Archive for the 'Real Estate Market Data' Category

More Big Homes Sell for $200/SF in Coral Gables

posted on June 15th, 2011 filed under: Properties in Focus, Real Estate Market Data

Continuing to validate the proposition that price declines are migrating up the food chain to bigger, costlier homes in Miami and Coral Gables, several Gables homes in the 5,000-sf range have recently sold for about $200/sf.

The 5,530-sf historically designated home at 2027 Alhambra Circle sold for $1,025,000, or $185/sf.

2027 Alhambra Cir.

2027 Alhambra Cir.

Around the bend and toward town, the 4,960-sf 1930s manse at 756 Alhambra Circle sold for $1,138,000, or $229/sf.

756 Alhambra Cir.

756 Alhambra Cir.

Another classic old home, the expanded 6,528-sf spread at 2200 Segovia Circle, sold for $1,350,000, or $206/sf.

2200 Segovia Cir.

2200 Segovia Cir.

If you’ve been planning to buy a big house in Coral Gables, your patience has been rewarded.  Now you can shop and negotiate with much less fear of loss.  Properties like these were selling for more like $400/sf at the peak.  That was maniacal, of course.  But at $200/sf, these classic Coral Gables homes are back to roughly 2001 prices, completely unwinding the excess appreciation of the bubble years.

Of course, any collapse in asset values can overshoot to the downside, and there is risk of further price declines.  But the risk of loss is a lot less than it was before.

Stay tuned for another post with charts showing the trajectory of prices for big homes in the 33134 zip code of Coral Gables.

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S&P Case-Shiller Index Shows Prices Continue Falling in Miami

posted on May 31st, 2011 filed under: Financial Responsibility, Real Estate Market Data

We’ve never had a decline in house prices on a nationwide basis.  So, what I think what is more likely is that house prices will slow, maybe stabilize . . . .

Ben Bernanke (July 2005)

A few years ago, the very idea of falling home prices appeared to be incomprehensible to the elite coterie of policymakers who created the housing boom and bust.  The reality, when it hit, caused financial panic and drove the banking system and millions of households into insolvency.  Yet now, monthly reports of a renewed decline in real estate values are met with what-me-worry carelessness.

So there will probably be no panic over the latest S&P Case-Shiller Home Price Index, which showed that (yawn) home prices fell again in Miami for the three-month period ending March 2011.

S&P Case-Shiller Home Price Index -- Miami -- Mar. 2011 (NSA) (from Jan. 2008)Source: Standard & Poor’s

The good news is that the rate of decline in Miami home values moderated from last month’s reading, and the current dip is not the sort of steep decline exhibited during the crash phase of the real estate collapse.

On the other hand, the long view does not give any clear indication of where the bottom will be, now that we have broken the previous low from spring 2009.

S&P Case-Shiller Home Price Index -- Miami -- Mar. 2011 (NSA)Source: Standard & Poor’s

Continued price declines will eventually combine with wage gains to put in a bottom for real estate prices in the Miami metro area (including Coral Gables).  For now, the data show that Mr. Market is still working his way to the downside.

There may be specific neighborhoods, price ranges, and most important, individual transactions (houses or condos) for which the risk is low enough to justify buying real estate despite falling values in the broader market.  Otherwise, it remains a dubious financial undertaking to buy a depreciating asset with borrowed money.

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Mini Land Rush in High Pines, Ponce-Davis, Hammock Lakes Neighborhoods

posted on May 13th, 2011 filed under: Properties in Focus, Real Estate Market Data

Looking to build your dream home in the estate areas of Miami and Coral Gables that lie south of Sunset Road (SW 72 Street) and east of South Miami?  Several of the lots listed for sale in the estate neighborhoods of High Pines, Ponce-Davis and Hammock Lakes have recently either sold or gone pending.  The property at 5490 Hammock Drive in Coral Gables sold for $1.25 million.  It’s in the soon-to-be-gated Hammock Lakes neighborhood.  Two other lots, each about one acre and listed for about $1 million, went pending in the High Pines / Ponce-Davis neighborhood of Miami.

5490 Hammock Dr.

5490 Hammock Dr.

There wasn’t much buildable land in the first place, and it just got a bit more scarce.

