People often ask me why I chose to focus on condominiums rather than single family homes when I began my career in real estate. I guess the answer is mainly attributable to my formal education and the work experience I gained after graduating college.
As mentioned in the About Me section of this site, I graduated from the University of Illinois at Champaign-Urbana with a Bachelor of Science Degree in Finance with a specialization in Investments. After graduation, I worked as an equity options trader on the floor of the Chicago Board of Options Exchange for four years.
It became second nature for me to begin to analogize most aspects of my life in investment terms. Condominiums to me had similar homogeneous characteristics as that of a financial security than single family homes.
In my opinion, it is much easier to analyze the true market value of a condominium than it is for a single family home. A price per square foot analysis of condo units in a building, and even a neighborhood, reveals more truth than the price per square foot analysis of single family homes on a particular street or in a particular neighborhood.
A 2 bedroom condo in a particular building, in many instances, will have the same characteristics of another 2 bedroom condo in that same building, such as shared common areas, amenities, year built, square footage, appliances, floor plan, maintenance fees, view, parking spaces and so on. Any differentiations in the aforementioned qualities can be easily adjusted in the value of the subject property versus comparable properties.
It is much more difficult to assess the value of a single family home. It is common to see a small, outdated home situated right down the street from a large, recently built home. Of course there are ways to appraise the values of each by making adjustments for any differentiations in each home but it just isn’t the same, in my mind. A home buyer may fall in love with one home while he or she finds the home right down the street an eyesore.
It becomes much more expensive to turn a home down the street into your dream home than it is to turn a condo down the hallway into your ideal abode. The expense of replacing or changing the floors, paint job, window treatments, light fixtures and other elements of a condo can more easily be ascertained.
These thoughts guided me into the decision of choosing to specialize in condominiums over single family homes when I began my career in real estate. As the housing bubble talk began to escalate a few years ago, I began to think of how nice it would be conceive a way to hedge real estate investments for the average home purchaser or investor in case of a bubble-popping scenario.
I guess fellow Chicagoans at the Chicago Mercantile Exchange had similar thoughts. They created a tradable home market index based upon the Case-Shiller Home Price Index, which measures home prices based on recorded changes in home values and a repeat sales methodology.
The futures and options instruments that were enacted by the CME began trading in May of 2006. The purpose was to offer jittery homeowners a way to hedge the investment in their homes against future price declines. The CME also saw a large interest from investors to directly participate in the much-talked-about housing market.
While being a giant leap in the right direction, the CME’s housing index is far from perfect. They introduced tradable securities based upon large metropolitan areas which include the following: Miami, Chicago, Boston, Las Vegas, Los Angeles, New York, San Diego, San Francisco, Denver, Washington, as well as a weighted composite index.
However, it is difficult to adequately hedge the value of a condo in a building such as The Setai in South Beach from a condo in a boutique building in Hialeah using their index.
I have decided to create my own, localized, index. This index will be based upon market data derived from major condo buildings in Miami. I will create a graphical representation of a six-month price per square foot moving average using data of closed sales and a month-to-month price per square foot analysis of units currently on the market. I may include other relevant statistics in the future to provide more in-depth information relevant to the Miami condo market. I hope you guys trading the Miami housing index at the CME appreciate the information. I’d love to hear from you.
I plan to release an index update each week. At the outset, I will rotate Miami neighborhoods for a total of four neighborhoods (South Beach, Brickell, Arts & Design District and Miami Beach minus South Beach). In the future I plan to add Downtown Miami and Park West as its own index once the nearly constructed buildings in those areas are fully built.
I’ve decided to name my index the “Miami Condo Index”, or MCI for short. Obviously my index won’t be tradable as is the Chicago Mercantile Exchange’s housing index, but I hope that it will provide more insight to localized housing markets throughout Miami’s major neighborhoods.
The Miami Condo Index will launch next week with an in-depth look at Brickell.
I urge other Realtors throughout the country to create their own localized housing indices to fully encompass their own markets and provide market transparency to home buyers like no other.
Foreclosure Listings at Vue at Brickell Doubles in Three Weeks
On May 24, 2007 I posted an entry entitled, “Vue at Brickell – Overpriced or Insanely Overpriced?“, in which I questioned the average price per square foot of the condo units at a building called Vue at Brickell. I surmised that mortgage fraud may have been partly at fault for prices at Vue at Brickell reaching such irrational levels.
At that time there were three listed foreclosure units in the building. Now, there are a total of six. In three weeks the number of the listed units that are currently in the foreclosure process have doubled. Those are just the ones that are listed. I’m sure there are others. Below you will see those six listings, as well as relevant property information.
