The Miami Beaches Market Pulse: The Market Correction Continues…

Miami Beach
Miami Beach

The Miami Beaches Market Report:

January 1st 2015 – September 4th 2015 (October 2015 Update)

As the summer in Miami Beach came to a close I ran these reports on the five zip codes constituting the Miami Beaches ahead of the Labor Day Weekend.  My last report was published shortly before the end the Spring and just ahead of the Memorial Day Weekend; and it was quite was alarming.  Using data from Realtor’s Property Resource, an authoritative database for all transactions listed via the Multiple Listing Service, when compared to the same time period in 2014, transaction volume on the Miami Beaches had plummeted by 30-50% and listing volume was up sharply.

Since then, the stock markets, worldwide, have roiled over the uncertainty surrounding the future of interest rates, let alone the world’s reserve currency, the US Dollar; which, albeit stronger in the last couple of years, remains fixed in a 30+ year long downtrend.

US Dollar remains in a long-term downtrend
US Dollar remains in a long-term downtrend

The recent upswing in the Dollar resulted in properties being more expensive to foreign nationals, and for this reason, amongst others (i.e new construction), I believe is the root cause of what is currently happening along the Miami Beaches.  Please note that the data below DOES NOT include pre-construction or new construction purchases; but also keep in mind that there is virtually nothing, of consequence to the numbers, in the new construction category within the Miami Beaches that is priced under one million US Dollars.

The Miami Beach & South Beach (33139) Market Report

Below is a link for the 33139 Market report.  The data is summarized as follows:

Median Est. Home Value: $397K, Up 10.5%; Median Est. Listing Price $185K, Down –21.1%; Median Days in RPR 105, Down –9.5%; Sales Volume: 87, Down –48.5%

The Miami Beach & South Beach (33139) Market Report

Below is the Neighborhood Report for 33139.

The 33139 (South Beach) Neighborhood Report

As you can see, Home Values continue to rise despite market weakness, however, I expect a shift in this as Median Listing Prices are down substantially and homes are on the market longer.  In addition, the chart goes back as far as 2012, where there were circa 1500 homes listed in the South Beach Market.  Listing Volume has more than doubled in the last 3 years having passed more than 3200 listed homes currently on the market!  Naturally, Median Listing Prices have been declining over the same time period as Sellers wake up and realize their home is not worth nearly as much as they imagined.

The Miami Beach & North Beach (33140) Market Report

Below is a link to the Miami Beach (33140) / North Beach Market Report.  The data is summarized as follows:

Median Est. Home Value $489K, Up 7.1%; Median Est. Listing Price $340K, Down –5.4%; Median Days in RPR 107, Down –4.5%; Sales Volume 62, Down –34%

The Miami Beach & North Beach (33140) Market Report

Below is the Neighborhood Report for Miami Beach / North Beach 33140

The Miami Beach / North Beach (33140) Neighborhood Report

The 33140 area lies immediately to the north of South Beach, 33139 and is, with respect to home ownership and other demographics a stark contrast to South Beach.  North Beach is more of a full-time resident neighborhood and has far less tourist traffic than 33139.  However, it is also not immune to the market correction we have been seeing.  Again, Home Values continue to increase, while Listing Volume also continues increase, having nearly doubled in the last 3 years.  More owners than renters exist in this market, and in my opinion, it is a more family friendly zip code to live in.  Median List Prices are relatively flat year over year, and I expect this sideways trend to dip lower as listing volume increases.  When looking at the the Price Range of Homes Sold, it should be noted that nearly 1/3 of all sales were over $1,100,000 USD.

