The Miami Beaches Market Pulse – May 2017 Results

MLS Search for Miami Real Estate Listings
Christopher J. Lazaro’s MLS Website is REBroker.Miami

Market Activity & Neighborhood Reports by Zip Code for the Miami Beaches

As the Spring ended and Summer began, the month of May saw some interesting changes in data.  For example, the prior month, Miami Real Estate searches on the Internet were topped by foreign nationals in Brasil, but this month, Colombia has taken the top spot.  I asked a friend of mine why this might be, as only a couple of years ago it was my understanding Colombia was exploding with business opportunities.  He believes the country is likely to be the next nation is South America to follow Brasil, Argentina, and Venezuela in terms of shifting to a more socialist system, and by consequence, likely substantial corruption.  We will see how that situation unfolds, but one thing is clear, there is a lot of Colombian nationals searching South Florida for real estate opportunities presently.

Also in the news, after Memorial Day violence, there is a growing demand by locals and the politicians to do away with Urban Beach Week.  This has been an ongoing issue as seemingly every year there are dozens of dozens of arrests (in 2012 there were 431 arrests), dozens of guns confiscated, etc.  It is unfortunate that those who come here for that weekend seeking only music, sand, sun & fun are accompanied by armed, gangster-like ( I would not want to insult gangsters, particularly those of the days of Capone, who were reputedly gentlemen…murderers, yes, but well-dressed and well-mannered gentlemen overall).  I am all for putting an end to this weekend as it is common knowledge many locals, both renters and owners, literally flee the area ahead of this week/weekend for no other reason than this event.

I continue to try and improve the format of my articles.  If you have any suggestions (or requests), please let me know!  Now, onto the data!

33139 – South Beach & The Venetian Islands

Click here to receive the Market Activity Report for 33139

Click here to receive the Neighborhood Report for 33139

MLS Sales Volume is at a 3 year low.  Listing Volume is at a 3 year high.

There is a lot of construction in South Beach (and I will be covering these projects in a forthcoming issue); luxury, ultra-luxury, and a more “affordable” upper-end (500K+) class of assets being built and many of these are being listed the moment the building comes online, further driving listing volume to the upside.  Sales Volume has decreased, in large part to the well-known Summer Slowdown in real estate sales.  Also, people are not willing to overpay anymore just for the privilege of being on South Beach.  The Buyer’s Market continues and I am beginning to see some good opportunities come, and go quickly while overpriced assets languish on the market for an average of 4 months (twice the national average).

33140 – Mid-Beach, Bayshore, Sunset Islands, La Gorce & La Gorce Island

Click here to receive the Market Activity Report for 33140

Click here to receive the Neighborhood Report for 33140

MLS Sales Volume is at a NEW 3-year low.  Listing Volume is stalled at a 3-year high.

I love this area of the Miami beaches and recommend it highly.  The west side of this area is one of the most beautiful and family-oriented neighborhoods in all of the Miami Beaches.  A median listing price of 390K warrants any logical buyer to start viewing properties NOW as I do not see this phenomenon persisting for very long.

33141 – North Beach, Normandy Isle, Normandy Shores & North Bay Village

Click here to receive the Market Activity Report for 33141

Click here to receive the Neighborhood Report for 33141

MLS Sales Volume is at a NEW 3-year low.  Listing Volume is at a NEW 3 year high.

Median List price is also at a NEW 3-year low.  I have been urging customers to consider buying in this area as I believe it represents the best and most affordable area-of-opportunity for an average family to own a piece of the Miami Beaches, and frankly, the location is superior for the working person who has to commute on a daily basis.  At $200-$300 per existing square foot, you cannot build anything for that cheap anymore!  I do not expect the market to move lower.  For some time there were assets selling in the low 200s per square foot for Class B condominium units, but those have grown fewer and more far between.  This is a Buyer’s Market and I think the waiting is over.  If you are waiting for lower prices on the retail (non-distressed) market, you will be both disappointed and be living elsewhere.

