Who has the most money and what kinds of properties and locations are they vying for?
52% of our total sales are now condominiums with 48% single-family sales. This doesn’t mean that single-family is less desirable, but quite the contrary. With vacant land for new development virtually exhausted, land values have increased 10 times over the past 25 years. Vacant one-acre lots not on water or golf courses that we are selling today for $1,250,000 sold for $125,000 in 1983. A vacant one-acre lot on Star Island near South Beach is now valued in excess of $10 million. In most cases, you must demolish an old home in order to have a lot upon which to build a new one. And, high-end condos are now sought after more than ever before. 25 condominums sold in Miami during 2007 in excess of $5,000,000 compared with only 5 which sold in 2006 for more than $5,000,000… a 400% increase in unit sales. While South Florida was mostly a suburban-based community through the mid-80’s, we have rapidly become an international city which caught its initial spirit and energy from other world cities such as New York, Paris, London and Madrid. Many refer to Miami as the 6th borough of New York. When the Jets play the Dolphins in our Dolphin Stadium, it’s hard to determine the home team! Miamians have a lot of pride in feeling connected to the Big Apple. Prior to 20 years ago, our condos were mostly occupied by our second-home friends, but today… many of our buildings are filled with prior single-family home dwellers, corporate CEO’s and young professionals, as well as our lower income workforce. Wealthy foreign buyers have shaped, and will continue to shape, our market. Geographically, we are sandwiched right in the middle of the western hemisphere… 500 million people north of us and 400 million people south of us. It seems that even minimal-wealth families from all over the world all want to either own something in Miami, or they want to frequent Miami enough to feel that they are a part of our vibrant transformation.
What kind of property sells best now and which properties are not selling?
Our rate of sales is currently one-half of what our industry was selling during the same period one year ago. It’s not that people aren’t still coming here, but they have been frightened to buy in fear that values may erode. Rental activity is up 54% from 2 years ago, evidencing that buyers are simply “waiting in the wings” until they rebuild their confidence to purchase. Our inventory levels have increased almost six times over the last 2 1/2 years, therefore, we have many more homes and condos on the market than we need to fulfill our current demand. Inventories in the over $1 million single-family home and condo markets began to stablize last spring. We have actually slightly reduced the inventory levels in this price range, but sales have remained stagnent due to buyer concerns that values may slide further. While values are down from last year, values today are still twice what they were 5 years ago. Therefore, property owners who purchased prior to 2005 still have a significant build-up of equity.While our sellers remained steadfast in their pricing throughout 2006 and most of 2007, we have seen significant reductions in asking prices over the past 6 months. Our showings are up dramatically since the beginning of 2008 and we are finally now seeing offers being made. With an overall market drop this past year in asking prices of approximately 35%, sales prices are now averaging about 85% of the average asking price. Actual sales values are down 10% to 12% from one year ago. The neighborhoods and condo buildings which were the stable markets before the downturn are still the most desirable. “Minimal” new buildings in “minimal” areas are the properties that will be the last to rebound. Buyer interest is directly proportional to the level of services and amenities available within the building complex or neighborhood, such as grocery stores, restaurants and shopping. Our new mixed-use condo developments are having the highest level of interest, while buildings where basic services are blocks away rank 3rd, 4th or even higher on a buyer’s list. The six-acre Metropolitan Miami complex in downtown Miami has many of the same characteristics as the Time Warner Center at Columbus Circle in New York: Whole Foods, luxury condos, Class A office tower, Marriott Marquis branded luxury hotel, trendy restaurants & shoppes, etc…. including Daniel Boulud’s DB Bistro, his first in Miami. The closing of MET Miami’s first 40-story 447-unit residential tower which is sold out will begin next month, with all the buildings on their three city blocks being completed by 2011. Residences in a first-quality complex like this one average about $500 per square foot… compared to Time Warner units at $3,000 per square foot.
How are new developments selling and are builders still building them? Do they discount the prices substantially?
It will take 12 to 36 months to complete the condos that are under currently under construction. The “staggered” closing of these buildings will help to spread out the release of inventory to the market, but we will continue to deal with an over supply of units in the downtown Miami/Brickell areas. New building starts are very, very few. Developers are offering discounts on unsold units, with the discounts varying widely depending upon the neighborhood and it’s services and amenities. Pre-sales have been virtually non-existent this past year. The units where buyers will find the best deals are in completed buildings. The best deals will begin to surface between now and the end of next summer. We are telling our buyers to begin staking-out the buildings or neighborhoods where they have an interest so that they will be able to move quickly once those buyers in the market sense that we are at the bottom. I heard you say the other day on the Today Show that the “magic” in our business is that by the time that one buyer believes that we we have hit the bottom, others are thinking the same thing… and by that time values will have already begun moving up again! I agree with you that buying at the “very bottom’ is very hard to do, but buying “close to the bottom” has made a lot of money for a lot of prpoerty owners.
Where are there real deals to be made? In Miami itself, South Beach, etc.?
Deals are very “building specific”. Buildings with a high concentration of owner/occupants have more stable values than those buildings with a high percentage of investor/speculators, which will see the most volatility.
Are there auctions there like in the rest of the state?
Auctions have never been successful in South Florida. Professional marketing will generally yield higher values.
What are the up and coming areas and why? Wynwood section across Biscayne Bay?
Again… the areas that have a “community feel and spirit” with basic-need shopping, restaurants and enough new neighborhood development surrounding them (where buyers don’t feel isolated) are the “up and coming” areas. Areas that lack these basic services will be the last ones to recover.
Is Miami still a retirement oasis or are prices too far out of reach for people wishing to retire there?
Miami hasn’t attracted retirees since the 50’s. Our average age today is only 37 years old. Only recently have pre-retirees shown an interest in retiring to Miami. But, we will increasingly become the retireee destination by those professionals and others who have spent their careers in other urban environments, such as New York, Boston, DC, Buenos Aires, etc. Our retirees today will remain very active. Until the past 6 to 8 years, a New Yorker would not have considered retiring here, but today they see many opportunities to continue the lifestyle that they have enjoyed during their careers… easy travel, great restaurants, excellent health care, recreational outlets, abundant shopping, and now we have finally begun to fill in the cultural piece with our new $450 million performing arts center, Art Basel, etc. And the weather… don’t forget about the weather.
Last, I looked over the NAR report that came out yesterday and it showed that prices in Miami had only dropped 6% last year. That’s so much better than everywhere else in Florida. Can you give me your impression why.
With all the new housing that we have delivered to the marketplace over these past 5 years, our values are higher today because we have a very high percentage of newer housing units. Newer housing will generally cost more in our market in every case, unlike the “pre-war” premium that New York buyers pay. The condominium form of ownership wasn’t even enacted by our Florida Legislature until the mid-1960’s; therefore, virtually all our condo housing is new! Very little of our housing was built prior to the 1940’s.The median price of a single-family house in Miami-Dade County in January, 2002 was $155,000. Today, it is $350,000, an increase of 126%. The median price of a condo in Miami-Dade in January, 2002 was $115,000. Today, it is $240,000, an increase of 109%.
Any information you could provide would be of course so much appreciated. Thanks, Barbara Corcoran