(FL#=floor number, #BEDS=number of bedrooms, #FB=number of full baths, #HB=number of half baths, LA=living area square footage, LP$=list price, LP$/SqFt=average price per square foot, #GAR=number of parking spaces, WTRFR=waterfront?)
I find it humorous that two of the listings categorize Vue at Brickell as being a waterfront building. It is far from being a waterfront building.
As you can see, the average price per square foot of the listed foreclosure units at Vue at Brickell is currently $475.81. The non-foreclosure units in the building have a much higher price per square foot. Only one of the six listings penetrated the $400 per square foot mark on the downside. Mark my words, within 18 months the majority of condo listings in Vue at Brickell, both foreclosure and non-foreclosure, will be under $400 per square foot. The availability of such a large number of newly constructed condo units within the next 18 months, in much higher-end buildings, will be the driving force. These buildings already offer price points below $400 per square foot and the growing supply will push those prices even lower.
It now more important than ever that you research various buildings in the neighborhood and receive a comparative market analysis when making a home purchase to ensure that you are making a wise investment. You know what they say…”Buying a home is the most important investment that you’ll make in your life”.
Cynergi Buyer Wants Out
A guy named Evan left a comment on this blog and dropped me an email over the weekend. He bought a 1 bedroom/1 bath (D floor plan) with 962 square feet of interior space and a 204 square foot balcony on the eighth floor at Cynergi. He went into contract on his unit in June of 2005 and is looking to find a buyer to take over his contract. The price that he locked into was $380,000 but he is willing to accept $360,000 to get out. His unit comes with a $10,000 upgrade package, a full granite backsplash, washer/dryer and one parking space. The following are the prices that the sales agent working for the Cynergi developer quoted him in March 2007 for other D units in the building:
2nd floor – $425,000
3rd floor – $430,000
6th floor – $450,000
7th floor – $460,000
8th floor – $470,000
My reaction was holy crap! Those are unrealistic prices! I dug through some of the old price lists that I still have for Cynergi to see what those units were listed for a year or two ago. I used to get regular pricing updates emailed to me by a few of the sales agents who worked for Cynergi. I found a price list dated February 6, 2006. It has D units priced from $395,000 (2nd floor) to $425,000 (8th floor). Looks like Evan did get in pretty early. I still think that the prices are high even at $360,000 but I figured that I would post his situation on here in case someone knows somebody out there who is looking to buy a unit at Cynergi. Maybe they can help each other out.
Also, I’ve heard rumors that the developer of Cynergi is thinking about downgrading the kitchens and bathrooms on the remaining unsold units to cut back on costs. Does anybody out there know if there is any truth to this? It makes sense to me since it will be nearly impossible for them to sell those one bedroom units priced in the $400K’s.
The picture slideshow below will show you the floor plan for a D unit. It will also show you the kitchen and bathroom as they should be delivered to contract holders. I took these pictures a while ago when the model showroom still existed.
If anyone else out there is looking to get out of their contract to purchase a Miami preconstruction condo before they close, feel free to send me an email or drop a comment describing your scenario. Later this week I’ll discuss 10 condo units that are up for grabs at Midtown 4 They were purchased by an investment group when sales first launched. The group is looking to sell the condos for exactly what they paid. I will post that story once I get all the details from a member of the investment group that I met this past weekend.
Update: Evan has reduced the price of his one bedroom unit at Cynergi to $345,000. He will consider all offers.
Ten Museum Park – More Opportunities as Closing Dates Approach
I met with a sales rep today who works for Ten Museum Park to go over pricing and availability for a few out-of-state clients who are interested in buying a condo unit there. I took in a lot of good information during my 30 minute meeting and want to share it with everyone. Ten Museum Park has received its TCO (temporary certificate of occupancy) and closings for units on the first 35 floors will begin shortly. I learned that the developer will grant one extension to people scheduled to close. Then, a letter will be sent out notifying the contract holder of a firm closing date. They will be charged for each day that they are unable to close at an 18 percent APR.
There are a lot of great deals currently available at Ten Museum Park. People holding contracts for condo units in the building were required to put down a total of 20% in deposit money. The first 10% was payable in January 2004. The second 10% was due in December 2004 when the building broke ground. Many of those people are currently looking for a purchaser to step in and close for them. In many cases they are willing to sell their unit at a price point that would allow them to break even or accept a small loss. This is an opportunity to get in at January 2004 pricing. The developer charges the contract holder a transfer fee of 3.75 percent and a co-broker fee of 3 percent. Most contract holders have factored in this cost to compute their break-even point. The worksheet below will show some of the deals that are available. The majority of these deals do not appear in the MLS. The data used to create this spreadsheet was provided by a sales agent working for Ten Museum Park.