33154 – Bal Harbour, Surfside & Bay Harbor Islands

Click here to receive the Market Activity Report for 33154

Click here to receive the Neighborhood Report for 33154

MLS Sales Volume is at a NEW 3-year low.  Listing Volume is at a NEW 3-year high.

Despite a spate of buying in the prior few months which drove sales volume higher (albeit to the 3-year average), it appears Bal Harbour is not immune to the Summer Slowdown, posting a new 3-year low in sales volume and a new 3-year high in listing volume.  Keep in mind, the median list price is well within its 3-year range AND Bal Harbour continues to be one of the most sought after places to live in the United States.

33160 – Sunny Isles Beach, Eastern Shores & Golden Beach

Click here to receive the Market Activity Report for 33160

Click here to receive the Neighborhood Report for 33160

MLS Sales Volume is at a NEW 3-year low.  Listing Volume is at a NEW 3-year high.

I have called Sunny Isles Beach “Home” for nearly 8 years and I am looking forward to having many more years as a resident here.  The City of Sunny Isles Beach has been undergoing a massive transformation since 1997 when the City first incorporated and was no longer part of the City of North Miami Beach.  I am looking forward to, hopefully sooner than later, enjoying some years here without an endless stream of construction vehicles and lane closures; and, in approximately 2 years, when the City completes its endeavor to sink all the power lines under the A1A and replace the ugly streetlamps with more aesthetically pleasing, and perhaps innovative lighting along the corridor.

Sales Volume is down and Listing Volume is up, however, more than HALF of all homes sold in the past year (over 300) have been under 600K.  There are still plenty of existing construction bargains (in my opinion) to be had.

Summary

Is it a good time to buy or sell?

This is the most commonly asked question of me.  It should be noted that the average time on market for listings ticked down by as much as 12% in all zip codes.  This could be an indicator that certain asset classes have reached their inflection points in the market, the point where Sellers have become more realistic with their asking prices and Buyers are coming back into the market as a result.

The overall market continues to correct slowly, and it remains to be seen whether or not this trend will worsen; as it stands right now it has been very slow and gradual; but painful enough to drive many Realtors from the Beaches in search of more active/easier markets to compete in; or, in some cases, move on to greener pastures in other fields.  However, if the US Dollar should weaken against the major currencies of the world, expect a jump in prices as Foreign Direct Investment will likely become resurgent as it did between 2010 and 2013.  As of late, the Dollar is well off its post-election highs, and some economists are predicting the Dollar will see new historical lows in as early as the next 1-2 years.

I believe that in some markets where the trend is up, if you are considering selling, it is always better to sell into a trend (or “too early” as Warren Buffet says); and if you are looking to buy, I would consider looking at markets that have corrected to their 3+ year averages or below to look for opportunities AND also consider price per square foot to buy versus to build.  There are a great number of opportunities to buy in the Miami Beaches, right now, to buy for a lot less than the cost to build new.

 

Noteworthy Articles & Studies from May 2017

  1. National Association of Realtors Commercial Real Estate Report – May 2017 – This is a 6MB download with an extensive analysis on emerging trends & risks in the Commercial Rel Estate Market – https://www.nar.realtor/sites/default/files/reports/2017/2017-commercial-real-estate-alert-05-17-2017.pdf
  2. The Miami Association of Realtors Market Update:  Single Family Homes in Miami-Dade County showed another increase in sales in April.  As I have been commenting, the Condo Market is a mess, and this is weighing down the numbers for the Beach-centric reports I publish monthly, but single-family homes are a very strong market (56% jump in Luxury Single-Family Homes Sales!!!) right now making it a Seller’s Market for that asset class.  http://www.miamire.com/news/news/releases/2017/05/24/miami-single-family-home-sales-increase-again-in-april
  3. Luxury Condo Sales Slowing – http://miami.cbslocal.com/2017/04/12/sales-slowing-down-miami-luxury-real-estate-market/
  4. In May, Colombia was the Top Country Searching for Real Estate in Miami: http://www.miamire.com/news/news/releases/2017/06/08/colombia-tops-all-countries-searching-miami-real-estate  This article lists the Top 10 Countries searching for real estate in Miami; dated June 8th, 2017.
About the Miami Beaches Market Pulse

