Lis Pendens Filings are UP on the Miami Beaches!

Distressed Market Edition: The Miami Beaches Market Pulse: June 2016 – 1st Half of the Year Report, Part 2 of 2

Lis Pendens Filings are UP on the Miami Beaches!
Lis Pendens Filings are UP on the Miami Beaches!

 

The first half of the year has begun to demonstrate a substantial shift towards a spike, and potentially continued growth, in the Distressed Market.  Note that I am saying “spike”, as at least one to two more data points would really be needed to see a marked change in the inclination of the overall foreclosure trend (and by then, it will be too late though to do anything about it).  In this dataset I go back to as far as my Tax Record Application, provided by the Miami Association of Realtors, allows: 2008.  Prior to 2007/2008, either the computer’s database records do not go back that far, or Lis Pendens filings were not specifically tracked until then.  Regardless, with nearly 10 years of data, covering the very beginnings of the prior distressed market until present, there is a disturbing increase in filings throughout the Miami Beaches.

For the most part I am displaying data and encourage my readership to draw their own conclusions, but I have provided commentary in places so as to properly set the context (as best as I can for the purposes of this article) of the time period as a backdrop for the actual number of foreclosures occurring in, what are, 5 of the wealthiest and most desired zip codes in the United States.  Please note I have pulled data on many other areas in the Southeast Florida area; with few exceptions thus far in my experience, the results for those areas parallel those below.

To provide a better frame of reference, and perspective, to the data-by-zip code below, I am providing this Historical Key, chart of the US Dollar, and Commentary to historical & present events in the Macro Economy:

The US Dollar Index (DXY) 1974 to Present
The US Dollar Index (DXY) 1974 to Present – Source: MacroTrends.Net

Year    |  Event(s) & Commentary

2008 |  The single biggest set of financial beatings in history begin!  Unprecedented institutional actions are implemented in an effort to restore confidence in the financial system and prevent a global financial system collapse.  By comparison, the Savings & Loan Crisis of 1985-1995, + the Dot Com Bubble + the Enron / Worldcom disasters of the 2000-2002 era, combined, pale in comparison!  The largest bailouts and bankruptcies in US history begin with the  failure of two of the most storied US based investment banking firms, Bear Stearns & Lehman Brothers.

2009 |  Asset purchases by the Federal Reserve begin with extreme prejudice.  By the end of the year, 1.75 Trillion USD are on the Federal Reserve’s books, and more debt in the history of mankind is monetized than all previous civilizations combined….and they are just getting warmed up!

2010 |  Scandal (“robo-mortgages” / “robo signings”), unprecedented backlog of foreclosure filings, nationwide, in the courts, loan modifications, and tons of cheap money slow & dull the pain!  This drives the Dollar into the depths of Hell over the next couple of years, setting a new historic low exceeding the lows of the late 1970s, the mid-1990s and, of course, 2008; 2008 being a period of what nearly amounted to a complete loss of faith in the financial system and fiat currencies virtually everywhere.

2011 |  By the end of 2nd quarter 2011, nearly another 600 Billion Dollars worth of defaulted assets were purchased by the Federal Reserve  The Buying spree continued through the year while loan modifications (and related businesses) popped up everywhere.  Whole real estate brokerages became founded upon Short Sales & REOs.  Special access to Fannie Mae, HUD and Freddie Mac portfolios were granted to large institutional buyers leaving a multitude of smaller investors out in the cold and only able to select from what was getting listed by licensed brokerages.

2012 | The economic stimulus (economic heroin), and massive backlog in the courts as a result of both volume and scandal, continued to slow the number of foreclosures.  Globally however, money pours into the United States in the form of foreign direct investment.  With the resulting “cheap Dollar” coming off of a historic low, real estate in the USA, especially Florida, looks “cheap” and the wealthy of other nations, many of whom were seeking to escape Socialism, Communism, and Austerity Measures of all kinds in their own home countries, flee to US Assets and begin driving the Dollar up, along with asset prices across all industries.

2013 |  Continued talk of “improving economy”, and of a forthcoming “tapering” of the Quantitative Easing from the Federal Reserve,  build confidence in the Dollar driving it higher well into 2014, simultaneously beginning a driving up of actual carrying costs, via currency risk,of US Assets by foreign investors who borrowed.

2014 | The 3rd round of Quantitative Easing ends in October…the money printing subsides…(for now).

2015 | After nearly 24 months of talk by the Federal Reserve, in order to maintain confidence in the US Dollar, the Federal Reserve raises interest rates in December 2015 by 25 basis points (0.25%) despite worsening, lackluster economic data.

2016 | Talks of additional rate hikes continue, however, by mid-2016 this appears to be a non-starter rate-hiking cycle.  Economic data continues to worsen, with record lows in the Workforce Participation Rate & the manufacturing indexes, an obvious spike in foreclosures, and what appears to be a looming sovereign debt crisis which, if a recent Federal Reserve Paper in favor of a 4th Round of Quantitative Easing comes to fruition, is a likely scenario.  As of right now, we as a nation are painted into a corner it seems.  There is a high probability, if the Federal Reserve chooses to do another round of Quantitative Easing (printing more money), a currency crisis will ensue (the value of the Dollar i.e. the Dollar’s purchasing power), will diminish in potentially spectacular fashion.  At the same time, if the Federal Reserve chooses to raise interest rates, this will crash the stock market and absolutely obliterate the bond market; it may also push the United States into a Sovereign Debt Crisis.