The best deal in the building right now is unit 1607. As the worksheet reveals, it has a price per square foot of $363. That is remarkable for a building of this caliber!
Ten Museum Park is located in a Downtown Miami neighborhood now known as Park West. Besides Ten Museum Park, Park West will have three additions to the neighborhood in the next 12 months. These include the following:
There are a few things that I love about Ten Museum Park. One, is that it only has 200 units. I definitely wouldn’t call it a boutique building but it isn’t a monster development either. Two, the price per square foot is much lower than in these other buildings. The building was able to launch sales and begin construction in 2004, prior to when construction costs began to escalate. These other developments weren’t as fortunate and had to price their units in accordance with the higher construction costs that needed to be taken into consideration. I also love the open floor plans at Ten Museum Park. If you’re a fan of lofts then you’ll appreciate the layouts of the units at Ten Museum Park.
I learned today that when the real estate market was red hot, a few of the “04” units sold as high as $1.3M during resales. Those people are pretty screwed. Fortunately, the lender, Mellon Financial Corporation, only allowed the unit to be resold a maximum of one time. It may seem logical for some of these buyers to walk away from their deposits seeing that comparable units are now on the market at a 38% discount to what they paid. If one of the resale buyers walks away from their deposit then the initial buyer is on the hook to close. I learned, however, that if this scenario were to occur, the 20% deposit forfeited by the second buyer would be applied to the initial purchase price of the first buyer. That is a pretty sweet deal! An instant 20 percent in equity just like that.
I’ve scheduled to have a tour of Ten Museum Park late next week. I’ll be sure to take lots of pictures and shoot as much video as I can. I’m looking forward to seeing the penthouse unit with the 1,298 square foot rooftop terrace and vitality pool.
Icon Brickell – 2 Bedroom+Den/2 Bath Becomes Available
Word came to me today that an early contract holder at Icon Brickell has passed away and his contract is up for grabs. The contract has passed from his estate to the developer and The Related Group has it back on the market at the initial price offered when it was purchased in mid-2005. Icon Brickell sold out relatively fast in 2005 and availability is now limited to the condo-hotel units in the Viceroy tower. The Related Group is the most successful developer in Florida and has the reputation of selling out their buildings within the first week. They are known to price their units very well and to leave profit on the table for purchasers rather than squeeze every last penny out of a project. They price their units slightly below market, sell out and then move onto the next project. Great business plan, and it has worked quite well for them.
The condo unit that just came back on the market is unit 2703, located in tower one of the Icon Brickell development. It is floor plan B, which has a southeast view. The picture below will give you an idea of the view that you would have.
It is a 2 bedroom plus den/2 bath with 1,503 square feet of living space and has a 219 square foot balcony. It is priced at $916,000, or $607 per square foot.
Icon Brickell is the second development with the Icon name attached. Icon South Beach was the first and is one of the most well known buildings in South Beach. Icon Brickell is sure to be as spectacular as its South Beach counterpart. The picture slideshow below will show you some renderings of the building and amenities.
Mortgage Rates Continue to Head North
Existing home inventories are up, foreclosure rates are rising and mortgage rates continue their ascent – talk about bad medicine for the current lackluster real estate market! CNN.com reports that 30-year fixed rates have jumped to 6.53%, their highest level in 10 months. While rates, a year ago, were slightly less than they are now, the state of the real estate market was in much better condition 12 months ago. An increase in rates now only amplifies the problems that exist.
The Mortgage Bankers Association (MBA) expects 30-year rates to hit 7 percent by year’s end. The Mortgage Bankers Association (MBA) and the National Association of Realtor don’t foresee a recovery until the beginning of 2008. This foreseen recovery has been pushed back a number of times, and at one point early this year a slight increase in home prices for 2007 was predicted. In real estate markets, such as Miami, I expect this recovery timetable to continue to be pushed back until early 2009. The number of new units coming to market actually increases next year and doesn’t drop off until the following year. There’s no denying that the South Florida real estate market is a safe long-term bet as it will become one of the top retirement destinations for the millions of Baby Boomers set to retire in the next ten years, but demand has to catch up with supply. That will take some time.
Those people holding preconstruction contracts will soon seek financing to close on their condo units. For those that are questioning whether to walk away from their deposit or to close on their condo unit, the ever increasing rates will make their decision a little easier.
