Archive for the 'Real Estate News' Category

S&P Case-Shiller Home Price Index: Miami Update

posted on May 4th, 2012 filed under: Real Estate Market Data, Real Estate News

According to the S&P Case-Shiller Home Price Index, prices in Miami have been in a narrow, flat channel for about one year now.  A similar pattern held from 2009-2010 before slipping to the current level.

S&P Case-Shiller Home Price Index -- Miami -- Feb 2012 (from Jan 2008) (Chart, Graph)Source: Standard & Poor’s

A few observations:

  • The difference between the current level and the 2009-2010 level is about 8 out of 145 Case-Shiller index points.  That’s almost exactly the same proportion (8 out of 145) that the government’s $8,000 home buyer tax credit in 2009-2010 bears to the median home price in Miami, which stands at about $145,000.  Could be a case study in the economics of temporary government intervention.
  • It’s just a coincidence that the Case-Shiller index level is close to the median home price.  The index level does not signify dollars and cents, but the relationship of current prices to the level in January 2000, which is assigned an index level of 100.00.  The current index level of 139.49 means prices today are 39.49% higher than in January 2000.  Not bad, and indeed it represents annual compound appreciation of 2.77%, which is actually below the 2.95% rate of appreciation from 1987 to 2000, which suggests that current prices are reasonable as a matter of long-term appreciation.
  • The S&P 500 index closed at 1455.22 on the first day of trading in the year 2000.  It closed at 1391.57 yesterday.  That’s annual compound appreciation of -0.36% (i.e., depreciation, not appreciation).  Of course, January 2000 was close to the top of the biggest stock-market bubble of all time, and was before the real-estate bubble was created (yes, intentionally, and precisely to offset the bursting stock-market bubble).  Picking a different time frame would tell a different story about real estate versus stocks.  And a truly accurate comparison between real estate and stocks would be more complicated than that, taking into account dividends, income taxes, property taxes, insurance, rent avoidance, etc.

When looking at a long-term chart, it’s tempting to draw a straight line and say prices remain above the trendline:

S&P Case-Shiller Home Price Index -- Miami -- Feb 2012 (with trend line) (Chart, Graph)Source: Standard & Poor’s

On the other hand, a trendline accurately adjusted for the effect of compounding would curve gradually upward.  If the Case-Shiller index had continued rising at its 1987-2000 rate of 2.95% instead of booming and busting, its current value would be about 142.50.  In that sense, prices have already overshot to the downside by a few percent.

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The Best Advice, Right Here

posted on April 20th, 2012 filed under: Financial Responsibility, Real Estate Market Data, Real Estate News

Miami Real Estate Photos -- Biscayne Bay and Waterfront Homes on Palm Island

“[P]rices in Miami will fall 30% to 50% over a period of three to four years, and not return to their old highs until more than a decade has passed.”

House Price Index Update — New York and Miami, Sept. 4, 2008.

How many other real estate agents warned you at all, much less so accurately?  Heck, how many economists did?

The best advice.  The best real-estate representation.  Right here.

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Opportunity and Risk in the New York Suburbs

posted on April 9th, 2012 filed under: Properties in Focus, Real Estate Market Data, Real Estate News

It’s too soon for prices to start rising in the New York suburbs, and significant risk remains for further declines.  Beware salesmen (and saleswomen) bearing happy-talk.

According to the National Association of Home Builders, the New York metro remains the least affordable in the nation, with a median home price of $409,000 and a median income of $67,400, a ratio of 6 to 1.  That’s down from 8 to 1 at the peak of the real estate mania, but still far above the 3 to 1 that prevailed in New York before the boom began.  Sure, record-low interest rates ease the pain, but if rates rise faster than incomes, the downward pressure on prices will intensify.  That’s what pricked the bubble a few short years ago.  Have we already forgotten?

A similar observation works at the micro-market level.  Consider the exemplary New York City suburban yuppie enclave of Cedar Knolls, a neighborhood in the city of Yonkers that shares a zip code and much of its daily life with the adjacent village of Bronxville.

Bronxville is no median suburb.  Wikipedia puts the median family income at $200,000.  The average kid taking the SAT at Bronxville High School scores at about the 90th percentile nationwide.

Being in Yonkers, Cedar Knolls doesn’t get Bronxville schools.  But most of the houses are classics from the 1920s, and carry much lower price tags and property taxes than their Bronxville counterparts.  The combination of beauty and relative affordability makes Cedar Knolls a popular choice among young professionals who work in New York City, but haven’t gained master-of-universe status.

You won’t find income data for Cedar Knolls, but a proxy will do.  Let’s compare Cedar Knolls home prices to a widely published compensation benchmark for young professionals in New York: the salary of first-year associates at big New York City law firms.