In the first scenario, more Quantitative Easing, Dollar Prices of real estate will increase substantially, but the purchasing power of those Dollars will simultaneously be diminished (i.e: while prices may rise, the cost of living will increase at a dramatically faster rate); this is bad for both prospective Buyers as well as Sellers.  In the second scenario, and this has happened throughout history, if interest rates are raised, real estate values will decline commensurate with the interest rate, and with respect to both Sellers and prospective Buyer-Investors, higher capitalization rates will be required in order for any particular asset to clear the market (this is very bad for Sellers who may end up under water as a result of declining prices).

 

33139 – South Beach & The Venetian Islands

Year    |  Number of Foreclosure Filings

2008  | 10

2009  |  21 – 200% increase over the prior year.

2010  |  63 – 300% increase over the prior year.

2011 |  21 

2012 | 12

2013 |  33

2014 | 27

2015 | 28

2016 | 55UP 196% YTD versus the same time period in 2015! Uh oh…the drugs are wearing off…More “stimulus”?

 

33140 – Mid-Beach

Year    |  Number of Foreclosure Filings

2008 | 4

2009 | 18 – 450% increase year over year.

2010 | 26

2011 | 6

2012 | 8

2013 | 8

2014 | 16

2015 | 23

2016 | 21  Slightly down – but this could be considered within a certain standard deviation models as normal or, at best, “a slight downtick”.

 

33141 – North Beach & North Bay Village

Year    |  Number of Foreclosure Filings

2008 | 5

2009 | 31

2010 | 44

2011 | 12

2012 | 26

2013 | 27

2014 | 21

2015 | 20

2016 | 31 – Up 150% from 2015!

 

33154 – Bal Harbour, Bay Harbor Islands & Surfside

Year    |  Number of Foreclosure Filings

2008 | 4

2009 | 5

2010 | 21

2011 | 3

2012 | 5

2013 | 13

2014 | 7

2015 | 9

2016 | 11 – Up, but this could be considered within a certain standard deviation models as normal or, at worst, “a slight uptick”.

 

331460 – Sunny Isles Beach, Golden Beach & Eastern Shores

Year    |  Number of Foreclosure Filings

2008 | 14

2009 | 37

2010 | 79

2011 | 12

2012 | 28

2013 | 27

2014 | 18

2015 | 21

2016 | 46 – Up over 200%!

Recommendations:

New foreclosure filings are up substantially on the Miami Beaches, and while I do not publish reports for other zip codes, I have performed these same analysis across three counties for my customers & clients.  There is A LOT of this going on.  I have nearly 100 short sale listings on MLS; only last year I had none.  It is a growing business again.  33140 and 33154 have not seen much action, yet, but I will be keeping tabs on them as I expect the tide to start sinking all ships at some point.

If you are a property owner and had plans to sell within the next 3 years, I strongly urge you to SELL NOW and immediately trade out of Dollars for either real estate (real estate of the same class, but perhaps a different location), that can fetch a higher capitalization rate if you were to rent/lease it, or plan to do so (view all purchases, even if it is your own home, from an investor’s perspective) or physical currency in the form of Gold and/or Silver, or a combination of the two.  Every situation is different, and I am happy to advise you.

If you are a Buyer/Investor, the distressed market is expanding once again.  Buy/Rehab/Flip and Buy/Rehab/Rent/Flip continues to be a working model.  What you need to be careful of is the potential loss of purchasing power of the Dollar.  I believe that locking in low interest rates at 50-75% Loan-To-Value, and thereby strategically increasing your Cash-on-Cash Return, is the best path to follow to protect yourself from the potentially damaging effects of inflation.  Thus, If inflation begins to kick in substantially, the only real estate you want to be left holding is that which is in a fantastic location; as you will continue to be able to raise your rental rate commensurate with what is appropriate for the location of Demand.  Following the same strategy; if Deflation occurs, your financial leverage will work against you on paper, however, as long as you are able to continuing to leasing your real estate at or near current rents, your return on investment should continue to provide substantial returns despite the value of the property declining; and income should really be your primary goal as a long-term investor in real estate; not property appreciation.

I also like certain REIT (Real Estate Investment Trust) investments, Gold/Silver and other niche areas & industries where money can best be shielded from the consequences of the long-standing poor monetary & fiscal policies of our government. Call me to discuss!

Forthcoming – I will be publishing July’s & August’s data on the Miami Beaches over the next few days as I am winding up for a close of 3rd Quarter Edition of the Miami Beaches Market Pulse coming in October.

Cheers,

photo
Christopher J. Lazaro, MBA
Licensed Real Estate Broker at Metro International Investments
Direct  1-800-798-9192 Ext. 333  Phone  1-800-798-9192  Mobile  305-878-2288  Fax  305-521-8995  Email  chris@mii.miami  Website  http://www.mii.miami
“Quality is never an accident; it is always the result of high intention, sincere effort, intelligent direction and skillful execution; it represents the wise choice of many alternatives.”

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Christopher J. Lazaro

I am a Licensed Real Estate Broker specializing in Residential Real Estate transactions from Downtown Miami, through the Miami Beaches and into Fort Lauderdale along the US1 Corridor and East. Whether you are a First Time Home Buyer, an Institutional Buyer, or Private Investor, I will be happy to provide you a consultation to evaluate your real estate investment goals. I can be reached at 1-800-798-9192 ext. 333. My MLS Website can be found at http://REBroker.Miami. I am a Qualifying Broker Metro International Investments & Miami Beach Brokers.

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