The Miami Beaches Market Pulse is a monthly market analysis by Christopher J. Lazaro, MBA & Licensed Real Estate Broker, featuring professional commentary, data & statistics, downloadable market reports & neighborhood reports, of the five zip codes of the Miami Beaches: 33139 (South Beach & The Venetian Islands), 33140 (Mid-Beach, the Sunset Islands, Bayshore, La Gorce & La Gorce Island), 33141 (North Beach, Normandy Isle, Normandy Shores, North Bay Village), 33154 (Surfside, Bal Harbour & Bay Harbor Island), 33160 (Sunny Isles Beach, Eastern Shores & Golden Beach).

Advertisements

Removing Fear & Greed from the Real Estate Investing Process through Education

I am entering the below article into the PG Real Estate (http://www.RealtySoft.pro/realestate) article competition.  I have been looking at their software for a long time and would love to build a quality real estate website using their platform!

On RealtorMag today I spotted an article that states the obvious, but in my opinion does not go into any detail on WHY the point of the article is true.  As a reference, here is the linked to the original article:

http://speakingofrealestate.blogs.realtor.org/2013/06/12/young-adults-sour-on-buying-study-says-no/

My Response:

    This article is stating the obvious. Anyone, such as a real estate student, will be more likely to want to pursue purchasing real estate once they have become educated. Education dispels fears by providing facts rooted in logic & reason. The two most powerful forces in any market are Fear and Greed. Fear is more powerful. It takes a stock, and typically Real Estate, a long time to appreciate in value relative to how fast it can crash when people lose confidence, fear takes over and everyone heads to the exits at the same time. Markets ALWAYS overshoot more to the downside than they do to

Miami Realtor, Miami Real Estate Professional
Christopher Lazaro, MBA – International Realtor of Miami

the upside. The educated people who had the cash during the real estate bust were the very first into the market in 2008 & 2009, and since 2011 have been reaping the rewards of the opportunities provided by the Greedy; many of which got gutted financially.

       So what really creates the opportunity?  It is a combination of the Fear/Greed paradigm, combined with a general lack of education & sophistication in the general populace.  As soon as something, ANYTHING, starts going up and looks promising, people with any kind of cash start to pour into it, regardless of whether they understand the business or not.  Don’t just take it from me, take it from the most successful investor in US History, Warren Buffett:
1)    One of Warren Buffett’s biggest rules is to never invest in anything you do not fully understand.  If you cannot figure out how a venture makes money, don’t walk…RUN!
2)   Another rule of the great Warren Buffett is a contrarian rule “Be Fearful when others are Greedy, and be Greedy when others are Fearful”.
3)   And according to Warren, the number one rule for building success, wealth and prosperity is NO DEBT!  I, personally, don’t have billions of dollars at my disposal, so for the majority of us, a reasonable amount of debt incurred to accomplish a real estate purchase is often necessary.  I try to keep debt as low as possible and make sure that any debt incurred is for tangible investment and not superfluous, materialistic, nonsense.
      Most people fall into middle & lower income brackets.  They have more of an emotional attachment to their money, and generally speaking,  therefore have a greater predisposition to Fear & Uncertainty, which certainly clouds judgement.  This is not to say that more wealthy people do not share this trait too; after all, these are HUMAN characteristics.  These emotions are experienced the moment an opportunity to either

Miami Realtor, Realtor of Miami, Miami Real Estate
Christopher Lazaro, Miami Real Estate Professional

Buy or Sell occurs while the market is in a state of turmoil (or not, but opportunities generally occur when there is an “inefficiency”, typically created by turmoil), be it on the way up or on the way down.  If you are a person investing in real estate, you should have a long term approach.  It is easy to still get sucked into the mentality of the 2000-2007 market, where people were trading real estate almost as quickly as they could buy and sell a stock.