  • In 1998, before the real estate boom, first-year lawyers made about $90,000, and a typical Cedar Knolls home could be had for about $450,000 — a ratio of about 5 to 1.
  • When Cedar Knolls home prices topped out in 2004, first-year lawyers made about $190,000 (salaries spiked when dot-coms were luring lawyers away from firms), and a typical Cedar Knolls home cost about $1.25 million, a ratio of about 6.5 to 1.
  • In 2011, first-year lawyers were back to about $170,000 (bonuses were crimped by the financial crisis).

If you don’t want to pay a bubbly price for a house in Cedar Knolls, you might want to stay close to the pre-boom ratio of 5 to 1, which works out to $850,000.  But sales prices during the past year suggest that you’d have a hard time paying so “little”:

  • 132 Pondfield Road West sold for $1,083,500 (6.4 times the salary of a first-year lawyer)
132 Pondfield Road West

132 Pondfield Road West

  • 11 Beechmont Avenue sold for $1.2 million (over 7 times the salary of a first-year lawyer)
11 Beechmont Avenue

11 Beechmont Avenue

But there are some decent opportunities out there:

  • 170 Pondfield Road West is now listed for $945,000 (about 5.5 times the salary of a first-year lawyer, and considerably less than the current owner paid about eight years ago).
170 Pondfield Road West

170 Pondfield Road West

  • 13 Cedar Lane is now listed for $1.195 million (about 7 times the salary of a first-year lawyer, but for one of the larger homes in Cedar Knolls, a 6 BR, 4-1/2 BA, 3,860 sf house — almost twice the size of 11 Beechmont).
13 Cedar Lane

13 Cedar Lane

All four of the above properties are basically within a one-block radius.

After a real estate boom, overvaluation is worked off by a combination of falling prices and rising incomes.  While that plays out, the market will present attractive opportunities to savvy buyers.  REF Real Estate likes savvy buyers.

REF Real Estate is a licensed real estate broker in Florida and New York.

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Supply of Single-Family Homes for Sale in Coral Gables Drops Below 300

posted on February 3rd, 2012 filed under: Real Estate Market Data, Real Estate News

The number of single-family homes for sale in Coral Gables has dropped below 300 (to be precise, the number stands at 297), according to MLS data.  The supply has steadily declined since hitting a high of 631 in March 2008.

Coral Gables Real Estate Photos -- Entrance Arch at Miracle Mile and Douglas Rd 2

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Federal Reserve Says: No Rush to Buy That House

posted on January 28th, 2012 filed under: Real Estate News

In the 1970s, inflation, wages, interest rates and home prices chased each other upward like runaway balloons.  People paid more for houses despite rising interest rates because people feared that waiting would only mean paying more and borrowing at a higher rate to do it.  That’s the inflation dynamic — prices rise as consumers buy now fearing higher prices later.

This ain’t the 1970s . . . at least if you ask the Federal Reserve.

Bernanke & Co. this week announced they do not expect to raise interest rates until the end of 2014.  This is great if you think low interest rates are an end in themselves.  On the other hand, when you see news like this, always ask why.  Apparently, the Federal Reserve thinks the economy is going to remain weak for a very long time.

The Fed might as well have told home buyers: “No need to rush.”

Ben Bernanke Photo (Wikipedia Commons)

So if you’re looking for real estate in Miami, Coral Gables, Coconut Grove, Miami Beach or Pinecrest, Ben Bernanke thinks you have plenty of time to shop.  Just remember, he and the Fed have been enormously wrong before.

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2805 Columbus Boulevard Sells for $527 Per Square Foot

posted on January 18th, 2012 filed under: Financial Responsibility, Properties in Focus, Real Estate Market Data, Real Estate News

The home at 2805 Columbus Boulevard recently sold for $3.3 million.  Just a couple of shady blocks up the tree-canopied street from the elegant Biltmore Hotel, it’s easy to see the attraction.

2805 Columbus Blvd

2805 Columbus Blvd.

But the sale will pose a challenge for anyone trying to understand the value of luxury real estate in north Coral Gables.  At 6,255 square feet and built in 2004, the home sold for $527 per square foot.  The lot is 16,500 square feet, and not on water or a golf course.

Compare the recent sale of nearby 1260 Anastasia Avenue, an 8,701-sf Mediterranean built in 2001 on a 24,400-sf lot.  Located directly on the Biltmore golf course, the home sold in August for $3.05 million.

1260 Anastasia Ave.

1260 Anastasia Ave.

Granted, the clean lines of the architecture and interior at 2805 Columbus might have resonated especially well with today’s luxury home buyer.  But are Mediterraneans really going out of style, to the point that you can get 25% more house on 50% more lot, throw in the Biltmore golf course location, and still pay 13% less?

No, there is no objective explanation for the disparity in these two sales.  In real estate, subjective factors sometimes dominate.  That’s troubling if you want to believe that the market is rational.  But it’s also promising, because it means the market will occasionally present you with opportunities.

