never goes out of style.
Question to muir re # 38
is the condo located at the old Perini developed Land of Presidents?
What is the square footage ?
was quite THE place I recall back in my parents’ generation in 1970’s with wealthy snowbirds+wknd commuters ..
There are hundreds-maybe low thousands of units- to absorb major expenses like security and landscaping costs; thus $ 800 a month sounds unusually steep..
UNLESS it includes mandatory dues /dining at country club ?
Not to argue, but since it’s not Real Estate.
Nightline last friday had a piece on a brothel in Az.
The house and girls had to cut rates.
Talk about deflation at work!
(deflation in a brothel, who woulda thunk it?)
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Anyways, it was a rather long piece (is it ratings week or something) and the madam went on about the discounts that the Johns were getting and some of the “girls” talked about having to work out deals with “regulars” &”customers” because times were rough.
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George,
Yes to first and no second.
It’s not the same place as in the 70s. (has lost it’s pizzaz)
But what kills it is the insane overbuilding of condos here in Palm Beach.
Sound familiar?
Rentals are plummeting.
Golf/club fees are extra.
1200 sq feet
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Go for it if you want it. Post e-mail I’ll send data.
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In my opinion, a very bad investment.
HOA + taxes are more than rent!
It’s a negative equity investment.
1250 South Miami will be at $75 sq feet within 8 months and be the same lousy investment.
–
There’s better stuff in the pipeline.
Patience.
Someone told me that I would run out of money before I ran out of opportunities in this deflationary period.
And, although I am well aware of the government printing press (page 3 of PDF if you click my name) let’s not get ahead of ourselves.
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The re-default rate, that is the default rate on loans that were modified already because of a default, is 50%. Just goes to show….people that aren’t good with money usually will continue to be not good with money. Just like people that ran up credit card bills then paid them off with a home equity loan only to run up the credit cards yet again, and again. Let the chips fall….
I was telling my friend today- I like tone of the holiday season this year- restrained. I sat and wondered to myself all this time, how are people affording this “Pottery Barn” lifestyle? As our parents sat on their “Sears and JcPenny sofas”… now I get it. They weren’t affording it and now they have to pay the piper and they can’t.
I do feel bad for the people that thought they could afford the “American Dream” and now are being foreclosed on, but basic simple arithmetic- my monthly salary vs the mortgage I will have to pay when my ARM matures should have been a clear indicator- I can’t afford this…
If my monthly payment won’t cover the interest on my mortgage let alone touch the principle- I can’t afford this…
As for the investors who thought they could unload it before it matured…basic economics of supply and demand for one thing could have been a clear indicator that they might be the ones stuck holding the cards at the end…
I, for one, hope America (and the world really) learns to reassess its priorities and learns to decorate themselves with talents, hard work, wisdom, and kindness. The world will then be a much better place.
My dad told me as a kid, anyone can wear a gucci watch or drive a mercedes, but it takes someone special to play an instument, play a sport well, be intelligent. These are things that will get you respect in life, not to drive a fancy car or wear fancy jewelry- anyone can do that. He’s wise, America (and the world) needs to revert back to these philosophies if there’s to be any hope for us.
aj,
Housing is an asset, not a commodity…IN a broad inflation of money supply commodities do well…housing is tied rents which are tied to local income. That’s why when you go to Mexico a house doesn’t cost 200000. The only way housing prices will eve outpace income again is if we go back to no standards 100% financing….ain’t gonna happen.
someguy,
I dealt with this subject a few months ago. I said in post #51 “inflation will not cause corresponding increase in wages, then we are heading towards Third Worldization of America. There will be two classes of people. One holding the assets and the commodities and the other holding the bag.”
This is what it means. Let us assume that the wages do not keep pace with the inflation. That does not necessarily reflect in lower rents. Case in point: Check any third World country. People are paying up to 70% of their salaries on housing.
The beauty of America is that we only spend 30%-40% of our salary on rent and the rest is disposable income to spend on the things we want. Due to such high disposable income, we are one of the richest countries and the envy of the World. But if due to stagnant wages and inflation, an American family has to start spending 50% or 60% or 70% of their salary on housing, all that will happen is the reduction in the spending power. Americans will start living like the Billions of people in the rest of the World. My words may sound shocking to you but nothing can be ruled out any longer.
Bottomline: stagnant wages + high inflation = less money for sneakers, piano lessons, restaurant outings, vacations but all the money for housing and basic foodstuffs.
Upon further review…and to alleviate my inflation concerns…..deflation is the worry for at least 2009 (as I previously posted), not inflation. We are in for more deflation as there seems to be slack in most things….a large supply with too little demand. Previously demand was being spurred on through easy and ever easier credit (which pulled future consumption into the present)…and people invested into such capacities based on that elevated level of demand (see new retail strip malls being opened, new subdivisions with 20 years worth of empty lots, new manufacturing facilities abroad (China, etc.), etc.). In order to continue to spur on demand, credit had been extended beyond any rational limit….even unsecured credit was given to the worst subprime borrowers — also just look at how credit was extended to college freshman in the form of student loans and credit cards as another example, these people didn’t even have an income. Once credit was extended well beyond the borrower’s ability to repay and there were no more borrowers out there, defaults began to rise and hence these debts can no longer be passed on through securitization (homes mortgages, auto loans, even credit card loans are done this way)…the music stopped. So, we’ve gotten to the point that instead of private investors buying these crappy loans up the fed govt is stepping in to essentially buy them up, or at the very least, take them off the books of the banks and other financial institutions. Fine, but where does that get us? Well, banks (or anyone for that matter) aren’t going to repeat that mistake (and the fed govt couldn’t afford to step in again anyway) so credit standards are returning to normal (or even more strict in the short term as we’ve seen) which is going to cause demand to stay at a lower level then during what I will call the “credit bubble demand rate”. This dramatic decrease in demand in a persistent over supply and capacity market will cause further slack in the economy which will result in further deflation ….. prices for homes, autos, wages, rents, commodities, etc. will continue to decline.
The Fed has essentially reached it’s limits to spur on demand and is out of bullets with an effective Fed Funds Rate of 0.3% (stated policy rate is 1%) and it will soon be at zero (short term treasuries are already at zero in the open market). We are now in a liquidity trap situation where the Fed Funds Rate can’t spur on demand and even modest inflation….we’ve entered a deflation spiral that will get worse as the value of leveraged assets decline in real dollar terms yet were financed with nominal dollar debt that has an interest rate of the stated rate plus the rate of deflation. Being underwater with what is essentially a higher interest rate will cause people to walk away from their debt obligations (maybe a debtor’s prison will solve this….hmmm). Just like when condos were going up 12% per year and inflation was 3% you made 9% in real dollar terms….or 4% if you had a mortgage at 5% (12-inflation of 3-mortgage of 5 = 4). Well, the opposite is now true where you borrow at 5% but the REAL rate is the 5% PLUS the deflation rate….that low mortgage ain’t so low when you factor that in now so even low mortgage rates are far less effective in a deflating home price market. As deflation becomes common place, people delay purchases….just the opposite of when prices were inflating (such as the marketing tactics of developers to raise prices every month or so) there was an urgency to buy now (don’t get priced out of the market forever) when prices are deflating people delay…this cuts demand further resulting in even more over supply, which causes more deflation and less demand….it is a bit of a spiral then.
Anyway, looks like inflation is not the concern. The added dollars are only an attempt at filling the void of what was once easy credit…and there won’t be enough dollars to do it so deflation will continue. The only concern now is if we have an intentional policy to weaken the US Dollar against other currencies….that does not look like is on the horizon much either as this is a global deflationary environment.
That is my analysis, feel free to comment….
So, with respect to miami condos as an “investment”…the asset will continue to deflate through 2009.
Just read your post above AJ. No worries, even with stagnant wages (nominal dollars) the real wages will rise in a deflationary environment. The people that will get hurt the most are those that hold illiquid declining price assets that were purchased with nominal dollar debt and interest rates.
AJ, regarding comment #44:
I am not new to this blog, and have posted under Jamie several times. I stopped reading for a while, too engrossed in other stuff, like losing 40% of my net worth in the stock market.
I have contributed to this blog – ask Lucas where he got his green/red spreadsheets from, and I hope he will give credit where credit is due.
You don’t need to tell me anything. Honestly, I’m kind of impressed that a professional DJ earns enough to buy several condos. Who knew?
I apologize if you read my post as personal, and in retrospect, I can see how you did. I think ALL landlords who think they can increase rents in this environment are out of their minds, and you were the only one to suggest you could, so I addressed my comment to you. This is very normal on blogs, so don’t get your knickers in a twist about it.
Chill out.