North Beach & North Bay Village (33141) Market Report

Below is a link to the Miami Beach / North Bay Village Market Report.  The data is summarized as follows:

Median Est. Home Value $267K, Up 6.5%; Median Est. Listing Price $150K, Down –32.7%, Median Days in RPR 85, Down –24.1%; Sales Volume 58, Down –52.1%

North Beach & North Bay Village (33141) Market Report

Below is the Neighborhood Report for Miami Beach & North Bay Village, 33141

Miami Beach & North Bay Village (33141) Neighborhood Report

Following the greater trend, Home Values continue to rise but the Median Listing Price has fallen off a cliff, now down 32%.  I sold a couple of homes in this area in the past quarter and noticed that the recent Market Correction has brought in Ready, Willing and Able American Buyers (both were soon-to-be Retiree Couples).  The Average Days on the Market also fell substantially as Buyers looking for a deal are snatching up properties in this area.  I think that for a second home, investment property, or wanting to simply live in the area of Miami Beach, the best values can be found in this particular neighborhood right now.  It is absolutely a Buyer’s Market with Sales Volume down more than 50% and Listing Volume having more than doubled in the past 3 years.  This is a weaker market than the North Beach (to the south) and the Bal Harbour (to the north) Markets, and in my view, it has led the market correction on the beaches as a result.  I expect the other markets, to a degree, to follow suit prior to the Spring of 2016 (although from May 2015 to September, Bal Harbour has taken quite a beating.  It was “leading” the markets (in terms of resilience at least) in May.)

The Bal Harbour, Bay Harbor Islands & Surfside (33154) Market Report

Below is a link to the Miami Beach / Bal Harbour & Bay Harbor Islands (33154) Market Report.  The data is summarized as follows:

Median Est. Home Value $629K, Up 16.9%; Median Est. Listing Price $323K, Down –23.7%, Median Days in RPR 107, Down –10.8%; Sales Volume 25 Down –62.7%

The Bal Harbour, Bay Harbor Islands & Surfside (33154) Market Report

Below is the Neighborhood Report for Miami Beach / Bal Harbour (33154):

The Miami Beach – Bal Harbour (33154) Neighborhood Report

Bal Harbour is one of the wealthiest communities in the United States, home to one of the most exclusive malls in the world (The Bal Harbour Mall), and is an absolutely beautiful place to behold.  However, it has not been able to hold up against the market correction as well as it was doing back in May when I published my last report.  While, once again, Home Values continue to rise (and substantially here, +16%), Median Listing Prices are down by nearly 25% and Sales Volume is off by a whopping 62.7% (I am glad I am not an agent only specializing in Bal Harbour!).

Listing Volume is at a 3 year high and is currently double what it was in January 2012.  Median Listing Prices have broken through a support range of 375K and are continuing to fall.  One third of all listings sold were under 400K and another third of all homes sold were over 900K.  Therefore this recent market correction has obviously spared no one.  I expect market turnover to continue until Listing Volume begins to decline.

The Sunny Isles Beach, Golden Beach & Eastern Shores (33160) Market Report

Below is a link to the Sunny Isles Beach & Eastern Shores, 33160 Market Report.  The data is summarized as follows:

Median Est. Home Value $356K, Up 9%; Median Est. Listing Price $195K, Down –20.4%; Median Days in RPR 109, Down –12.1%; Sales Volume 113, Down –38.9%

The Sunny Isles Beach, Golden Beach & Eastern Shores (33160) Market Report

Below is the Sunny Isles Beach & Eastern Shores (33160) Neighborhood Report:

The Sunny Isles Beach & Eastern Shores (33160) Neighborhood Report

I have lived in Sunny Isles Beach for the last 7 years and I know this town well.  In fact, I am pretty sure the data has improved in this zip code substantially in the past month due to the sheer volume of Buyers who have called me interested in taking advantage of the recent market correction here.  While Home Values Improved, the Median Listing Price dropped substantially, at one point was off by nearly 30%.  Listing Volume has climbed steadily however, and is currently sitting at a nearly 4 year high.  In September, the trailing 12 months of Sales Volume was off nearly 40%, but a recent spate of closings I believe has reduced this to less than 5%.  Keep in mind that a very substantial demographic change is currently underway in Sunny Isles Beach.  With the construction of numerous beach front condominiums, a breed of extraordinarily high net worth people have been scooping up pre-constructions prices STARTING at $1400 per square foot!  In turn, I have seen a number of beach condominium owners, also wealthy, but, not as wealthy as the newer beachfront apartment buyer, put their condominiums up for sale and inquire about making a purchase on the intracoastal side of the barrier island, an area of older, smaller, less expensive homes and apartments.  This bodes well for home values and tax receipts to the City of Sunny Isles in the future as the demographic of this city becomes, on average, even wealthier.  With few exceptions, I do not see prices declining much further here, however, I do see rents continuing to skyrocket as a result of this shift.

