Miami Real Estate Market Contradictions

Forbes recently listed Miami as America’s second most over priced real estate market. Now CNBC lists Miami as number 4 in its top five metro areas in (property value) appreciation.

CNBC analysis goes on to report:

“But there continue to be puzzling stories in the national mix that appear to defy employment and land supply. Take, for example, Miami. Florida is leading the housing bust, with existing single-family home sales in March down 28% statewide from a year ago. Prices statewide are down 4%, but not so in Miami…While single-family home prices in the city are flat, condo prices are up 18% over last year, despite the fact that the Miami skyline is still teeming with cranes.”

If you read the Forbes list you saw two of its targets on the downside of the CNBC list (San Diego and D.C.), but Miami, a Forbes target, is on the upside of the CNBC list. The articles are both looking at property value appreciation in the same city but drawing two very different conclusions.

The Forbes conclusion is that the prices in the Miami market are too high to sustain further growth. Forbes formed their conclusion by looking at the median household income of Miami-Dade county but ignoring the city’s appeal to domestic and foreign buyers.

The CNBC report looks at the property value increases as positive and the reality on the ground as highly active. The conclusion is that Miami’s real estate market, particularly the condo sector, is defying the odds and continuing to increase in value.

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10 Comments

Filed under Economy, The Big Picture

10 responses to “Miami Real Estate Market Contradictions

  1. brad5720

    I think the Forbes analysis is correct whereas the CNBC analysis is a reflection on the current stalemate between buyers and sellers and sellers’ unwillingness to lower prices. There is no way prices will hold or increase when all those additional units downtown and elsewhere come online in the next 12-18 months. I predict (as does Forbes) that we will see significant price reductions in the condo sector once all the speculator buyers start receiving their closing date notices from developers.

  2. mikeymia

    Do the condo numbers accurately reflect reality? If I buy a condo in late 2005 in the amount of 500,000, but don’t close on it till 2007 It shows up in the 2007 numbers right? Which to me means that the 2005 numbers are lower then the market represented, and 2007 numbers are a reflection of how the market was in 2005. I think that if this was just a few units it wouldn’t matter but when you have an entire 400 unit building closing on contracts in a short time span (2 months) doesn’t that skew the numbers? If the market is still appreciating at 18% yoy why are condo units in luxury buildings showing up in the foreclosre noitices on miami-dadeclerk.com?

    • Hi Ramki,Has gold now formed an inrtamediete top arnd 1790,and is it now moving down to target that mentioned price of $1400 now?Please update your outlook on gold ThanksVaibhav

  3. Brad brings up a good point, but the price drop down effect will be short term. Some buyers will be desperate to sell because of lack of funds. The market has to correct itself. These people have to be phased out. But look at the median home price of Miami compared to other less active but more established markets. Use the Forbes list. It is much lower. There is enough construction activity to result in the affirmation of Miami as a world class city. In the long run, Miami, with its comparatively low home prices and historically high construction activity, presents a market, particularly the urban multi-family segment, that is ripe for continued value gain.

    Regarding the data issues that Mikey points out, one or several buildings coming online is an expected boost in the number of closings. A reality check. Not a skew or distortion. Pre-construction sales data is sketchy at best so closings are the final tally. As far as foreclosures, Miami is high up on the list due to the massive sum of transactions that have and still are taking place. There has been so much hype that many people invested for the wrong reasons and with insufficient funding and planning. This is not a deficiency on the part of Miami’s real estate market, but an inevitable effect of the residential boom and the buzz that trailed it.

  4. mikeymia

    Do you know where the articles were getting their data from?

  5. CNBC Sources:
    S&P/Case-Shiller Home Price Index, February 07′ and McCabe Research and Consulting

    Forbes Sources:
    National Association of Realtors (NAR), the U.S. Census Bureau and the Office of Federal Housing Enterprise Oversight

  6. Pingback: Wall Street Journal: Florida is Housing Shakeout Epicenter « Boom or Bust: Miami

  7. Marco Hernandez

    I believe Forbes is correct. The average household income for Miami-Dade County was $36,089 in 2003 (U.S. Census Bureau). The price of a median home in Miami-Dade County is over $270,000, more than twice what the average household can afford. Just wait until the foreclosures begin to stack up. Too many people have bitten off more than they can chew and it’s just a matter of time before it hits the fan. Buyers should wait it out. They have nothing to lose. Sellers (flippers) don’t want to take a loss and are keeping the asking prices high. Unless we see a large increase in salaries across the board, prices should logically decrease.

  8. It’s already hitting the fan Marco. Unfortunately a large chunk of the market are flippers. Don’t count on them holding on for long (especially when they’re hit with inevitable regular assessment increases and unexpected special assessments). For many, the choice is going to be sell now and take a loss or face foreclosure. As the inventory shakeout continues, there will be a dip in the prices until end-buyers fill in the inventory. This will take time. There are factors that can stabilize the market, for example, a boost in office development will improve demographics, increase the MHI, and improve property values, but the progress is slow moving. Retail activity can help, but with occupancy incomplete and potentially seasonal, it doesn’t look encouraging at this point.

  9. I call bullshit! How is this accurate information with all the mortgage reductions being spit out left and right by NACA?

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