Lala,
5 years ago a talk show host asked an eminent guest on TV as to why the kids in China, India, Korea do exceedingly well in Math and Science and other academic subjects but our American kids want to be foot ball players and rap stars. He had this to say ” The kids in those countries are hungry (hungry for a better life). The American kids have it all and the parents who give them everything. When the American economy starts going down and the American kids start feeling hungry (for a better life), then only we will see a change here.” Very prophetic. That will also apply to attitudinal and lifestyle changes too that you are talking about.
@RenterTom post #64.
Deflation is here.
I negotiate with everyone nowadays. My dentist charges $150 for a routine cleaning? Bullshit. I had a quiet word with him, and it’s now $100 (still more than I think I should pay.) I could bore the entire blog, but let’s just say there are very few prices I accept anymore, without asking for a discount. And I get a discount more often than you would expect.
Unfortunately, deflation is a nightmare. I expect it. I’m 80% in bonds and treasuries, and I am no investment genious. The first rule is, Don’t Lose (Any more) Money.
I went to Subway today after seeing the ads on tv for $5 footlongs. After they made my sandwich, I told them their prices were bullshit and plunked $4.95 on the counter before walking out! Boo-yaa!!!
The mayor’s blog says that condos are still strong in Miami.
Jamie, I am also a promoter of bars/nightclubs and I employ a few more DJ’s in my company who all in turn make money for me. I make a decent living. In any case, all my RE outside Miami have been paid for while I was working corporate. The two Miami condos are a legacy of my new profession. In any case, I bought a SOBE condo in 2004 for an excellent price and a downtown condo in 2008 (for a 2004 price!). It is not such an impossible scenario as you make it out to be. If one is prudent with their money, they can do wonders with it. One thing I pat myself in the back for is that I did not put one red cent in the stock market. Thank god for that.
Anyway I appreciate the clarification that your digs are not directed at me.
I wanted to clarify the rent/tenant issue. I am researching a bit more to back my position. I will write on that soon.
la la
you are in the wrong city if you’re gonna try to push this notion of “who you are is measured on the inside” nonsense. seriously, take that back to the midwest where it belongs. we’re in miami, where what you wear, what you drive, what you drink (fyi p.dids is telling me via a billboard off 395 that the art of celebration includes a bottle of ciroc) and what connections you have at “da club” is what matters to 95.3 pct of the population.
and the only reason why this year’s holiday season is reserved is due to the involuntary reality that’s being forced upon most consumers. don’t ever doubt for a second that the american consumer, if given the chance, will immediately shoot his proverbial load on the latest fad and ask questions later. how do you think so many hummers got sold?
RT, I’m not disagreeing that in 2009 we will see deflation, the problem is for how long and how severe? anything can happen, and we have seen how volatile it is out there. as soon as the deflation stops you are going to see a huge surge in inflation, and its going to be fast and furious. trying to prepare for deflation in 2009 and inflation in 2010 is going to be like trying to predict the market, buying low and selling high. unfortunately that never happens and most people end up chasing the market and never ever buy low and sell high. so I wouldn’t be so worried about deflation as much as I’d be about inflation. from the way you speak you make it sound like you are a very well educated and financially well off individual, if you have found the right condo and the price is good I don’t see why you wouldn’t buy today. You are going to live in it for a long time I assume, and you know without a doubt severe inflation is coming, so really I see no reason for you to wait through 09′ to buy, you might end up getting burned.
David
that’s the same mayor who tried to rip off the fine citizens of this city in the fire fee scandal. in short, manny “the black hand” diaz is not to be trusted unless the “fix” is in. in that case, he’s always to be trusted because, like most crooked politicians, he respects the “fix.”
AJ wrote: “5 years ago a talk show host asked an eminent guest on TV as to why the kids in China, India, Korea do exceedingly well in Math and Science and other academic subjects but our American kids want to be foot ball players and rap stars. ”
– Does that apply to just football players and rap stars or can we include DJ’s too? Just kidding! 🙂 Actually glad you’re not wasting $$$ on $20 drinks all the time and having a place in Miami and NYC makes sense if your job takes you back and forth. I would caution that we are seeing a pull back in entertainment spending. As you mentioned people may buy 2 drinks instead of 4…that WILL affect tips and what club owners can pay for entertainment. By the way, I have a friend down here who is close to going in for half a club…..haven’t gone to it yet to check it out but I’d sure I will if he buys in. Stocks may be back to 1997 prices or whatever it is …. but condos will be too…..so don’t get too smug just yet since it is hard to be nimble with illiquid assets. Overall, credit will continue to return to the norm standard and consumer credit will get hit the worse….we are still in the second inning on the consumer credit pullback as credit card issues run scared since the debt is unsecured and easily wiped out in bankruptcy.
Raffi – I don’t see deflation to inflation turning on a dime. We are in an entrenched deflationary environment …. a spiral …. that won’t end anytime soon. Even massive spending by the U.S. fed govt can’t pull us out of global deflation. A weaker dollar or inflation will only soften the deflationary blow, it won’t kill it or certainly won’t reverse it to inflation anytime soon. I have broader dollar worries that don’t include inflation in 2009. I’m not really sure where to buy yet so no rush…but if a really great deal comes along I may bite since the downside risk will have been minimized if the purchase price is right. I intend on having more than one residence and will pick the cities/counties over time. The place I am renting now really is perfect for me now….really couldn’t ask for a better place esp since it was brand new 100% professionally decorated and furnished right down to the bathrobes and bubble bath. Even came with a bottle of nice french wine. I may take a gander at the Trump Towers though since it looks like there are going to be some great rental deals there too… probably a lot of rentals. Or maybe SoBe area or go a bit north to Ft. Lauderdale? Make renting an adventure with so many places to sample. Can’t do that if you own. But then again, might just renew since this place has a great view without other buildings looking into the windows….never have to close the blinds….truly relaxing…and can see all the way down to One Bal Harbor and beyond to Blue and Green Diamond buildings and Akoya (spelling)….love leaving the sliding doors open all day like now, listening to the waves and doing some research on the laptop chilling out with a glass of wine….relaxing. I am amazed how I don’t hear any of the traffic or noise from Collins Ave esp. when there is at least a light breeze from the ocean. Love it.
La,la re post#61
Hear hear!
jamie, re post#64
That’s why I am all cash and have been so for a while.
There will be great opportunities if the government doesn’t screw up everything with more “recovery stimulus plans.”
I’d be tickled pink if tomorrow the DOW fell 2000
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Disclosure I’m a Democrat that thought Ron Paul was the best candidate.
Raffi ,
“trying to prepare for deflation in 2009 and inflation in 2010 is going to be like trying to predict the market, buying low and selling high. unfortunately that never happens and most people end up chasing the market and never ever buy low and sell high. ”
Only if you follow the Dow (a mere pimple on a humongous rococo ass)
Follow the bonds….
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The really smart money (well, someone has to hold the place for Ace, besides, he was wrong on Bluestar)
🙂
You’ll know deflation is over when supplies come down and unemployment begins to drop…..supplies are going UP, not down now and just wait for the post Christmas sales and retail store closures (auto dealer closures too). Unemployment is in the same boat here too. Just stop and think….new auto sales were 17-18 million per year, we’ll be lucky to break a pace of 10 million. There is too much supply, too much capacity and not enough demand. The “credit bubble demand rate” is history and everyone who geared up to that capacity level will be hurt badly. There are sooo many empty lots that were platted out in some parts of the country that people are thinking it will be decades before they are ever built on. Too much supply without the “credit bubble demand rate” equals deflation…..and higher unemployment.
P.S. Yes, I coined the term “credit bubble demand rate” so hope it catches on. Since it explains it….it was a credit bubble, not just a housing bubble.
Lucas, care to comment on post #20? That’s where I said that puling stats off the MLS is misleading. We’ve discussed this before, and you answer has been, how can I pull the other stats?
I have a suggestion. Focus on one building. It’s not hard to pull all the sales figures for one building off the Miami-Dade website.
I suggest that this website would be more useful if you posted the average asking price, average sold-at price (mighty few data points), and average foreclosure price.
Jcrimes-
What’s that saying- something like- look at who your friends are and you’ll see who you are…
Fortunately, (probably cause we all met in College) I’ve been able to surround myself with a nice group of friends (none native to Miami) with the same values and priorities in life as me…if it weren’t for that, I wouldn’t have a chance in hell of finding like-minded people in this superficial shithole…and thank God more mid-westerners seem to be coming to this coast of FLA now too.