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Listings of Bank-Owned (REO) Luxury Homes Surge in Coral Gables Real Estate Market

posted on April 15th, 2011 filed under: Real Estate Market Data, Real Estate News

In the last 90 days, more bank-owned (REO) homes have been listed over $900,000 in Coral Gables than were listed in the preceding year.

Since January 15, 2011, 14 bank-owned homes have been listed in Coral Gables.  Five of them — more than a third — have been over $900,000.

From January 15, 2010 to January 14, 2011, 67 bank-owned homes were listed in Coral Gables.  Four of them — less than one sixteenth — were over $900,000.

825 Coral Way

825 Coral Way

There were already cracks in the ice of the overpriced upper end of the Coral Gables real estate market.  The surge in luxury-home liquidations will add to the downward pressure on prices in this bloated segment.

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Miami Home Prices Hit New Low, Says S&P Case-Shiller Index

posted on April 8th, 2011 filed under: Real Estate Market Data

Having drifted lower since expiration of the $8,000 government handout program last summer, the S&P Case-Shiller Home Price Index for the Miami metro area broke down a little more decisively for the three months ending January 2011.

The data are not very encouraging whether viewed in the big picture . . .

S&P Case-Shiller Home Price Index -- Miami -- Jan. 2011 (NSA)

Source:  Standard & Poor’s

or close up . . .

S&P Case-Shiller Home Price Index -- Miami -- Jan. 2011 (NSA) (beginining Jan. 2008)

Source:  Standard & Poor’s

Nonetheless, to keep things in perspective, the recent acceleration in the rate of decline pales by comparison with the declines of 2008-09.  We’re not in crash mode anymore.

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Real Estate Still Overvalued in Miami and Coral Gables

posted on April 1st, 2011 filed under: Financial Responsibility, Real Estate Market Data, Real Estate News

There’s something evil about pushing people into committing more and more of their income to house payments, as the the financial-realty complex managed to do over time.  If it were a modest consumer good, people could retreat at will from overspending.  But housing is different.  It’s the mother of all purchases, demanding that the buyer leverage the next 30 years of income.

The amount of misery this has produced in the Miami metro area is staggering.  The Center for Housing Policy recently released its annual housing affordability analysis and found that 42% of working households in the Miami metro area had a severe housing cost burden (too much income devoted to housing) during 2009, the last period for which the relevant data are available.  That’s the highest percentage of households in any metro area in the nation.  Remember to say thanks to your bankers and brokers, everyone.

Homes are assets that produce no income (although they replace the expense of renting).  So it’s hard to value a home like a business.  But we can analogize.  A basic measure of stock valuation is the price-earnings ratio.  Stocks were historically cheap in 1974 when they were trading for about 7 times earnings, and overvalued in 1999 when they were trading for about 40 times earnings.  Similarly, we can compare homes prices to family incomes.

The chart below compares the median price of single-family houses in Coral Gables, Florida to the median family income there.  (Note: family is defined as more than one person related by blood or marriage; household is one or more people.)  In 1999, this price-to-income ratio was about 3.19.  By 2007, it had risen to 6.58.  Now, it’s down to about 4.39.

Coral Gables Real Estate -- Single-Family Homes -- Price to Income Ratio -- April 2010

A few noteworthy observations:

  • Overvalued conditions always revert to normal.  Bubbles always burst.
  • Property values in Miami and Coral Gables are not back to normal yet.
  • Most of the progress in normalizing property values in Miami and Coral Gables real estate has been through falling prices.  Incomes have risen, but the boom and bust is mainly about prices.
  • Prices are still falling.

The rest of the normalization process will be a combination of falling prices and rising incomes.  Comparing the current price-to-income ratio to the pre-boom 1999 price-to-income ratio, real estate remains about 30% overvalued.  That can be worked off through any combination of rising incomes and falling prices, over any time frame.

  • If prices fall 10% per year and incomes rise 5% per year, all of the overvaluation will be mopped up in 2 years.
  • If prices fall 5% per year and incomes rise 2.5% per year, the overvaluation will be mopped up in 4 years.
  • If prices stabilize, valuations would not be back to normal for 6 years at 5% income growth, or 12 years at 2.5% income growth.

If you find a good deal, you can grab it without worrying too much about the residual overvaluation.  Otherwise, caveat emptor.  Be careful out there.

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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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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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