         As Michael Douglas points out in the movie Wall Street, “Greed is Good”, or at least it can be.  We all desire more money and greater prosperity for ourselves and those we care about.  The very idea of investing is to, bottom line, make money; even if that investment is tied to something “Socially Responsible”, which is completely secondary in the majority of people’s minds.  It is Greed that puts us into a position where we are presented with an opportunity to make an investment.  Without the desire to make more money, there would be no desire to consider making an investment in the first place.  It is at that point where people not only feel the emotions of Fear & Uncertainty, because they are emotionally tied to their money, but while they are sorting through those emotions, they are also trying to contend with what is known in Economics as “Opportunity Cost”; meaning, if I spend my 100K in savings on buying this investment property, I will be giving up the ability to put that 100K to work elsewhere should an opportunity avail itself, or already be considered as an alternative.
      It is here where emotions must be put to the side and the would-be investor needs to perform an analysis (actually a set of them).  Generally speaking, they should be performing a SWOT Analysis:  Strengths, Weaknesses, Opportunities & Threats.  If you do not understand HOW you will make money, scrap the opportunity until you fully understand How and all of the Issues, Risks, Actions & Obligations that will come with the investment.
      In order to answer under each of those columns in SWOT, additional analyses are needed, such as Market Analysis: pulling comps, doing inspection(s) of the property and getting a rock solid idea of what it can rent for and/or sell for versus the total cost of ownership.  You must know what your ROI (return on investment) and your CAP rate (Capitalization Rate is what you get to keep after Taxes, Dues and other expenses on the property are paid for) will be.  Be sure to include the cost(s) of Commissions, Rehab and Satisfaction of any Liens associated with the property. This is typically done via a Pro Forma.
     While considering the choice (or choices, in which case you may have several Pro Forma documents in front of you) of an investment, you then need to compare it to other types of investments.  For example, if I take my 100K and buy an investment property with it, my ROI might be 10% and my CAP rate might be 7%.  I might weigh similar opportunities with similar numbers.  But I also should look at the “What if I simply invest it in an REIT (Real Estate Investment Trust), that pays a Dividend of 10%?  Right now (2013), that looks “better” because even if I am making over the 400+K a year where the tax becomes 20%, I still get to keep a full 1% more (meaning it would be an 8 CAP) than if I owned property and I have none of the management & ownership & general upkeep headache of a property.  However, the savvy investor should consider that a physical piece of property can be borrowed against (so I can invest in yet another property, possibly as much as doubling my ROI and absolutely increasing my ROE (Return on Equity).  The additional “cost” associated with this would be whatever the mortgage debt associated with the borrowing would be and this too, can be clearly put on paper and calculated in a Pro Forma.  In addition, income generated from the property or properties, can be offset with not just taxes & other expenses, but rental properties can also be Depreciated (this is an additional “Deduction”).
      The vast majority of would-be investors, in my experience, have little to none of the above knowledge or expertise, and while I have given a pretty solid synopsis, it is simplified and incomplete.  A complete dissertation on the subject itself is beyond the scope of my response.
      Circling back to the original point, and concluding: given all of the above that I have written about proper investment analysis, there is no mention of emotion playing a role in the decision making / evaluation process, and “gut instinct” has absolutely nothing to do with a legitimate analysis; NOR DOES LUCK! This is where the value of a qualified (and by qualified I mean BEYOND simply licensed to practice real estate) Real Estate Professional can be of tremendous value to an Investor; and a be a provider of “Luck”.
Note:  Be prepared to either pay a TRUE real estate professional for properly done Analyses & Pro Forma, or at the very least sign a Buyer-Broker Agreement.  As a Real Estate Professional I get paid Fees as well as Commissions, and dependent on the transaction at hand, I have deducted my fee(s) from the total Commission(s) paid on property closings.  Be wary of agents “working for free” or not requiring a commitment.  The best Brokers & Agents I have met in the business get paid, one way or the other (or both) for their services; and they have a lot of repeat business.
Cheers,
Christopher Lazaro
I can be reached at:
************************************************

PG Real Estate Solution – script for creating a real estate site.