AJ, you keep hanging tight on your investments, I KNOW you will eventually be very fiscally glad you did. You got sort of “stuck” but you are making the best of it. I think in the end (even if it takes 10 years) you will end up ahead. I think you are one of the few that have the patience to look long-term. I KNOW it’s not the highest and best use of your money, but if other priorities are guiding your decision as well, then hang tight.
Jcrimes,
I did crack up at your post though.
la la,
Your post#61 : What is a “Pottery Barn” lifestyle ?
la la,
BTW, I appreciate your comments !
Visionary,
Don’t encourage me, most of the time I wish I could just keep my mouth shut! But you asked so…
A Pottery Barn lifestyle has come to symbolize these newly starting out couples who have been indulging in luxuries like a beautifully designed house with flat screens, sub-zeros, granite counters and accent pillows and generic rooms that have been perfectly laid out and designed by PB- just plunk it in the house and voila- you are instantly stylish! Even if you are generic and unoriginal…
But what I was not realizing is that these things have not been bought with savings or even large incomes- which is why our parents sat on their JC Penny couches all those years, but on credit. It gives a smokescreen that they are doing so well they can afford these things, but the actuality (I now realize) is that they bought everything on credit and now can’t keep up with the debt they’ve incurred…or with the Joneses anymore…
la la,
Thank you for the information, I got it.
I think it is a matter of education, they way you were brought up.
One’s behaviour and conduct of life is beeing shaped in one’s childhood. I am also devoted to so-called old fashioned values.
Hey, if there was ever a time for a cultural revolution, now is it! Advertising and the media are evil purveyors of this consumerist mentality. It makes me sick. I hope someday there will be backlash.
la la – The easy … very easy … credit made it so people could get way in over their heads in debt if they so chose. I remember one of my 8th grade teachers commenting about people buying too much house…a large house that they didn’t have money to furnish all the rooms, apparently they would have to furnish them over time. So buying too much house is common ever since buying homes on debt has been around but the ability to instantly furnish them with consumer debt has become more common, and home have been getting larger too. So yes, as a midwesterner, common sense needs to return and priorities need to be reestablished. The mania over homes has ended not by choice but by the lack of credit and end of the bubble.
I do take issue with your financial advice: “AJ, you keep hanging tight on your investments, I KNOW you will eventually be very fiscally glad you did. You got sort of “stuck” but you are making the best of it. I think in the end (even if it takes 10 years) you will end up ahead. I think you are one of the few that have the patience to look long-term. I KNOW it’s not the highest and best use of your money, but if other priorities are guiding your decision as well, then hang tight.” On what possible basis are you giving such financial advice? He will not do well even long term, 10 years or otherwise. These types of statements do not serve AJ well. Adjusting one’s portfolio to not have all of your investments in real estate, particularly at least two in the worst bubble markets 2004 prices or not. The most you can do now is simply exit doing the least damage. Having four, yes four, residential rental properties that you have to supplement the rent each month is not a sound investment for 90% of your protfolio…and using leverage to invest like that is even worse. I gave my honest straight forward advice weeks ago…and niave optimism serves no one well in this market. Have you talked to people that invested in housing recently? Not people that live in the homes, but that made investments instead….I am surprised there aren’t more suicides out there. Seriously it is that bad.
We are continuing to go through crazy time of major financial institutions going by the wayside or being bailed out…this is going on nearly every week. Even today, the news is what the fed will do to free up consumer credit….yesterday’s unprecedented and incredible Citi news is no longer the headline! Wow! The govt is attempted to keep spending at the artificial level during the housing bubble….they are basically going to substitute private spending/debt with public spending/debt….it is not sustainable since the U.S. income (GDP) does not support such a spending level whether at the consumer level or govt level. They are attempting to force a level of demand that was made up by easy credit. Moreover, the govt won’t be out buying clothes or home furnishings so even with govt spending (on debt too…$1 Trillion maybe?) there will still be major dislocations and the govt’s distortions into the modifying consumer behavior will cause further market distortions. This thing is gonna get out of hand if the govt doesn’t stick to its knitting of investing in roads and bridges…..not giving consumers credit to buy a tickle me elmo from china.
The latest from CNN:
Breaking News
Fed to buy $600 billion in mortgage-related debt; Treasury to pump in $20 billion to boost consumer credit
When will this end??? Tell the deadbeats to pay their bills.
not giving consumers credit to buy a tickle me elmo from china. Lol!!!!!!!!!!!! RT that was funny!!
Renter Tom,
I think anyone who reads this blog even once a week is very clear on your position since you repeat yourself over and over and over and over. As a renter it is to your advantage and glee to see everyone getting sucked down by this hot mess, we get it. If AJ is able to afford his current financial situation, which from what he keeps saying, it appears he is, then let him be. This is why I said I wish I could keep my mouth shut to Visionary because we keep beating the same subjects to death and it goes round and round and round. I wish I had a dollar for every time you’ve had a come back as soon as I say anything encouraging or positive to the owners on this blog. It’s old. Why don’t you just go back to your inflation/deflation argument that goes round and round ad nauseum instead.
la la – Why take it personally. There are two situations (1) people that bought a home to live in and (2) people that bought as an investment. Well, guess what, number 1 is under stress and number to is hurting big time. I don’t take glee out of misfortunes of others but those that brag about getting rich in real estate and borrowed to the hilt, the NOW want to stick it to the banks and tax payers can fall on their swords…the people that borrowed against the homes for the new cars, overseas trips, and other nonsense they couldn’t afford can do the same too. From a financial investment viewpoint I gave an honest straight forward assessment…..being a pollyanna doesn’t help people but will just put them in a worse position 2 years down the line. This is very serious stuff that the country is going through right now….we seem to be avoiding a systemic collapse on a weekly basis.
la la
i’m not sure if it’s pottery barn in miami. i’m thinking something more along the lines of one of the furniture stores at merrick park or lincoln road. in any event, your characterization rings true. where i grew up in chicago (i’m a gold coast brat), even the “haves”, at least back in the day, just didn’t flash the scratch the way folks do down here.
anyway, you organize the protest (preferably down brickell/biscayne so we can piss off everybody but shutting down traffic), i’ll bring a sign.
All,
What is the current financing situation like in Miami? I am interested in buying a condo in the downtown area and occupy the unit myself. Great credit, very stable job ($100k+), but no down payment. I’d like to buy something in the 200k-250k range. Is it still possible to get a zero down mortgage at a decent rate? Thanks.
WHEN WILL YOU ALL GIVE ME PROPS FOR PREDICTING THIS WOULD HAPPEN BEFORE RENTER TOM EVEN POSTED HERE!
I WANT MY PRAISE AND WORSHIP!
jamie,
As is, it takes me about six hours to publish a condo index from start to finish. I realize that non-MLS sales appear on the Miami-Dade website but there isn’t an easy way to pull this data without searching for each unit in a building one by one. Besides, I don’t think it’s difficult to figure out that a for-sale-by-owner can afford to accept 5%-6% less than an owner represented by a Realtor since they aren’t paying a commission.
Christopher@housingfear – I’m new to the area…..but props to you.
We know Renter Tom, believe me, we know! Jcrimes, lmao.
Well, in case you don’t know, the latest Case-Shiller numbers are out. Nominal prices continue to fall across the country. The credit bubble demand rate was simply a fantasy.
“All three Case-Shiller aggregate indexes, as well as 13 of the 20 metro areas, saw new record rates of decline, Blitzer noted.”
The RATE of decline hit a record, so much for leveling off anytime soon.
That $1M condo is now $716K….on average over the last year. That’s a $23,667 decline per MONTH….a lot cheaper to rent, a lot cheaper. Oh, don’t forget to add in taxes and condo fees and that baby….along with the mortgage or cost of capital cost a whopping $350,000-$400,000 over this last year to hold. When you put the numbers to it…it really hits home. Perhaps I’m only paying 10% of the actual cost in rent now….
Here’s how prices in the 20 cities performed in the past year:
Phoenix, down 31.9%; Las Vegas, down 31.3%; Miami, down 28.4%; San Francisco, down 29.5%; Los Angeles, down 27.6%; San Diego, down 26.3%; Detroit, down 18.6%; Tampa, down 18.5%, Washington, down 17.2%; Minneapolis, down 14.4%; Chicago, down 10.1%; Seattle, down 9.8%; Atlanta, down 9.5%; Portland, down 8.6%; New York, down 7.3%; Cleveland, down 6.4%; Boston, down 5.7%; Denver, down 5.4%; Charlotte, down 3.5%; Dallas, down 2.7%
Aj well have to agree to disagree… May i ask what university you attended for undergrad?