In the case of 2805 Columbus, the buyer was a Puerto Rico limited liability company, and the same agent both listed the property and found the buyer.  The transaction is essentially opaque.

The buyers of 1260 Anastasia, meanwhile, were James and Pamula Schlesinger.  Mr. Schlesinger appears to be the president and CEO of AWE Talisman, a real estate development firm.  Obviously, Mr. Schlesinger would not be likely to overpay for real estate.

If you, too, would like to avoid overpaying for a home in Miami, Miami Beach or Coral Gables, REF Real Estate will be glad to assist — and give you a hefty commission rebate.

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1248 Coral Way Auctioned for $1.175 Million

posted on December 20th, 2011 filed under: Properties in Focus, Real Estate News

The federal government recently auctioned a significant property in Coral Gables.  This was no distressed property, though.  Uncle Sam came to own 1248 Coral Way when the prior owner died and left it to help pay the federal debt.  (Yes, really.)  On a recent Saturday, the home was auctioned to the highest bidder for $1.175 million.

The 3,887-sf house, built in 1928, has seen better days.

Coral Gables Real Estate Photos -- 1248 Coral Way (Exterior)

Coral Gables Real Estate Photos -- 1248 Coral Way (Exterior 2)

Most of the rooms are a gut job, but some nice details remain.

Coral Gables Real Estate Photos -- 1248 Coral Way (Interior)

The value primarily resides in the land: two 17,500-sf lots, one with the historic but decrepit house on it, and the other an adjacent vacant parcel.

Coral Gables Real Estate Photos -- 1248 Coral Way (Land)

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Two Luxury Homes Sell on Santa Maria Street in Coral Gables

posted on September 12th, 2011 filed under: Properties in Focus, Real Estate News

Santa Maria Street is one of Coral Gables most desirable addresses.  The street runs up the middle of Riviera Country Club, and houses on both sides have golf course views.  Numerous historic homes and a canopy of old oak trees make Santa Maria and the surrounding neighborhood one of the most picturesque places to live in Coral Gables.

The grand home at 4415 Santa Maria changed hands at $3.5 million, or $607/sf.  It appears to have been a private sale, because the property was not really listed on the MLS (although the sale has been reported there).  Last sale was in October 2003 for $2.875 million.

4515 Santa Maria Ave.

4515 Santa Maria St.

Another fine historic home, at 4412 Santa Maria, sold for $2.7 million, or $456/sf.  Last sold in March 2006 for $3.78 million.

4412 Santa Maria Ave.

4412 Santa Maria St.

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Mortgage Rates Testing 2010 Low

posted on September 4th, 2011 filed under: Financial Responsibility, Real Estate Market Data, Real Estate News

The rate on the 30-year fixed mortgage averaged 4.27% last month (August 2011), according to Freddie Mac.  That’s just 4 basis points above the low of 4.23% set in October 2010.

Mortgage Rates -- 30-Year Fixed -- August 2005 to August 2011

Whether you’re getting a good deal on a home in Coral Gables, Miami or Miami Beach depends on a lot of other factors (including the quality of advice you get from a real estate agent).  But one thing you can’t complain about is the rate you’re going to pay on your mortgage.

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FHFA House Price Index Suggests Risk of Further Price Declines in Miami and New York

posted on June 28th, 2011 filed under: Financial Responsibility, Real Estate Market Data, Real Estate News

Mean Reversion

A theory suggesting that prices and returns eventually move back towards the mean or average.

www.investopedia.com

Today’s release of the S&P Case-Shiller Home Price Index was a mixed bag.  A modest rise nationally, but a modest decline locally here in Miami.  With no big news, let’s pull the camera back and look at another data set from a long-term perspective.

The FHFA House Price Index reflects transactions involving Fannie Mae and Freddie Mac.  This is not the luxury market, but it’s a reliable indicator of overall market conditions.  It went up during the boom, and it’s been coming down during the bust.

The FHFA index suggests risk that prices will fall further here in Miami.

FHFA House Price Index -- Miami MSA -- 1Q1976 to 1Q2011 (NSA) -- with trend line

If prices are to revert to their long-term trend line (in red) — and don’t bet they won’t — then Miami real estate remains about 25% overvalued.  The overvaluation needs to be worked off as a function of price and time.  Prices can get back to the long-term trend line by falling fast, going sideways while the long-term trend line catches up, or more likely, some combination of falling prices and passage of time.

Same story in New York, except the overvaluation there may be even greater than in Miami at this point.  (Remember the NAHB-Wells Fargo data that peg New York as the most overpriced market in the nation, based on the ratio of median home price to median income.)

FHFA House Price Index -- New York MSA -- 1Q1976 to 1Q2011 (NSA) -- with trend line

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