Outlook

Despite the market correction on the beaches, Miami continues to be a top international destination, and barring an apocalyptic event, I do not see that trend softening, let alone reversing, any time soon.  For the last 5 years inbound traffic and hotel stays have set records year after year, room rates continue to rise, and tax revenue from tourism continues to increase substantially.  In tandem, massive non-residential commercial investment continues to pour into Miami-Dade County, and Southeast Florida as a whole.  While the vast majority of the United States, I expect in the coming 1-2 years, will take an economic beating as a result of our Country’s ludicrous fiscal and monetary policies, The Miami Beaches and the City of Miami, I believe, will weather whatever the coming economic storm may bring for numerous reasons.  First of all, the Baby Boomer Generation is retiring at a rate of 10,000 people per day (or 1 person every 8 seconds); and many of them have their eyes set on the warm Sun, sandy beaches and green palm trees of the South Florida subtropical climate.  In addition, even if the Dollar takes a hammering, in an array of ways, that will boost foreign direct investment as wealthy foreign nationals seek to escape from harsh taxation & regulations in their home countries (and our policies are no picnic!).  With that in mind, it should be noted that we are looking at a Buyer’s market here on the beaches and this is an opportunity that prospective buyers should, at the very least, look at closely with a knowledgable & reputable real estate broker.

Lastly, I would like to apologize to my readers for having not published another market update report sooner.  I am extremely busy servicing my own customers & clients (who get the benefit of my analysis and insights on request) in both a residential & commercial real estate capacity; and therefore my time has been constrained with respect to Publishing & Marketing.  As my firm grows, I expect to be able to publish on a more regular basis.

Thank you for your time and attention!

Cheers,

Miami Realtor, Miami Real Estate Professional
Christopher Lazaro, MBA – Licensed Real Estate Broker & International Realtor of Miami, 305-517-3086 x333
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On the Federal Reserve: Repeating the Insanity

One of the biggest problems the average working American Citizen has these days is Information Glut.  We are constantly bombarded with information be it on the TV, on our phones, on the side of a bus, and sometimes on a nice clear day at the beach, in the Sky!  Unfortunately, and in fact, few Americans; even prior to the Information Age, paid much attention to the happenings in Washington DC.  Even fewer have the education level needed to truly understand the Who/What/Why/How(s) of what (and whom) they are voting for and how a single person’s (or group’s) policies can ripple-effect through the very fabric of our existence living in this country.  We live in a litigious society that is slanted towards entitlement, and has very little understanding of the consequences it will face tomorrow for actions taken today; particularly when it comes to the insanity of our monetary & fiscal policies.  As the old saying goes, “Those who do not learn from history are doomed to repeat it”.

To better establish my case and point, I will establish the timeline of the irresponsible fiscal & monetary policy our current regime is moving ahead with at full steam:

In 2006, conveniently ahead of the implosion of our economy and near economic collapse of the nation (and the resulting money printing bonanza), the Federal Reserve ceased publishing M3 which includes the total of M1, M2 and Long Term Time Deposits.  Tim McMahon wrote an excellent article on this back in 2006 that strongly questions why the Federal Reserve would do this as well as portrays a logical, cogent theory (in short, they are cooking the books!) as to why they did this:

What is the Government Hiding? by Tim McMahon, March 16th 2006

Hindsight being 20/20, it is my view that they saw the inevitable, bursting of the real estate bubble and shifted further towards a policy of less transparency so they could continue the masquerade and postpone the pain, suffering and related consequences of irresponsible fiscal & monetary policy.

Also in 2006, Peter Schiff predicted the forthcoming 2008/2009 economic collapse in extreme detail, but he had also published a book predicting what the Federal Reserve would do as a result of this collapse.  Unfortunately, the Federal Reserve has done EXACTLY what Peter was afraid they would do (read his book! Crash Proof: How to Profit From the Coming Economic Collapse).