Year over year doesn’t tell the whole story….Miami is now down 38% from peak….were only half way through the price declines…inflation will only further the declines…more money spent on gas and flood means less money to spend on 500 seat patio furniture and oversized renissance art.
financing question
zero percent down is not attainable. downtown is at least 25% based on the stats you provided. if it’s an older, more established building, 20% might be doable.
la la,
I would like to contact you. My mail address is [email protected]
Well, it is sooo bad in Vermont (yes, that state) that someone is giving away a pony…under threat of otherwise having to euthanize it. There are two solutions to this: (1) stuff it and add it to the ICAN’T decor in Miami (the small scale of a pony should look nice to next to the over sized furniture to really distort things) or (2) Ben & Jerry’s comes out with a new pony flavored ice cream with real chunks of meat and hair.
http://burlington.craigslist.org/zip/930732541.html
FREE PONY! (Waitsfield, VT)
Reply to: [email protected] [?]
Date: 2008-11-23, 9:45AM EST
Free pony. Appx. 12hh. Cute as can be! Only 10 years old. This pony has jumped, fox hunted and done basic dressage. Due to overwhelming circumstances with his owner, this pony needs a new home. He needs someone that he can trust and respect. If I cannot find a new home for this litte guy, his owner will have him euthanized. Please help! A pony like this is NEVER free. I will go take some pictures today. Email for more info. and pics.
– On second thought, we do have a lot of empty condos down here….wonder if you could sneak on in and save on gas?
Lucas,
I’ll be in Miami over the Thanksgiving weekend (in a couple of days) and wanted to see if I need to have appointments to see the condos in the Brickell area. I don’t have any particular building in mind but want to check out Icon, MB, Vue etc… do they accept walk-ins?
Visionary,
I sent you an email to the address you posted, so if you haven’t received it, check your junk mail, maybe it got diverted to there or something…
RT,
Stop using big words like “Pollyanna.” I have to click that that icon thingy on my Mac that looks like a book and had the letters “A” & “a” and then copy and paste.
It’s just too much work.
–
Someguy,
re post 102
Yes, I caught that too.
But passed on commenting.
–
Ok class, once again:
If inflation, buy TIPS
If hyperinflation, buy debt (fixed debt) and pray.
–
Class tomorrow early.
Muir – what about deflation???
MUIR # 59
Thanks for the info: naw wouldn’t touch it with the proverbial 10 foot …
$800 month is a high HOA nut to cover for a small sized unit with low rentable value… some 25 year old buildings will have special assessments for mechanical eqp if the condo has been stingy with ongoing repairs/maintenance .
RT
“Muir – what about deflation???”
–
Well, you and I just sit back and enjoy ourselves, don’t we.
Our only concern being when to pull the trigger.
I’m not a businessman, so I will not be looking for cheap machinery or distressed businesses (those which other than being over leveraged are in sound shape.)
I will not be doing this, but others will. And they will do great!
For me, I’d love to buy the SP long, I mean a decade long. (decade trader versus day trader)
For you and I, yes for the time being we can gloat.
But just for the time being.
RT,
You are more enterprising than I, here’s something
bidpbtc.com/main
reverse auction for tax certificates.
Bidding starts at 16% and goes down.
Something tells me that next year there will be many and not enough trust or banks buying these.
Good properties this year netted 6%
As a certificate holder you are in first position, even ahead of first mortgage!
The above link is for Palm Beach but all counties hold their own.
–
If you never gone, I’ll invite you to go with me.
Beats the 3% that the, oh, I meant 2.5% that, oh, so sorry, meant the 2.0% that the ….
–
George,
Welcome!
I dont know a single young couple that would shop at Pottery Barn
Not sure if anyone posted this yet….no surprise here.
Home Prices in Record Decline
By Les Christie, CNNMoney.com
Nov 25th, 2008
Case-Shiller survey shows 16.6% annual decline in summer months as housing picture continues to deteriorate.
NEW YORK (CNNMoney.com) — The home price plunge stayed on a record pace this summer, according to a widely watched gauge of national real estate markets released Tuesday.
The S&P Case-Shiller Home Price national index recorded a 16.6% decline in the third quarter compared with the same period a year ago. That eclipsed the previous record of 15.1% set during the second quarter.
Prices in Case-Shiller’s separate index of 10 major cities fell a record 18.6%, while its 20-city index dropped a record 17.4%.
With foreclosures soaring at record rates, the economic picture dimming and job losses ramping up, all the elements were in place to push prices lower.
“The turmoil in the financial markets is placing further downward pressure on a housing market already weakened by its own fundamentals.” said David Blitzer, Standard & Poor’s spokesman for the indexes, in a press release. “All three aggregate indices and 13 of the 20 metro areas are reporting new record rates of decline. . . . Prices are back to where they were in early 2004.”
The 10-city index is now 23.4% off its peak price, which came in June 2006; the 20-city index is down 21.8% from its July 2006 high and the national index has fallen 21% since the third quarter of 2006.
Home prices in the 10-city index have fallen for 26 consecutive months. The decline has broadened over the past 12 months, with prices dropping in every city of the 20-city index during September.
In the weakest market, Phoenix, the 12-month loss came to 31.9%. Las Vegas prices plummeted 31.3% and San Francisco recorded a 29.5% decline. The best performing markets, Dallas and Charlotte, N.C., still posted drops – 2.7% in Dallas and 3.5% in Charlotte.
With San Francisco and Las Vegas, the other members of the 10-city index are: Miami, down 28.4% year-over-year; Los Angeles, down 27.6%; San Diego, down 26.3%; Washington, down 17%; Chicago, down 10.1%; New York, down 7.3%; Boston, down 5.7%; and Denver, down 5.4%.
In addition to Phoenix, Dallas, Charlotte and the cities in the 10-city index, the 20-city index is made up of: Detroit, down 18.6%; Tampa, Fla., down 18.5%; Minneapolis, down 14%; Seattle, down 9.8%; Atlanta, down 9.5%; Portland, Ore., down 8.6%; and Cleveland, down 6.4%.
Foreclosures continue to take a heavy toll, with sales in some cities dominated by properties repossessed by banks and then put back on the market, often at bargain prices. In Las Vegas and Cleveland, for example, about half of all homes for sale are bank-owned properties, according to the real estate Web site, Trulia.com.
“Foreclosures are clearly a part of the market now,” said Blitzer.
He added that the national index price trends tend to be more moderate because they encompass many more exurban and rural areas, where, in many cases, home prices never skyrocketed as they did in some of the hotter, urban markets.
Karl Case, the Wellesley economics professor who is the Case in Case-Shiller, said during a news conference about the latest index report that he would hesitate to put a number on how much further prices could fall, but the increasing job losses will surely worsen the situation.
“There’s no cushion against unemployment,” he said.
And Pat Newport, an economist with Global Insight, pointed out that the latest numbers don’t even capture the impact of some of the events of the past couple of months.
“The real economy took a sharp turn for the worse towards the end of the third quarter,” he said. “Since then, housing permits are down, the National Association of Home Builders index of activity dropped to a record low in November and purchase loan applications were down 15%. That’s telling us the housing market has worsened a lot.”
Add to that a jumping unemployment rate and more bank woes and it adds up to lousy home price numbers for months to come, according to Newport.
“As bad as the latest Case-Shiller numbers appear to be, they are bound to get a lot worse,” he said.
I wanted to wish everyone in here a Happy Holiday tomorrow. Cheers to good friends, family and good food.
hey guys,
Had posted this before, didn’t get a reply from Lucas…
I’ll be in Miami over the Thanksgiving weekend (in a couple of days) and wanted to see if I need to have appointments to see the condos in the Brickell area. Would like to check out Icon, MB, Vue etc… do they accept walk-ins?
Prof Renter Tom has concluded, and as stated in previous posts, but here is the term to describe what has occurred…. we just got out of a sustained period of “Credit Exuberance” where the focus was on the transaction fees and not the probability that the principal would actually be repaid, after all you could just refi (Refi Madness) (i.e. the repayment obligation was passed on to someone else via MBS’s and CDO’s, etc.). Now the talk is about the “credit crunch”… yes, credit may have over corrected during this time of uncertainty, but like tech stocks, credit will never return to those levels again….. This is a sustained pullback in the economy that had been dependent on vast amounts of easy credit given to people without the incomes to support that credit. We are now back to the traditional paradigm and there is nothing the govt can do to return to the old ways….they can only soften the blow and help the economy adjust back to the long term historical norm. Anything else is futile and harmful in the mid to long term. The home price drop trend will continue and will dip below the historic norm.
There will be no class on Thursday and Friday… 🙂
Muir
I have some friends that buy up tax certs. Last few years have been tough – mnay banks and funds used to form a slew of SPEs to buy these up. This year will be the first in which the competition should decrease. It’s an interesting investment class, and if you pick them right, you might be able to get some plum properties. Usually the mortgagees knock this out before the property ever gets turned over but in today’s market, that’s far from certain.
