Archive for the 'Real Estate News' Category

Miami Case-Shiller Rising, National Case-Shiller Fading

posted on March 31st, 2014 filed under: Real Estate News

The strong uptrend in the S&P Case-Shiller Home Price Index for Miami continues, according to the latest data release from Standard & Poor’s.  Meanwhile, the 20-city nationwide composite version of the index has fallen three months in a row, albeit only slightly each time.

So prices slip nationwide while prices forge onward and upward in Miami . . . . Pretty cool . . . . Didn’t manage that trick even in 2008!

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Beware Local Papers Hyping Homeownership

posted on February 20th, 2014 filed under: Financial Responsibility, Real Estate News

Today’s Miami Herald includes a puff piece claiming that it’s still cheaper to buy than rent in Miami, based on the latest nationwide report by real estate data-crunching firm RealtyTrac.

Miami Real Estate -- Herald -- Buy Versus Rent (2014-02-20)

Do not take that report at face value. The methodology RealtyTrac used for its nationwide analysis has major flaws as applied to the Miami market.  From the RealtyTrac website:

To calculate the monthly house payment, RealtyTrac assumed a 20 percent down payment, a 30-year fixed interest rate of 4.46 percent for homes purchased in the fourth quarter of 2013 and a 3.35 percent 30-year fixed interest rate for homes purchased in the fourth quarter of 2012.  Also included in the monthly house payment is a 1.04 percent annual property tax rate, 0.40 percent of the purchase price in annual maintenance costs, 0.35 percent of the purchase price in annual home insurance costs, and subtracting the tax benefit from the mortgage interest deduction and property tax deduction using a 30 percent income tax rate.

For a Miami home-seeker, these assumptions are laughable.  They bear no relation to reality in Miami:

  • The assumption of a 1.04% property tax rate is way too low, generally speaking.  The rule of thumb for property taxes in Miami is closer to 2%.
  • “0.35% in annual property insurance costs”?  Good luck with that.  Florida has the highest property insurance costs in the nation.  Rates vary radically depending on location, year of construction, storm-protection features and other variables, but for purposes of a market-wide generalization, anything less than 1% of home value is probably unreliable.

Even the assumptions not affected by local realities are questionable:

  • Not everyone can muster a 20% downpayment and thereby reduce their monthly mortgage payment by the magic of borrowing less in the first place.
  • A very small portion of the population is in the 30% income-tax bracket that yields a tax-deduction benefit.  According to the IRS (Pub. 1304, Table 3.4), less than 5% of the population was in the 28%-or-higher tax bracket in tax year 2011.  And remember, a portion of the benefit from the mortgage-interest deduction is illusory, because you actually save money only to the extent that the itemized deduction exceeds the standard deduction.  Particularly for lower-income buyers of lower-priced homes, there may be no benefit to itemization at all.

As always, the question whether it’s cheaper to buy or rent depends on your specific circumstances.  REF Real Estate will be glad to help you estimate the true costs of buying versus renting a home in Miami.

Whatever you do . . .

Don’t Believe the Hype.

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Venetian Pool Opens for 2014 Season in Coral Gables

posted on February 20th, 2014 filed under: Real Estate News

The Venetian Pool is probably the most unique of all the treasures in Coral Gables.  Created in 1923 from a coral rock quarry as part of the original design of the city, the pool includes lookout towers, loggias, porticos, a footbridge, a waterfall and grotto, a small beach and other charming features.  It is the only swimming pool to be listed on the National Register of Historic Places.

After its annual closing from late November through January, the Venetian Pool has now reopened for the 2014 season, looking as beautiful as ever.

Coral Gables Real Estate Photos -- Venetian Pool (2)

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Key Biscayne Had Highest Price Per Square Foot in 2013

posted on January 31st, 2014 filed under: Properties in Focus, Real Estate Market Data, Real Estate News

Where in Miami will you find the most expensive real estate in terms of price per square foot for single-family homes?  Turns out it’s in the relatively small homes that line the waterfront in Key Biscayne.  Four of the five top home prices per square foot in 2013 were there.  Of those, three were on a single street — Harbor Drive — while a fourth was on North Mashta Drive.  List below . . .

398 Harbor Drive, Key Biscayne (3BR, 3-1/2BA, 2,155 sf, sold $8.5M):  $4,455/sf

4211 Indian Creek Drive (5BR, 4-1/2BA, 2,322 sf, sold $8.5M):  $3,661/sf

830 Harbor Drive (4BR, 3BA, 2,922 sf, sold $6.25M):  $2,567/sf

571 North Mashta Drive (3BR, 3BA, 3,239 sf, sold $6.7M):  $2,316/sf

881 Harbor Drive (3BR, 3BA, 2,903 sf, sold $5.6M):  $1,998/sf

Miami Real Estate Photos -- Key Biscayne -- Rickenbacker Causeway

Based on MLS data.