See his TV debate:  from 2006 versus Art Laffer.

How many of you called him, or people like him “crazy” or “conspiracy theorist” at the time?  How many of you saw the implosion of 2007-2009 coming?  I know I did; and I can prove it (I was trading my 401K at the time, shifting money between funds, and as a result, I was flat the first half of 2008, by the end of 2008 had lost 16% because I was actively buying the decline, shifting money from bonds – which had gone up a bit as “people ran towards the blast” – Peter Schiff, but then I saw 40+% and 30+% gains in 2009 and 2010 as a result of my trading/re-weighting of the portfolio.  I continue to retain these records).

However, it was not just the fundamentals & technicals in the market that tipped me off the most (I use a method of market evaluation called Rational Analysis, ie: where Fundamental & Technical Analysis overlap, which I learned from studying the work of John Bollinger); it was the fact that, for years, I had been attending several monthly social affairs, and came to the realization (in 2006) that when I first began going to these functions (2001/2002), one person was a Doctor, another a Lawyer, another a Dentist, still another a Police Officer etc…now, in 2006, I was the only person at the affair who was NOT a mortgage broker or a real estate agent.  Historically speaking, scenarios like this favor the Contrarian.

In 2008, Peter Schiff was featured on Fast Money and told the Fast Money Team to fade (sell) the Dollar:  

For those chartists out there, you will note that Peter correctly predicted the fall of the Dollar index (Symbol: DXY) which fell from 90 to 75 over the next 12 months.  Since then, there was another rally into the high 80s, a revisiting of the lows, the setting of a new low, and in the last 2 years a feeble climb back into the 80s, which is showing a lot of technical weakness with a recent “double top” this past year.  However, his prediction was not for a short term trade; he still holds the position that the dollar will eventually take a, possibly permanent, dive well below the most recent support of circa 73.  From a technical perspective,  a move below that support level could see the DXY plummet to circa 68, which for the average American, would be very damaging in terms of their purchasing power.  Still worse, a move below the 68 level would be catastrophic to the nation’s, and possibly the global, economy.

For those who are not savvy traders or chartists, consider this: The US Currency is NOT backed by anything.  The value of the USD (and any fiat currency) is completely based on trust & faith.  Like any other asset (like a stock or commodity), the more of it that is available, the less value it will have.  For example, if we had the ability to make every grain of sand on the beach turn into gold, what would gold be worth?  If gold were as easy to produce as the asphalt you drive your car on, or as common as the beach sand you walk on, it would be worth nothing.  Therein lies much of the danger in the US’s “Printing Press Mentality”; and it is the continuous printing of money that pressures the Dollar Index (DXY) lower.  As it moves lower, the American Dollar has less purchasing power.

One of the best analogies to the most recent bubble was also given by Peter Schiff in 2009 where he goes into significant (and hilarious) detail about the Internet Bubble.  The very same reasons/causes of the Internet Bubble were re-implemented by the Federal Reserve to create the Real Estate Bubble.  Furthermore, the very same reasons/causes for the recent Real Estate Bubble and Economic Collapse are still continuing, unabated, via all the Quantitative Easing the Federal Reserve has been doing.  The United States Dollar continues to enjoy Reserve Currency status, however, there are limits.  The Liberals (Democrats/Socialists/Idiots…all synonyms in my opinion) argue that it is “Different this time”.  These are the most dangerous words that can ever be uttered in the financial world, and if you are a person working as a trader, broker or other person who works in a financial institution and is responsible for handling money, these words could get you fired instantly.  Here is our Vice President arguing that we need to print more money (ie borrow more) to get out of debt:

Here Peter demonstrates that It is NOT different this time, and it won’t be any different next time, especially if the current economic crisis becomes a currency crisis (as serious as the subject is, I like Peter because he is able to take what is typically dry material and make it quite humorous…this is a long video, but worth the watch and the laugh):