Does anyone think a great condo in an upscale building (say an 8 out of 10 with 10 being very top) on the beach, new unit (live in a few months but no wear and tear), direct ocean view, 10 ft. ceilings, top grade appliances, upper third floor height, already has quality marble flooring throughout and California closets at $350/s.f.??? It is a shortsale….a tad large though….. $350/s.f. isn’t bad but the dues and taxes get you. This would be $180K less than a recent sale on a much lower floor that sold designer ready….so probably the difference between this short sale and the low floor one that sold if you finish it out is $250K….. My thought is even if larger than I want…the downside risk can’t be too bad at $350/s.f. already with marble floors…. Any thoughts???? Or just please talk me off the ledge…..
jcrimes
“Muir
I have some friends that buy up tax certs. Last few years have been tough – mnay banks and funds used to form a slew of SPEs to buy these up. This year will be the first in which the competition should decrease. It’s an interesting investment class, and if you pick them right, you might be able to get some plum properties. Usually the mortgagees knock this out before the property ever gets turned over but in today’s market, that’s far from certain.”
Your post brought tears to my eyes.
Tears of joy.
Happy Thanksgiving!!!!!!!
Sorry RT.
Too rich for my blood to even have an opinion.
Any thoughts jcrimes?
RT
whenever i see a good deal…i ask myself, “will something similar be around in six months from now, or for that matter, a year from now?” usually, the answer is “yes.”
i know it may seem to put me in a camp of “well, you’ll never buy anything then.” that’s not the case. rather, it’s my personal circumstances that drive the decision. for me, a condo is a five to seven year roof over my head, mainly because, although it may be presumptuous of me, i assume i’ll get married during that time period. and if that happens…then a condo just ain’t gonna cut it for mrs. jcrimes. especially the condo i want (i.e., a massive loft). couple that (potential) personal reality with my view that the next five to seven years is a lost cause when it comes to miami condos (in terms of making a little scratch on this capital outlay) i’m in no urgent rush to buy something, even when it’s a great deal.
all that said, if you’re gonna be in the place for a longer time, the place suits exactly what you want (in this market, you can discriminate), and all the terms work in your favor, pounce on it.
after reading the above, i feel like a politician…i literally took no position.
Muir
we’ll see. i know a few guys who are pooling money to do this. i might jump in as well.
the only thing i don’t like about the tax certs is that you’re literally sticking around for two years before you know how the investment plays out (i.e., you just got your interest, or the property reverts to you). however, considering the auctions should be less competitive this time around, at least the interest rates on the certs should jump up a bit and be more favorable for the participants. a few years back, some of the funds were leveraged to the hilt in buying all of these things up. the result was that the final bid rate was so low than none of us small timers could make it work.
RT:
You’ve always been so tough and yet, now, I sense you are weakening. Be strong and remember how Rothschild got rich: he bought late and sold early. Don’t wait for the bottom – you’ll never catch it – wait till after the bottom, coming up. You’ll do fine.
Interesting….. I would have thought people would say buy at $350/s.f. in a luxury building on the beach with fantastic view (the floors are in, etc.). It is literally almost $750K less than what the current owner had into it (first owner closing price plus marble floors)….and that owner didn’t buy the most expensive pre-con price either (upper end of pre-con pricing but not the most expensive although it is an upper 1/4 of the floors)…so they bought and finished at $635/s.f. and it just closed in the second half of 2007….now can buy for $350/s.f. That is a 45% reduction in just a tad over a year after closing….with the balcony space it is about $265/s.f. The condo fees and taxes are about what I pay in rent now…so really just wonder how it would do appreciation wise to justify about $1M purchase….it would need to increase in value about $50K per year for a 5% return….that really is the killer, it ain’t gonna do that I suppose. Do I really want to spend $100K on housing a year? The downside price risk is not drastic since it is marked down 25% below the lowest priced comp. on a low floor and substantially less than similar floor listings (although those aren’t selling). Don’t I need a Sub Zero built in refrigerator and double Miele ovens even though I don’t cook? I’m pretty sure I need my own elevator entrance too, no? The other risk is the condo assoc risk….think it is OK but who knows in a year from now…..
You have NOT named the building which I guess it is in SIB ; and if it is located there and the project is Turnberry Ocean Colony it sounds like a decent deal in the here and now..
But if it is a new building in Hallandale be aware that town does NOT have the upscale sense of a SIB-and of course SIB is quite downmarket relative to BH!
Before getting too enamored with the shiny new I would look for bargains in BH and see what prices are in some of the “older” 20+years buildings that are likely very well-maintained with strong HOA s where I bet out of state heirs are bailing on inherited nice dwellings after the folks have passed on.
aj i jist reread what you typed….what the heck are you talking about. Most people spend less than us on housing and utilities. In the us we spend 12.3% of gdp. This is higher than every region except Europe.
Thanks george, you are probably right. One thing I am analyzing through county records is who all owns that same line in the building. Interesting is the number of LLC’s or Inc’s and also the developer still owns more than 10% of that line. Another stat is the number that claim exemptions….only 5% in that line, and it is the best line.
Anyone know how accurate the 2008 market assessed values are??? They are all 10%-20%+ below last year’s (2007) actual sales prices….
From The Daily Reckoning
The Turkey’s Revenge
“You can understand how fraudulent most economic analysis is,” Nassim explained, “just by looking the life of the turkey. The animal is fed for 1000 days…and then it is killed. So, if you plotted out the turkey’s life on a chart, it would look great for 1,000 days…each day, the food arrived reliably, and each day, the turkey gained weight. The turkeys would look around and say they were enjoying growth and a bull market. Momentum investors would see it as an opportunity. The quants would run linear regressions on the data and prove that the risk was minimal. ”
Ben Bernanke would describe the turkey’s life – with no setbacks – as the product of a “great moderation.” Turkey stockbrokers would assure their clients that nothing had ever gone wrong in the turkey’s life. Turkey econometricians and theorists would come up with explanations for why the turkeys’ growth would continue forever and they’d pat each other on the back for having finally mastered the “turkey cycle.” Turkey politicians would run for re-election on the grounds that they had helped create a better world. And turkey economists would project further weight gains…until the turkey was the size of a hippopotamus
Then, come Thanksgiving, and all of a sudden, something goes wrong. Alas, all the turkeys’ theories, models, and conceits were for the birds.
I just saw a stat that only 6 condos priced $900K-$999K closed in South Beach in the last 12 months…. Can anyone confirm that? That is only 1 condo in that price range every 60 days….
With the World gone mad from London to Madrid to Bombay, no place seems safe except the US. This will probably put more faith in the US among the rest the Worlds populace.
I concur AJ….just got done with a post on economics making the point that U.S. dollar will strengthen in light of what happened in India…the U.S. will continue to be a safe haven. Props to Bush for proving the U.S. will obliterate terrorists if they attack us and has the ability to secure its borders. India on the other hand is surrounded by crazy people with nuclear ambitions… The U.S. has a lot to be thankful for.
Saw you on channel 4, Lucas. Good report.
RT,
Here is the list of the most recent 100 sales over $500K:
http://www.zilbert.com/100_most_recent_sales.asp
The 6 condos sales in the $900K-$999K might be correct but there are clearly many more sales above and below this price range.
The Vue update
Can anyone tell me if the Vue is going to have an assestment or increase in HOA fees? Have it improved? I am thinking on buying a 1 bedroom? My concerns: asssestments, foreclosures, noise . Is there hope for this building? Prices are very good.
Fernando,
I’ve been calling $75 sq/ft on the Vue for months.
I’ve been calling that because of everything you mentioned and some you did not.
The problem with these high-rise is the property tax. Prices are very cheap to buy and should be go even lower. Association fee’s are high but that should settle whenever the building recovers. The problem is can you get the government to lower the property taxes to a reasonable amount instead of the crazy figures of $500k market value assessment for a $150k unit. The average income in Miami is around 30k. With so many units available, there is no way you can fill that inventory with such crazy taxes.
Hey fernando if you have an email address I have a very useful chart for you
leap,
and $150k is 5x your 30k which make the 150k a “luxury” condo, except it’s not.
besides the 22 mils on the 500k assessed, then there is the 50 cent+ per/ square ft and special assessments.
If it were truly luxury, fine, no problem.
Fernando#139
Despite prices that are falling faster than a condo saleslady’s neckline Vue has some very surprising real cachet : a younger member of the Badrutt family in St Moritz that has owned and operated Badrutt’s Palace for years in that tony Swiss village now operates a bar/lounge on the ground floor north corner of Vue that is first rate in appearance, drinks and vittles .