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2013’s Mortgage Milestone

posted on December 31st, 2013 filed under: Financial Responsibility, Real Estate Market Data, Real Estate News

The rebound in real estate markets, especially prices of homes in the hardest-hit markets like Miami, has been a top story in 2013.  One of the less appreciated bits of news was the passage of a major milestone.  In the third quarter of 2013, the total amount of mortgage debt outstanding recorded its first positive number since 2009 (and really since 2008, because 2009 merely saw one quarter of very slightly positive growth).

Fed Flow of Funds Z1 -- Mortgage Borrowing -- 1Q2000 to 3Q2013 -- Chart, Graph

Mortgage debt is the mother’s milk of real-estate prices, so continuation of the uptrend in debt is important to the sustainability of rising prices.  Since the 1950s, mortgage borrowing and home prices had increased without fail, lulling bankers and buyers alike into the ill-fated belief that prices would never fall.

Fed Flow of Funds Z1 -- Mortgage Borrowing -- 1956-2012 -- Chart, Graph

And indeed, when viewed on a logarithmic scale, the explosion in mortgage debt during the bubble might have seemed within reason — in keeping with the constant, long-term destruction of the dollar through inflation.  Unlike in the 1970s, however, incomes were not going along for the ride.  Without income to service the debt, the end was nigh.

Fed Flow of Funds Z1 -- Mortgage Borrowing -- 1956-2008 (Log Scale) -- Chart, Graph

(Negative numbers cannot be plotted on a logarithmic chart, so the preceding chart ends in 2008 — but you get the picture.)

Is the current uptrend in debt and prices sustainable?  The negative numbers represented not only a lack of borrowing by home buyers, but destruction of bad loans by banks — and banks have worked through a significant portion of the bad loans by now.  But interest rates have been rising, which creates several risks to continuation of the debt and price uptrends.  If 2013’s buyers paid as much as they could (as buyers are wont to do), and rates continue to rise, then there are four possibilities for real-estate prices in 2014: (1) cash buyers sustain current price levels; (2) incomes rise to offset the higher payments; (3) lending standards loosen to allow bigger and riskier loans to the extent incomes don’t rise; or (4) prices fall.

Don’t count on the first possibility.  Investors have sharply curtailed their purchases in recent months, quite possibly in reaction to the realization that the Fed’s program of interest-rate suppression has reached its limit.

It’s hard to rely on the second possibility either.  Incomes have been rising modestly, but not enough to keep pace with the rise in interest rates since 2012.  The only hope on this score would be that buyers have been uncharacteristically restained in their offers.  Considering the number of multiple-offer sales and the number of homes selling at or above asking price, it’s hard to believe that buyers have much in reserve — at least here in the Miami real estate market.

Will lending standards loosen?  It’s already happened to some extent, and there may be room for further relaxation.  On the other hand, new mortgage-lending regulations take effect in a couple of weeks and are generally expected to have a constrictive effect.

As for possibility number 4 . . . presumably nobody will repeat the mistake of thinking that “prices never fall” anytime soon.

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New Luxury Condos Continue to Rise in Brickell

posted on November 30th, 2013 filed under: Real Estate News

Sleek designs and artsy interiors are de rigeur in the resurgent Brickell-area condo boom in Miami.  Cranes again fill the skyline, as one after another project opens a sales center and breaks ground.



Current and upcoming offerings include the Brickell House, Millicento, MyBrickell, Brickell Heights, Brickell CityCentre, SLS Brickell, the Bond, 1010 Brickell, the Echo, and Nine at Mary Brickell Village.

Billboard for SLS Brickell

Billboard for SLS Brickell

The cynical view is that few full-time residents will occupy the thousands of units that these towers represent, and that the buyers consist of wealthy Americans seeking a Florida address to avoid state income taxes, or wealthy Central and South Americans looking for U.S. assets to escape their native countries’ inflationary and capital-threatening environments.

Brickell CityCentre

Brickell CityCentre

Another view is . . . who cares?  Downtown Miami is becoming a modern metropolitan mecca, a magnet for international wealth to rival other great cities.  You can’t expect jet-setters to stay in one place all the time.  So if the lights aren’t all on, that’s okay.  The jewel-encrusted skyline will sparkle plenty anyway.

Brickell Heights

Billboard for Brickell Heights

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S&P Case-Shiller Index Shoots Higher Again

posted on July 31st, 2013 filed under: Financial Responsibility, Real Estate Market Data, Real Estate News

According to the S&P Case-Shiller Home Price Index, values of single-family homes in the Miami metro area were rising at about 2.49% per month as of May 2013 (more precisely, it’s the May report for the rolling average of the three months that ended in May).  That’s about 30% per year!  The last time — indeed, the only time in Case-Shiller data — that Miami real estate saw such gains was . . . . . . wait for it . . . . . . in June 2005, just before the bubble burst.