In 2010, Representative Alan Grayson questioned the Inspector General of the Federal Reserve  (Elizabeth Coleman) regarding 9 TRILLION Dollars in Off Balance Sheet Accounting (isn’t this the sort of shananigans that bankrupted/imploded Enron and MCI Worldcom nearly a decade prior??) and several other subjects related to the Federal Reserve’s balance sheet growth etc.  More than 2 years after TARP was passed, this lady still had not even began a single investigation (and admittedly only just started a “high level review” of Fed Board activities) and could not answer one question.  In fact, she denied certain functions were her/their responsibility, only to be corrected by Rep. Grayson, that such investigation(s) are indeed her responsibility.

To boot, here are Ron Paul‘s comments regarding the printing of more dollars to not only bail out our own banks, but foreign banks as well!  Pay very close attention to what Ron says, as you will hear several common themes that will continue to play out throughout this article.

In 2011, Ron Paul summarizes the conception of the Federal Reserve, and the real and present dangers of the abuses of the Federal Reserve and the current fiat currency system:

It amazes me how complacent we as a nation have become.  The entitlement mentality in this nation has clouded our reasoning and sensibilities to the point where the average person will argue that “oh, that can’t happen here.”, but not be able to make an educated, rational, sensible, cogent argument as to why not.  Currency crises have happened many times over the past century; and have typically been caused by moves towards Liberal/Socialist agendas.  It happened with the Pound Sterling, Argentina, and is arguably happening right now with the Euro.  To think it cannot happen here is absurd, especially considering that our monthly trade deficit exceeds the GDP of most nations!

Finally, a full 7 years since the beginning of this article, I conclude with three additional videos.  The first, is another Peter Schiff video.  It is a 20 minute video recording of his presentation at the 2013 Las Vegas Money Show.  The second, is an interview with Jim Rogers, famous investor and billionaire; who is singing the same song/truth Peter Schiff has been professing.  The third video is a dramatized, What If? / Worst Case scenario of the US Dollar was to lose it’s Reserve Currency Status.  Keep in mind, most people will tell you “That cannot happen here”; what they do not know is that it has happened many times, in other countries, over the past century; and in fact it has happened to previous “Reserve Currencies”.

I found this very funny, and if you understand economics, I think you will too; he begins  “It is 2013, but if feels like 2006…”

Interview with Jim Rogers:  

Dramatized What If the US Dollar Collapses?

In a nutshell the problem can be summarized as this:  In the 90s the Federal Reserve lowered rates and created vast sums of cheap money which fueled the Internet Bubble. Then, we had a big bust; but instead of actually have a real recession and allowing Capitalism take over and cleanse the system; there were multiple bailouts, an expansion of government and interest rates were lowered even further.  This fueled another bubble; the Real Estate Bubble.  Once again, government grew massively, there were even more bailouts than before (and bigger than ever before) and interest rates were lowered to zero/near-zero; once again, circumventing the process of Capitalism.  So here we are in 2013, with a Federal Reserve printing tremendous amounts of cash and a government that has decided to try and grow its way out of debt through deficit spending.  We are not only repeating the insanity, we are doing it BIGGER than ever before!  How is more of the same supposed to help our economy grow and thrive?  That is like getting yourself into credit card debt and thinking that by borrowing and spending more you will get your family out of debt.  Millions of Americans tried this already over  the past 10 years, and I do not know of anyone who that strategy has worked out for.  So how will the US Government able to do it on such a massive and complex scale?  Simply put, they cannot.  We ran up debts in the early half of the 20th century, but that money was put into building factories, infrastructure etc.  Today, we are borrowing massive amounts of currency but we are spending it on consumption.  So the government is using its “credit card” to fund consumption, and not investments.  One produces nothing (Buy a meal, it feeds you for a day), the other produces a going concern that services & employs people (Buy/build the restaurant, it feeds you, and others, for a lifetime).

So how does this all relate to real estate?  What if the currency doesn’t collapse?  What if it does?  These are all questions I will touch on in my next article where I will discuss what I perceive to be the state of the real estate market.  Stay tuned!

Cheers,

Christopher Lazaro