I have been there late afternoon early evening twice and it was not noisy but because they have outside seating areas and sound travels I suggest that you drop by at a later hour to be certain that late night revelers won’t disturb your slumber as you dream about all the $ you saved when you purchased there.
And who knows but you might find an unhappy Vue owner sitting at Badrutt’s bar lamenting his $350 per square purchase upstairs and now ready to DUMP the place.
I noticed across the street that Infinity looks ready for occupancy and that the building garage occupies the first 9-10 floors of the narrow building so there goes the idea of self parking ; valet city here you come
Thanks for info. I was in the Vue today and valet parking is back and it looks cleaner than 3 months ago. BUt I do not know the financials of the building. I am looking at a unit in the 22 nd floor so I do not know how noisy it could be. The vue is good. At USD 100 sf I do not expect marmol baths but I do not want to expend USD100K and get into a problem. If anybody lives there and can give me some feedback as an owner or renter, Please do so. Continental is managing the building, is that good? Thanks
RT comment 129 – Home is where the heart is. If you can’t be happy or content without a 5% return on your home, I feel sad for you. of course know one should embark on foolish purchases with blinders on but your constant and sometimes over analysis makes me wonder. Don’t buy at a bad price, hold back if your instincts or homework tells you its got further to fall but PLEASE DO NOT TELL US THAT YOUR HOME NEEDS TO BRING A 5% RETURN TO BE YOUR HOME.
RT comment 136 – “Props to Bush for proving the U.S. will obliterate terrorists if they attack us and has the ability to secure its borders. India on the other hand is surrounded by crazy people with nuclear ambitions… The U.S. has a lot to be thankful for”.
Terrorists would be crazy to attack us during the course this country has been on. To do anything to disrupt the last seven years of US policy and direction would have been counterproductive for any thinking terrorist.
The U.S. has always had a lot to be thankful for and never much so as the opportunity for real change that is upon us. Opportunity” being the key word, only time will tell. Happy Thanksgiving to all!
I enjoy this website however I have seldom posted. After reading so many opinions on this blog I felt compelled to offer my opinion.
For starters, RenterTom spends way too much time professing his thoughts.
Nobody including the talking heads on CNBC have any idea on what lies ahead.
We all know we are enduring a serious economic problem.
However, in time, like all other times before, the US economy will prevail.
The excesses will be absorbed, unenployment will improve, and the real estate market will recover.
Undoubtedly, this is a great time to be a renter. One can save money yet still live an a beautiful condo unit.
In the long run, however, wealth is not created by renting.
As pointed out in a previous post the average salary in Miami is 30k. Unfortunately for those in that income bracket, they will not be able to afford a luxury condo unit in Brickell.
But, there are plenty of people with the assets to purchase these units. Are we close to the bottom? When we look back 10 years from now we will almost certainly realize that 2009 was much closer to the bottom than the top.
If you plan on living in the unit all the better yet investors will also do well.
Buying allows for great tax advantages as mortgage interest is deductable and the unit is depreciated over time adding additional tax benfit. Also, an investor can deduct the condo maintainence fees as it is part of the cost of carrying the property.
Therefore, one must carefully run all the numbers to compare the cost of renting to that of buying.
At current depressed prices there are many very good opportunities available.
RenterTom is getting a great deal now. However, for one willing to hold good properties for the long term I am confident you will be way ahead of the game.
It is impossible to pick a bottom. I have been around longer than most and have seen all the doom and gloom before. The world is always coming to an end. This time is no different. It’s just a different story on how we got into this mess.
Talk to your accountants, run the numbers.
Buying something you like now will turn out to be a great investment down the line.
Michael, er pollyanna, pull your head out of the sand or whereever. You are a clueless fool and full of babble. Since when is owning a house or condo something that CREATES wealth??? Don’t be silly and turn off those infomercials, real estate, particularly housing PRESERVES wealth if done right with MAYBE 1% gain over inflation. As far as I can tell, wealth in real estate is made through construction and development, otherwise it ain’t a wealth creator. Oh by the way, I can tell you where things are going in housing….substantially DOWN in 2009 for the Miami area. What are the GREAT tax advantages??? Mortgage interest rate deductions are severely limited by AMT and the depreciation deduction on rental properties is a temporary cash flow bonus and such depreciation is recaptured upon the sale of the property….which will probably be a at a HIGHER income tax rate! Your confidence is base on igonorance, seriously you are clueless to the point of being an idiot. WTF are you talking about the U.S. economy will prevail….we won’t collapse but we are going to see a 5%+ GDP pullback….yes 5%. Talk about a recession. Unemployment will certainly reach 9% across the country. The effective fed funds rate is at 0.3% and demand continues to fall, we have massive deflation with no hope of inflation as nominal priced debt exceeds the real prices of collateral….banks are toast without fed govt intervention….just look at Citi for goodness sake. Are you really that clueless??? Everyone needs to prepare for this financial hurricane, the warning have been issued and winds are at 50 MPH and you’re out walking your dog in denial….crazy.
RCR – are you Michael too? I’m glad you feel sad for me, I couldn’t be happier. Sorry that I am not IN LOVE with a house or condo….it is JUST a house or condo, not a person or a spouse for goodness sake…I don’t find happiness and fulfillment in things per se. It provides a roof over one’s head, not a source of intense happiness or something to fulfill you and your “lifestyle” aspirations. The fact is, I expect a house or condo to keep its value in real dollar terms. The one I just analyzed had the following flaws: (1) a 10%-15% further downside price risk, (2) probably too much condo for my needs, (3) possible substantial condo fee increase risks as most owners are “investors” (now massive losers…explains this first knife catcher priced short sale). I did an analysis….I’m sure many out their wished they did too instead of being a “Clueless Michael” above….all but one of the good line of condos are investor owned…the ONE that had a homestead tax exemption is also for sale and has been on the market for a while (was very nicely finished and the owners live there) and they will take at least a $250K loss (including transaction costs) and probably $500K as they have to continue to reduce their price…..this is in LESS THAN 18 months!!! They paid what was a reasonable pre-con price too. CRAZY….obviously NOT a good Miami Condo Investment don’t ya think. Do I want to lose money like that by buying at $1M now and risk condo fess based on a bunch of investor units? Do I want to be trapped in an illiquid asset? I can take the $1M and easily make a risk free FDIC insured insured which will pay for my rent instead with no risk…..AND rent the exact same unit on another floor. So perhaps I will be united with my condo “love”….just at ridiculously lower price, no risk, and no commitment…. Renting, oh how sweet it is! And this is from someone who has always owned since graduating from undergrad……
Who cares about “picking a bottom”? In real estate, it is best to wait after the bottom anyway….oh you silly realtors, go back to whatever you did before you learned to take crappy photos, write typo filled descriptions, make inaccurate statements, and point out wood floors that are really pergo instead. We’ll know when there is a bottom based on supplies….then you’ll have 1-3 years to still buy at those prices…..so silly.
Michael said – “In the long run, however, wealth is not created by renting.”
– Says who, you? Oh please, renting creates a lot of wealth by forcing people to have housing that proportionate to the incomes (versus buying too much house and becoming house rich but cash poor) and saving and invest the rest.
Michael said: “At current depressed prices there are many very good opportunities available.”
– Current DEPRESSED prices? Heck no, they haven’t even returned to their market prices yet….that’s still what another 20% to go? You can talk about depressed prices only prices drop at least 50% from todays prices. But right now they are still elevated. Prices are continuing to fall, inventories aren’t. Don’t be a knife catcher.
Michael said: “RenterTom is getting a great deal now. However, for one willing to hold good properties for the long term I am confident you will be way ahead of the game.”
– Don’t be silly. You won’t be ahead if you pay too much….so what is that confidence based on? Some magical belief? Babble babble babble.
If anyone is wondering what house prices in Miami will look like in 2 years. Please go to realtor.com and look at 48439/48346 in Michigan.
You will see that realestate is about 80 bucks a square foot.
And for all you naysayers… in 2001 it cost more money to own a house in Michigan than it did in Miami. LMFAO!
You had a 400% run-up in prices. now you get a 400% run down, enjoy the 80 bucks a sqaure foot suckers.
P.S.
Never trust a Realtor on Commission. Unless it Lucas, cause he is a bad ass.
Welcome to Economic armageddon my friends.
http://www.realtor.com/search/listingdetail.aspx?sby=1&srcnt=220&sid=6480dde6fb9e4f43988cfdbc83dadf76&fhcnt=8&loc=48439&typ=2&ml=8&pg=2&fhpg=2&lid=1104933464&lsn=19
Shiller: Crisis May Run for `Years and Years’
How convenient that people attacking RT always post right next to one another. Just like how AJ….errr….I mean those people were all attacking other bearish people on this blog. I just saw some pretty cool scatter plots of price/sf on another blog conclusively showing a downward trend…..do not buy now.