Neo Vertika – Living in a War Zone (pictures)
If the building, Neo Vertika, were a stock, I’d be selling it short all day long! This is a follow-up to a previous entry that I wrote on May 21, 2007 entitled, “Shoddy Construction at Neo Vertika?“. Now, there is no question about it.
When I wrote that piece, I had heard about all kinds of problems from residents including three major water leakages, the sprinkler system needing to be replaced in the entire building and each individual unit, and the air conditioning system being unusually loud. I didn’t realize just how bad it was until today. A client of mine, who is renting a Penthouse unit at Neo Vertika, sent me some pictures of the present condition of his condo unit. He began his lease at the very end of April and still has not been able to move his belongings into the unit. It goes without saying that he is looking to break his lease and get his money back. After seeing the following pictures I don’t blame him one bit. Work to replace the sprinkler system in his unit began last week, and he was told that it would take a total of 2-3 weeks. This is occurring in each and every condo unit in the entire building! Neo Vertika is not even one year old yet.
Imagine how high the cost of insurance will be for the building after all the work has been completed. I’m predicting that within the next six months, the association will increase maintenance fees and/or declare a special assessment. If that happens, which I feel is inevitable, prices at Neo Vertika will surely continue to head south.
Coming Soon: Ten Museum Park
Ten Museum Park is a highly anticipated luxury condo building that will begin closings later this month. Ten Museum Park is located in the recently-dubbed neighborhood of Park West and offers spectacular views of the city, Biscayne Bay and even the ocean and South Beach from high floors. Park West is making way to be the most high-end neighborhood of Miami. Ten Museum Park is walking distance to the American Airlines Arena, Entertainment District of Miami, the newly opened Carnival Center for the Performing Arts and the shops and restaurants at Bayside Marketplace. There are also plans for Bicentennial Park, which will be renamed Museum Park Miami, located across the street in the underutilized parcel of land that you see in the picture above. $13.5M has already been allocated for the new park and the Miami Art Museum and the Museum of Science are collaborating to work on the plans. The pictures below show a model of the design for Museum Park Miami. It will be the premier public park in Miami.
Ten Museum Park will have a total of 200 units on 50 floors and has units ranging in size from 858 square feet to 4,100 square feet with either 10-foot or 20-foot ceilings. Units at Ten Museum Park will have stainless steel appliances by Bosch and Sub-Zero, high-end bathroom fixtures by Duravit and Dornbracht, glass-enclosed showers with body jets and rain shower and much, much more. Take a look at the Ten Museum Park website for more information.
Ten Museum Park will receive its TCO (temporary certificate of occupancy) in the next week or two and closings will follow soon thereafter on units located on the first 35 floors. Condo units located on floors 36-50 will begin closings in 30-60 days. There are resales currently available at Ten Museum Park. There are quite a few people holding contracts in the building that have their units priced at, or slightly higher than, what they paid for them back in January 2004 to prevent from having to close on their units.
I am eagerly awaiting to see the inside of Ten Museum Park. I will try to gain access this week and post pictures and video of what I see.
If you haven’t taken a look at Google Maps in the last couple of days then head over there now and take a look at their new street-level view capability. It is simply amazing! It allows you to view a location from the perspective of a person walking down the street. It also allows you to interact with the photo by turning the view and moving forward or backward in the photo. Both Microsoft and Amazon released similar products earlier in the year, but the one released a few days ago by Google is on a totally different level.
When you get to Google Maps type in an address. For the photo above, I typed in “950 S Miami Ave, 33131”. It then shows you a map for that location. Click on the “Street View” box in the upper right hand corner of the map. You will then see an orange stick man appear on the map. Click on him and a photo, like the one above, will appear of the area. From there you can move forward or backwards in the map using the arrows within the photo or turn the view 90 degrees by using the two arrows in the upper left hand corner of the photo. It also allows you to turn left or right at intersections.
The images look to be about 4-6 months old judging by the photo above. The image at the top is of a new commercial development called Mary Brickell Village. It looks to have been taken around December or January. I navigated the street a bit and noticed that one of the restaurants is fenced off, as it was around that time.
The new street view functionality can play an important role in real estate. People can now “virtually” walk any neighborhood that they want without ever leaving home. Miami is a haven for second home buyers and investors. This type of mapping capability will prove beneficial to nonlocal buyers who can now familiarize themselves with various neighborhoods. I love technology! Just wait until the day when we are able to interact with video and navigate a virtual video map. Now that would truly be amazing!
