Archive for March, 2011

Friday Fountain Photo

posted on March 25th, 2011 filed under: Fountains

Photo of fountain at Lincoln Road, Miami Beach.

Miami Beach Real Estate Photos -- Fountain at Lincoln Road

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New Home Sales Plunge, CNBC Real Estate Reporter Calls Double Dip in Housing

posted on March 23rd, 2011 filed under: Real Estate Market Data, Real Estate News

Today’s disastrous numbers from the Census Bureau on the number of contracts signed in February to purchase new homes in the U.S., combined with other recent data showing renewed weakness in housing, led CNBC’s real estate reporter Diana Olick to officially call this a double-dip in housing.

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More Signs of Ice Breaking in Upper-Middle Real Estate Market in Coral Gables

posted on March 21st, 2011 filed under: Properties in Focus, Real Estate Market Data

Despite the greatest real estate bust of all time, it’s been tough for buyers in the upper-middle bracket to find better homes at reasonable prices in Coral Gables.  Some recent sales suggest sellers’ intransigence may be thawing.

The classic Old Spanish on a 12,500-sf double lot at 1240 Castile Avenue sold for $605,000, or $255.38/sf.  Previously sold for $650,000 in 2002 and $750,000 in 2003, so it’s back to roughly a 2000 price.

1240 Castile Ave.

1240 Castile Ave.

The big old colonial on over half an acre at 758 University Drive sold for $950,000, or $201.48/sf.  Needed lots of work by most buyers’ standards, but at a compounded appreciation rate of about 3.53% since its last sale in 1990, there’s money for a few improvements while still getting a good deal.

758 University Dr.

758 University Dr.

The bank-owned (REO) foreclosure at 1010 Asturia Avenue, which the Real Estate Fountain brought to your attention when it was listed at a rock-bottom price, sold fast for $530,000, or $198.80/sf.  It’s located a block away from the Granada Golf Course.  Prior sales: $315k in 1998, $830k in 2005, $1.189 million in 2007.  Of course, don’t make the mistake of thinking that it’s a million-dollar house.  That was mania and manipulation.

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Mortgage Debt Destruction Continues

posted on March 19th, 2011 filed under: Financial Responsibility, Real Estate Market Data

The value of residential real estate is a function of the amount of money private households are willing to borrow from the future to pay for it.  Generally speaking, you want to own a home when the appetite for mortgage debt is expanding, and you want to be fearful when the appetite for mortgage debt is receding.

A fair measure of the appetite for mortgage debt is the total amount of home mortgage debt outstanding.  True to form, this metric has told — indeed foretold — the story of the current real estate implosion.  When the wild expansion of home mortgage debt crested, it was time to sell, especially in the areas where lending had become the most detached from reality.  Real estate in Miami and Coral Gables fit that description, and prices followed the numbers for total debt, heading down.

Federal Reserve Flow of Funds Data -- Home Mortgage Borrowing (to 4Q2010) -- Table(Data reflect percentage change)

Unlike other real estate downturns, the present implosion has seen the appetite for debt not just recede to a lower level but turn negative.  This reflects both a drawdown in new borrowing as interest in home ownership wanes, and the destruction of existing debt as bad loans are written off.  Quite a deadly combination.

Notably, 2010 saw a bigger decline than 2009 overall, with the first half being worse than in 2009, and the second half matching 2009.

Do not expect real estate values to resume their long-term upward trajectory as long as home mortgage debt is being destroyed.

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Friday Fountain Photo

posted on March 11th, 2011 filed under: Fountains

Fountain in the courtyard of the Conference Center of the Americas, part of the Biltmore Hotel in Coral Gables, Florida.

Coral Gables Real Estate Photos -- Biltmore Hotel -- Conference Center of the Americas Courtyard Fountain (3)

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Cost of Living Comparison: New York Versus Miami

posted on March 8th, 2011 filed under: Financial Responsibility, Real Estate News

With oil above $100 per barrel again, it’s worth comparing the key factors in the cost of living in New York versus Miami.  It ain’t cheap to fill up the tank of a house.  How ’bout burning through a couple thousand bucks every month or so in the winter?

Coral Gables Real Estate Photos -- House DrawingMiami Real Estate -- Insurance Versus Winter Heating OilNow that’s money up in smoke.  As noted here in 2008 when oil was at $135 per barrel, you could easily spend five or six thousand a year on heating oil and another thousand or two on electricity in a medium-size home up north.

But what New Yorkers lose up the chimney, homeowners in Miami are forced to spend on the ever-soaring cost of property insurance.  The home that costs five thousand dollars to heat in New York could easily cost eight thousand dollars to insure in Miami or Coral Gables.

If energy and insurance roughly cancel each other out, what other cost-of-living factors weigh in the balance?

The pay scale is generally much higher in New York than in Miami.  But there’s no state income tax in Florida, which is especially nice if your income tends to be from investments rather than from a salary.

Public education is phenomenal in many New York suburbs, with lots of high schools boasting average SAT scores at the 90th percentile or higher.  But to pay for those fabulous education systems, property taxes are stratospheric.

Bronxville High School, Bronxville, NY

Bronxville High School, Bronxville, NY

In South Florida, there are some excellent educational opportunities if you do your homework, and your property-tax assessments can be capped at a three percent annual rate of increase.

Of course, if you want to use private schools, you’re going to pay a hefty price per child no matter where you are, snowshoes or sunshine.

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Miami Home Values: Price to Income Ratio Bounces Off Low

posted on March 3rd, 2011 filed under: Financial Responsibility, Real Estate Market Data, Real Estate News

(As predicted here . . .)

The National Association of Home Builders and Wells Fargo maintain a Housing Opportunity Index (HOI) that compares median home prices to median incomes in a couple hundred metro areas.  Back in early ’09, the HOI showed that the price-to-income ratio for the Miami metro area was between 4 and 5 to 1, based on 4Q08 data showing a median home price of $225,000 and a median income of $49,200.  That was better than the 6-to-1 ratio at the peak, but nowhere near the 2.5-to-1 that prevailed back in the late 1990s, before the real estate mania began.

Accordingly, The Real Estate Fountain observed that home prices in Miami and Coral Gables would have to fall another 30% to 50% to return to their normal historical relationship to incomes.

Coral Gables Real Estate Photos -- Elevated View -- Downtown to Southwest and Biltmore Hotel

And so it came to pass.  According to the HOI, median homes prices in the Miami metro area continued to fall, plunging especially steeply as the artificial effects of the $8,000 government-handout program wore off.

1Q09: $185,000

2Q09: $174,000

3Q09: $160,000

4Q09:  $185,000

1Q10:  $170,000

2Q10:  $134,000

3Q10: $126,000

4Q10:  $142,000

The median income has risen from $49,200 to $52,200 over the same period — a negligible change compared to the change in median price.

Bottom line:  In 2Q10 and 3Q10, we hit the old 2.5-to-1 ratio and bounced off it.

Make no mistake.  The price-to-income ratio is not likely to continue rebounding.  Do not expect another wave of irrational exuberance to goose the valuation of Miami and Coral Gables real estate.  Indeed, valuation measures like the price-to-income ratio often overshoot to the downside during a bust that follows a boom.  We haven’t even seen that yet.

On the other hand, the price-to-income ratio is back near normal, and that takes a lot of the risk out of buying.  You may not get rich buying real estate at merely normal valuation levels, but you’re a lot less likely to be ruined.

Break out the party hats.

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