Michael,
Every one of your points I have addressed at length with hard numbers, using real examples on previous threads, some would say ad nauseum.
Factually you are wrong, you are lead astray with inflation expectations and this I have also addressed.
Moreover, you just are very financially naive.
However, as I have pointed out, I welcome all sales, they are all comps.
Every new higher sale on the way up was a new comp, the same holds true going down.
I’ve even posted my lowest find on the Vue here which was not yet posted by Lucas.
–
Whether Fernando buys or not, whatever I say or RT says, matter little to the market.
Even Jorge’s spoken words as quoted on the Herald will not change the market, so what of RTs words posted here?
Maybe unlike RT I do so much wish for more sales. To me it is a very good thing.
–
Finally, you speak of “luxury condo unit in Brickell.”
Luxury, that is to say, privacy, quiet, tranquility, assurance that tomorrow will be as comfortable an experience as today, these qualities are not readily available in many of these condos.
We are a group of friends (5) buying a condo as a future investment but would like to use it to vacation until hopefully we can get a good return. We would probably use the condo just a week every month. Is there normally a restriction on having different people using those weeks?
We are very interested in 50 Biscayne, any info someone can share about that building? Skyline?
Also is the process of short-sell bidding really taking 3 months as some realtors claim? Thank you
My post was not to get into a pissing match with RenterTom.
We all know h0w bad things are and are going to get. It’s no secret.
Those who can afford to hold will hang on, those who can’t will hang it up and let the banks deal with their mess. But in the end, as always things will normalize.
In 1986, I bought a condo in the northeast when there was nothing but doom and gloom.
I rented it out which covered my costs, realized the tax advantages and sold it 17 years later for 250% what I paid.
Those who have cash available now are in a wonderful position for the longer term.
I know investors who are buying blocks of 10 or more condo units for cash at prices approx. 40% discount to the pre-construction prices.
The rental prices on these units average $2200/month.
The monthly maintainence is 700 and taxes are 400.
So, for 300k down in cash one nets 1100 monthly exclusive of the tax benefits.
Now, the same 300k can be invested in treasuries or muni’s with an approx. 3% return.
Also, remember as the economy improves and IT WILL… rental prices will go up.
There are plenty of individuals and funds with cash and within a few years they will have bought up the excess inventory.
Then as rents rise the pendulum swings the other direction.
It’s an endless cycle that repeats over and over.
I am not talking about buying and flipping. I am talking buying with cash, renting, and holding. It’s another great opportunity for those with the means to take advantage.
900 guy,
you are not worth the dirt under my shoes to even invoke my name. Who the F cares if you want to buy a flat in Miami or live a wretched life under McArthur Causeway. The likes of you can only dream of 900. The closest you will ever get to 900 is a slum 10 blocks to the West. A Loser like you should refrain from taking my name.
Dear Vaddi,
Don’t call me dirt because you don’t know who I am. I don’t take kindly to insults.
Dear Aj
Don’t call me dirt because you don’t know who I am. I don’t take kindly to insults.
Michael,
I am glad to hear among all the doomsday predictors a sound voice !
sorry i am not very good at future value calcs. i am referring to michael, who sold his condo for 250% of purchase price 17 years later. can anybody give me the equivalent interest rate on this? i know about 7.5% doubles your money in 10 years. seems like his investment gave about the same return (7.5%) over 17 years. not bad, but not exactly great either, considering your time and money is tied up in a property.
Gables,
Good question.
My point however was to convey that as always markets are cyclical and they always come back with time to normal.
However, with regard to your question, as time progressed rental income increased and the investment became cash flow positive for several years.
Bottomline, if you find a great unit you love to live in and can afford to buy now at these prices go for it. In the long run you will enjoy what you bought and with time it will grow in value.
Lastly, if you have plenty of cash, I strongly believe you will make money in the long run by renting and holding.
Don’t want to beat a dead horse…RenterTom will take care of that.
Best wishes to all for a happy and healthy New Year.
Michael said – “My point however was to convey that as always markets are cyclical and they always come back with time to normal.”
– Not necessarily. Look at the tech stock bubble crash…when is that coming back on the up part of the “cycle”? Same with the housing bubble crash…so your naive assumptions are just that naive. Invest at your own risk that this is just a “cycle”…….LMAO.
And regarding “beating a dead horse” from your post you still don’t get it.
Oh please release me, let me go
For I can’t afford you anymore
To waste my cash would be a sin
Release me and let me buy again
I have found a new Condo
And I will always want it near
Her colors are warm while yours are cold
Oh release me my bank and let me go
Please release me, let me go
For I just won’t pay you anymore
To waste my cash would be a sin
Release me and let me buy again
Let me go, oh release me my bank
Let me go
The Smart Money getting in tune with the straight and narrow.
If you bought a home in 1926 it took until 1954 to break even nominally….so there you go michael….
Michael,
The problem is most people in todays world do not buy and hold for 17 years. Jobs, marriage, etc force them to move rather quickly-every 5 to 10 years. This is the new paradigm we face in the modern real estate world. The entire RE scheme needs to be reformed for things to get better. A 6% commission is now too great. Deflating RE prices are killer. People who look at a 7 year horizon for home ownership are now extremely reluctant to buy with all of these issues. Buying a home under these conditions is a losing proposition. And most people cant buy to live in, and then rent out when they move to another location because they will still lack down payment ability (money is tied up in rental property). I dont dispute the ability to make money in the long run, just not sure whether you make enough to justify locking up your resources for so long. But things will change as prices continue to decline. Been following a couple properties that have been drastically discounted for a couple of months with no action. Seems like the bottom is still a ways off.
AJ must be bitter that his boyfriend left him because his real estate portfolio collapsed. He only “loved” AJ for his imaginary money.
Is it better to have loved a condo and lost or to have never loved a condo? Neither, it is better to just rent…since losing a condo usually is very costly.
The WSJ MarketWatch lead headline today is:
ECONOMIC PREVIEW
Worst job losses in almost three decades expected
Manufacturing, services activity also headed lower, forecasts say
Gables and Michael,
Gables, “I dont dispute the ability to make money in the long run, just not sure whether you make enough to justify locking up your resources for so long.”
–
But, I do dispute it.
He makes two points.
One: He bought a condo in 1986 and sold it in 2003 at a 250% profit.
Two: He knows investors who are buying condos at 300K. Their fixed expenses are 700 HOA and 400 towards taxes. Income is $2200.
One at the time.
First, the 2003 sale was an aberration.
He sold that during the greatest bubble in Real Estate.
It’s not “It’s an endless cycle that repeats over and over” as he states.
Just how many times will someone have to put up Case-Schiller with the sales of the last 100 years?
Second, It’s glib to quote those numbers of 300K and the fixed costs and then not do the numbers.
I have.
His glibness is astounding. (I no longer say he is financially naive, as it is obvious his intention is to either sell or bring in investors.)
Yes, rents go up, so do taxes and HOA fees. Let’s not forget the possibility of a special assessment during the 10-15 year time line.
But, let’s use his numbers (though suspect)
On an 11 month occupancy, it represents a 4% return.
He knocks a 3% return from other investments.
So for an extra 1% return, I should buy a condo?
–
My quick analysis just scratches the surface of how many holes his statements have.
Michael, by all means, buy a 100 condos.
All are my new comps. Thank you.
900 guy says
“Dear Aj
Don’t call me dirt because you don’t know who I am. I don’t take kindly to insults”
OK tell us who you are. John Gotti of Miami?
Anonymous guy making threats on the internet! Pathetic.
Muir,
Thanks. My point was that even though you can make money in real estate, with appropriate buy and sell points as you noted, the profit is not that much greater than many other safer options with increased liquidity options. People are always bragging about how they doubled their money in some investment, but when you consider the time period over which that occured, the investment was not that great especially considering the risk. Within the next few years we will most likely have fixed income products like safe bonds with yields approaching 10%, and real estate will not appreciate at that pace again for quite some time. The key to the next decade is the preservation of capital upon which to add wealth, and not credit risk for potential gain in the future. Assuming profit based on an increased future value will be a risky investment approach for a number of years to come. Dividends and yields will dominate the landscape for a while.
Don’t forget about the holding costs and transaction costs when you go to sell real estate….that is killing people now.
Gables,
I knew you knew.