S&P Case-Shiller Home Price Index -- Miami -- May 2013 (from Jan 2008) (Chart, Graph)Source:  Standard & Poor’s

The relatively short-term chart above begins when Miami real estate prices peaked in January 2008.  Viewed alongside the black-diamond ski slope of the real estate crash, the price gains of the last year or so seem respectable but perhaps not all that unusual.

On a longer-term chart, however, it is indeed highly abnormal for Miami home prices to rise this rapidly:

S&P Case-Shiller Home Price Index -- Miami -- May 2013 (Chart, Graph)Source:  Standard & Poor’s

After asset bubbles burst, a phenomenon called an “echo bubble” is sometimes observed.  And the Federal Reserve, which intentionally created the housing bubble in the first place to offset the collapse of the late-’90s stock bubble, is up to its old tricks.

Considering that the price-to-income ratio is already above pre-bubble historical highs, incomes are rising at a low single-digit annual percentage, and interest rates spiked in June to drive up mortgage costs by a double-digit percentage, there is reason to doubt whether 30% annualized price gains make sense.  (For a chart illustrating how fast opportunity in the real estate market has vanished, see Bloomberg — American Dream Suddenly Isn’t So Affordable.)

But hey, as one spirited auctioneer liked to say: “C’mon people, it’s worth whatever you pay for it!”

If you must buy Miami real estate (or sell Miami real estate), the least you can do to give yourself a fighting chance is to give REF Real Estate a call.  Buyers get 1% cash back on the purchase price, and sellers get full service for the lowest possible commission.

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Do Incomes Matter to Home Prices?

posted on November 23rd, 2012 filed under: Financial Responsibility, Real Estate Market Data, Real Estate News

A little dose of reality to put the black in your Black Friday . . .

Price-Income Ratio (NAHB) -- Miami -- Chart, Graph -- 1991-2012

Home prices have stabilized recently, and even gained in some areas.  But this recent price action may face significant headwinds going forward.  The ratio of median home price to median income in the Miami area has once again reached the highest level on record outside of the housing bubble.

The price-income ratio is like the price-earnings ratio of stocks.  When it’s historically high, so is risk.  And when it’s historically low, that’s usually a good opportunity.

The most important factors in the recent bounce in the price-income ratio are probably (1) record-low interest rates that enable buyers to pay more, and (2) continued investment by cash buyers, for whom income is by definition irrelevant.  Perhaps these influences will persist, but rates may not fall much further (having fallen very little since the Federal Reserve announced QEternity), and cash buyers seem like slender support for a major metropolitan area’s housing market.

Of course, it’s a bit late to time the market.  The crash already happened.  And with rock-bottom interest rates, you can’t go too wrong in buying that perfect home if it comes along.  Just be aware of the possibility of detours along the road to recovery.

[Geeks’ note: A few of the data points in the above chart were missing from NAHB statistics, and those gaps were filled by interpolation.]

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Halloween in Coral Gables

posted on November 1st, 2012 filed under: Real Estate News

It was a beautiful evening for trick-or-treating in Coral Gables.

Coral Gables Real Estate Photos -- Halloween 2012 (1)

And plenty of neighbors got into the act.

Coral Gables Real Estate Photos -- Halloween 2012 (2)

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Luxury Flips Hit Market in Miami and Coral Gables

posted on August 18th, 2012 filed under: Properties in Focus, Real Estate News

The luxury real estate market in Miami and Coral Gables sprang to life about a year ago.  An extreme oversupply of homes for sale quickly shrank to nearly normal inventory levels.

Perhaps another sign of strength is that some recent buyers of luxury properties in Miami and Coral Gables are attempting to flip the houses — i.e., sell them quickly for a large profit.

15 Star Island Drive is on the fabulous Star Island in the middle of Biscayne Bay.  There are just 34 properties on Star Island, and 15 Star Island Drive is adjacent to the home of Philip and Patricia Frost at 21 Star Island Drive, which is arguably the grandest estate in all of South Florida, with nearly 32,000 square feet of living space on over 6 acres of waterfront land.  15 Star Island is a mere 8,621 square feet on a 40,000 square foot waterfront lot.

The previous owner of 15 Star Island was Claudio Osorio, an embattled entrepreneur who declared bankruptcy in 2011.  The property made news when a bankruptcy judge thwarted a would-be buyer’s attempt to enforce a contract to purchase the property for $10 million.  The judge held an auction instead, and the property brought $12.72 million at auction in November 2011.

The buyer has now re-listed the property for $16.9 million.

15 Star Island Drive

15 Star Island Drive

6611 Leonardo Street in Coral Gables is not as ritzy, but still in the luxury-home segment of the real estate market.  It was listed for sale at $2.7 million in January 2009 and eventually sold for $1,215,899 in a short sale in March of this year.  The buyer re-listed the property in June for $1.995 million, and has since reduced the price to $1.799 million.

6611 Leonardo Street

6611 Leonardo Street

As auctioneers like to say, it’s worth what you pay for it.

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