Market Activity & Neighborhood Reports by Zip Code for the Miami Beaches
NOTE: The data for the month of August may be SKEWED due to the impacts of Hurricane Irma. Typically, numbers are due to be inputted into MLS by Realtors by the 15th of the following month. Given that power was not restored until well after the 15th (they say the 19th, but I do not believe that is true), This report and the September report may not reflect the true state of the market in terms of both listing volume and sales volume.
Due to the impacts of the Hurricane, I am withholding commentary (and have removed some previously written commentary) for the Months of August & September 2017. The October report will be a full report as I typically publish and I will be sure to note any spikes in listing volume etc, perhaps due to the hurricane. I am also keeping an eye out for surveys of homeowners, as I am interested in knowing what the aggregate general public’s reaction(s) and feeling(s) is/are regarding the hurricane and it’s aftermath.
I have attached the reports. These may or may not have been affected by the hurricane, but I prefer to be sure about what I am looking at. Much of the data is relevant of course, what is and has been listed and sales that did occur, and were documented, are properly recorded.
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).
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.
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.
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 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.
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.)
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.
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.
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.
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:
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
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
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.