🙂
The new HOV toll system is starting from December 5th in the Northbound I-95. But guess what you can only get on the toll lane by entering from no norther than McArthur Causeway (I-395). If you live Mid or North beaches, you can forget about getting on the express toll lane from Julia Tuttle or 79 st causeway or 125th st. So does anyone living on the mainland from 25th st or Norther.
SOBE and Downtown living got that much sweeter.
Folks, This is my last remarks on this thread. I posted to to engage in discussion and share my thoughts. In the end there are winners and there are losers. We will not find that out for several years.
As for the doom and gloom remarks it is my opinion that they are wrong.
Comparison to the depression as one blogger writes is absurd.
During the depression banks were wiped out. There was no FDIC insurance.
Peoples life savings were gone and they had to stand on bread lines.
Today is an entirely different situation. Your money is safe, unemployment is at recession levels and will probably worsen in the next year but that will eventually improve. Banks are well capitalized and lending in the future will loosen up.
I think this is a great website and I think Lucas does a great job.
As for me, I realize that neither my posts or any others will have any effect on the real estate market. I have dabbled here and there as an individual but I don’t rely in any way on it as primary income.
Lastly, RenterTom, as per your remark on the tech bubble…I see no comparison.
During that bubble, everbody and their grandmother bought anything with a dot. com in its name and drove up the prices. They were nothing more than pieces of paper that were being traded several times a day by people sitting at computers. Companies with no earnings and a dream were bid up multples of what they were worth. In fact, nobody even knew what they were buying. You can’t flip a piece of property several time a day.
With real estate you own something tangible that you can enjoy.
The tech bubble will never reinflate. Real estate will again appreciate in value.
America is a great country and we will emerge from this recession as we have before.
I wish everyone a great holiday season.
Michael,
Good insight. Keep posting. In a hopeless world, a ray of hope is the only thing that keeps everyone going. America is the most hopeful country in the World. They are the greatest optimists. Optimism is the only thing that has gotten us through wars and deppressions. It is the only trait that made us do the near impossible acts of win the World war II or send a man to the Moon. Mercifully the defeatists are a minority amongst us, notwithstanding a vocal few on this blog predicting financial armageddon and the day of reckoning. Hopeless people are non achievers. They declare defeat even before they begin. I am an optimist and I foresee incredible future for America and we have not even scratched the surface of the next big technological innovations that are about to put this country at the forefront of Worlds nations, China be damned.
Is Michael AJ or is AJ Michael?
Inquiring minds want to know.
Michael said re: the tech bubble:
During that bubble, everbody and their grandmother bought anything with a dot. com in its name and drove up the prices. They were nothing more than pieces of paper that were being traded several times a day by people sitting at computers. Companies with no earnings and a dream were bid up multples of what they were worth. In fact, nobody even knew what they were buying. You can’t flip a piece of property several time a day.
With real estate you own something tangible that you can enjoy.
The tech bubble will never reinflate. Real estate will again appreciate in value.
Michael could just have easily said:
During the Real Estate bubble, everybody and their grandmother bought anything with “Related Group” in its name and drove up the prices. Condos were nothing more than pieces of paper that were being traded by people sitting by the pool who had no intent of ever living in them. Properties were priced way beyond historical market levels and dreamers with no income were allowed to bid units up multiples of what the market could realistically support. In fact, nobody cared what they were buying as long as it started in “c” and ended in “o” and rhymed with bozo.
You could flip a piece of property as much as you wanted as long as the next dreamer (aka Real Estate Investor) in line was able to secure a larger no-doc loan. By staying out of this market and renting, you can buy all sorts of tangible things to enjoy on the $4K+/month you are saving yourself. The tech bubble MIGHT NEVER get back to bubble valuations while RE in Miami WILL NEVER get back to bubble valuations adjusted for inflation. The tech bubble started with 2:1 leverage and ended with 2:1 leverage. The RE bubble in the most speculative places like Miami and Las Vegas started with infinity to 10:1 leverage and ended with about 3:1 leverage. Leverage fueled the RE bubble much more than the tech bubble… scary thought considering the leverage that fueled the RE mania is never going to come back in our lifetimes. Desire for home ownership wasn’t the fuel, easy/criminal access to leverage was the fuel.
In the 1920’s before the depression properties in Miami were flipped several times in one day. I think it the records indicate one property changed owners 8 times in one day.
During the 1920’s real estate boom people in Miami had the same leased BMW’s, high property taxes and insurance rates. “Rooms to Go” had the same two years no payments no interest plan. We are much better off today than in the 20’s.
https://secure.roomstogo.com/index.cfm?fuseaction=creditFramesMain&target=creditAppEntry&CFID=15847111&CFTOKEN=92424701
Things are good. I can finance everything I own including my toothbrush.
JL – “Desire for home ownership wasn’t the fuel, easy/criminal access to leverage was the fuel.”
– Yep, it was a credit bubble economy, not just a housing bubble. Heck, it just happened to have condos be the focus, it could have easily been tulip bulbs again. Had the repayment risk not been able to be passed along, this thing would never have happened to this extreme.
Did you see this report?
Rental Rates In South Florida Drop Like Economy
http://cbs4.com/consumer/rentals.home.real.2.875649.html
– Rentals prices are going down down down and the number of renters goes up? Why? Because we have that much over supply of condos…. Better sell your Miami condos first AJ before the next big drop.
I know the focus here is on Miami. However, has anyone noticed just how bad it is in some of the other South Florida counties?
In St. Lucie county, homes that were selling in the $300’s are now selling below $100k. And I’m not talking about just a few here or there. There are hundreds of brand new single family homes on 1/4 acre lots that can be had for less than $100k.
Funny thing is, when I tried to figure out how these looked just as rental investments, I figured you’d be lucky to get someone just to squat in one for free. There are simply no jobs in St Lucie. All the employment there is real estate/construction related, so people are fleeing the area. And the taxes are still sky-high.
Who knows where the bottom is in these conditions. Just when you think something makes sense from a fundamental standpoint, the underlying fundamentals worsen.
RT,
With regards to your last post I was wondering the very same thing just yesterday. As we all know from Finance 101 prices in RE markets are set by supply vs demand. Since the number of renters is increasing as a result of people loosing their houses and needing a place to live, why are rental prices not increasing and surprisingly enough dropping like a rock? One would think with demand for rentals increasing the rental prices would go up accordingly. I can only think this has to be attritbuted to the oversupply of condos currently on the market and the number of desperate investors looking to subsidize at least part of their monthly cash outlay. Thoughts?
Angel – That is exactly why. Think of the diamond market and how supply is controlled…that is what developers did, releasing a little at a time and other games. Well, now diamonds/condos are being dumped on the market and prices are plummeting both to own and to rent. With low prices, it doesn’t make sense to mine any more diamonds or build any more condos since the costs to do so exceed the prices on the market. It is a glut and the gig is up…….
RT- Thought so. Thanks.
Miami Herald headline:
“South Florida bankruptcies up almost 50 percent from last year”
– Wait until 2009……
Renter Tom, I think you should change your handle to Debbie Downer. You bum me out.
The idea that there would be more people looking to rent makes sense. Many people that would have qualified for a mortgage in the past may now have no choice but to rent. Also, anyone leaving a foreclosure behind would have to rent.
However, if the total number of people seeking a place to live (buy or rent) is down, then for every new person looking to rent, you might have another 2 units go empty, adding to the supply (and pushing rental prices down further). Former “for sale” units are becoming rentals.
You wouldn’t even need additional construction added to the market for this to happen. The fact that there are new buildings still coming online only makes it worse.
Also, the rental prices are governed by what renters can pay – not just the number of people looking to rent. In this economy, with unemployment numbers rising, things could get worse for the rental market for some time before they get better.
A lot of new construction, a lot of empty investment properties, a lot people going back to having roommates, etc. more and more supply. I am told for every foreclosure being sold two more take its place…..things are capitulating out there…
Renter quality is another big issue. If you are renting because you were foreclosed on, you have credit issues. The few who are renting with good credit, rather than wasting the good credit on home ownership, are in the drivers seat. Really a bad time to be an amateur landlord.
A friend of mine lives in a managed apartment complex. It has gone downhill big-time. The managment company has essentially eliminated any qualifications for renters there just to get the units rented. The place used to be a decent apartment complex. Lately, it looks more like a slum. Also, many of the units have what seems like two families living in them.
this is when you hope to have a pain in the a$$ management company in your condo or apartment complex. in the past, strict enforcement of rules was a nuiscance. Now it is an advantage.
gables – You are sooo correct. A well run HOA is there to protect your property values and it needs very good communications, open meetings, and a friendly atmosphere. Where I rent now they have been tightening up and up and up….access controls for everything, interviews with the board to rent, you name it. I might even buy in this building…just not yet the rent is too good.
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