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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Social Media Usage & Broker’s Liability (Updated May 2015)

I updated an article I posted back in 2013 with current information and tips regarding Social Media Usage.  Click the link below to go to the updated article.

Social Media Usage & Broker’s Liability (Updated May 2015).

 

Cheers,

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

Open Office Spaces – An Emerging Trend in Commercial Real Estate

The December 2013 Article in Realtor® Magazine had a great article this month identifying a emerging trend in commercial real estate.  The article is entitled The Walls Come Down – More companies are shifting to open-plan offices, adding amenities while reducing square footage.

Properly identifying the beginning of the trend as being Tech/Dot-Com related (I worked for a number of IT Companies that implemented this plan between 1998 to 2011 when I was a full time IT Professional), the article goes on to explain why companies are moving towards an open-floor plan model and the benefits they are receiving as a result.  A cost savings, of course, is virtually always the first and foremost reason.  In addition, however, it has been found that a number of synergies are to be had by employees having greater access to each other, without the barriers walls and doors create in between them.  While I certainly believe an open-floor plan provides a more comfortable space to work in, I do not see private offices going the way of extinction any time soon and neither do the contributors to the article.

For example, in my own small brokerage, we have quickly realized that sitting a team at the same table with the Brokers (Mark & Myself), to be enormously productive & educational for the team as a whole.  We are quickly able to share ideas and act upon those ideas directly from our laptops and cell phones.  Team morale is often much higher after a group powwow than at any other time; especially when agents are working remotely (from home).  However, there is always a need to be able to take calls privately (for confidentiality reasons at the very least; obviously some calls are personal as well).

In American Express and IBM, I noted the existence of, and often used, micro offices (or cubby holes as they were called).  A Cubby Hole is an office with a single desk or chair and only about as large as a telephone booth (remember those? 😉 ). These were also sound proofed.  They were distinctly available for those who needed privacy – for however long – (confidentiality was always a very high priority at these organizations) and for visiting consultants/employees who needed to be on site.  I made use of them often when I was on site, as I was dealing with, or leading, confidential projects all of the time.  I also have a voice that carries, and the folks of more than one cubicle set in my career, would politely request I take my business to a sound proof room.

While there was a notable drop in space-per-worker (225 sqft tp 213 sqft), the authors and contributors do not see the number ever dropping to below 150 sqft.  They also cite existing leases as a reason why this trend will continue to only trickle towards a smaller number rather than occur in a sudden fashion.

Miami Realtor, Realtor of Miami, Miami Real Estate
Christopher J. Lazaro, Miami Beach Real Estate Broker & REALTOR®

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

Government Corruption & Hypocrisy

Posting to both my blogs:

The Democratic Party is the first to blast the Republicans about “Good Old Boy” practices & mentality.  Look at this crookery:

Source: http://www.snopes.com/politics/business/blum.asp

All In The FamilyThe US has entered into a contract with a real estate firm to sell 56 buildings that currently house U.S.Post Offices. The government has decided it no longer needs these buildings, many of which are locatedon prime land in towns and cities across the country.

The sale of these properties will fetch billions of dollars and a handsome 6% commission to the company

handling the sales. That company belongs to a man named Richard Blum. Who is Richard Blum you ask?

Why the husband of Senator Dianne Feinstein, that’s who. What a bunch of crooks we have running this country!

Senator Feinstein and her husband, Richard Blum, stand to make a fortune. His firm, C.R. I., is the sole real estate company offering these properties for sale. Of course, C.R.I. will be making a 6% commission on the sale of each

and every one of these postal properties.

All of these properties that are being sold are all fully paid for. They were purchased with U.S. taxpayers’ dollars,

and they are allowed free and clear by the U.S.P.S. The only cost to keep them is the cost to actually keep the

doors open and the heat and lights on. The United States Postal Service doesn’t even have to pay property taxes

on these subject properties. Would you sell your house just because you couldn’t afford to pay the electric bill?

Well, the Post Office is.

How does a powerful U.S. Senator from San Francisco manage to get away with such a sweet deal?

A powerful United States Senator’s husband is standing by, all ready to make millions from a U.S. taxpayer

funded enterprise.

No one in the mainstream media is even raising an eyebrow over his 6% commission on the sale of hundreds

of millions of dollars’ worth of quasi-public assets.

It is amazing that the media doesn’t bother looking at stuff like this in very much detail.  For those not in the know, Freedom of the Press does not apply to Television…a reason you do not see 1/100th of the corruption going on in Local, State & especially, Federal, government.

Response to a Response: Defining 21st Century Real Estate – On Purpose Magazine

On the wonderful website On Purpose Magazine, I just replied to a response by a Keller Williams Realty Associate (but I have no way to truly confirm that they are indeed working for Keller Williams) and it seemed more promotion; but also the person indicated that, in a nut shell “all we do is real estate”; and I believe the antiquated models of the Old World of Real Estate are becoming increasingly difficult to survive in.  I published this response:

Christopher Lazaro | February 27, 2013 at 9:08 pm 

We are more of a boutique brokerage than Keller Williams and as such have expanded our interests to finding sources and buyers of hard/physical commodities such as Iron Ore, Sugar, Gold, Silver & Oil. We have repeatedly come across the opportunities while working with investors seeking to sell/acquire large commercial real estate assets.

We also have no problem brokering legitimate business opportunities and joint ventures regardless of whether they are real estate related. We are more than simply real estate agents; we are trusted business consultants with decades of expertise in banking & finance, information technology, commodities, and energy as well as residential & commercial real estate.

The global nature of the market place has shown us new avenues for growth both personally and commercially speaking and in our view we can provide our clientele a greater scope of opportunities and possibilities by having this flexibility.

It was for this reason that our group came together to form Metro International Realty (and the DBA, Metro International Investments). Our transition to the new company/venture from TM Realty Associates. Inc is nearly complete and we are very happy that our fearless leader & commercial broker, Mark Moldoff, a 42 year veteran of real estate development and brokerage opted to partner with us and continue leading the group 

Cheers,
Christopher Lazaro