Thursday March 13, 2008

South Florida: Move here

miami sykline

“It’s too expensive to live here. We’re suffering. And you can help: don’t move here. If you’re thinking about it, just don’t come. If we can deflate this housing bubble, we can afford to live here once more. It might take years. But in the meantime, it sucks here anyway: don’t come.” — Amy, writing at Incertus (via)

Amy lives in Ft. Lauderdale, and the article that quote comes from concerns a story in Palm Beach. I’m not sure whether her logic makes any sense at all, but it for sure doesn’t apply to Miami. Look, keeping people from moving to your town (as if you could) might make housing there cheaper, but it for sure is not good for the economy. You want people to buy stuff, go to restaurants, create the demand for more stuff, and get the economy going. When your local economy is doing good, you have a chance, more then likely, of getting a better job. The above logic may work if you’re on a fixed income, but it’s a downer anyway you slice it.

More importantly, though, what we have here right now is an oversupply of new housing. Have you noticed? Maybe it’s not as acute for our neighbors in the BPB, but here in Miami we have tens of thousands of vacant condo units with no buyers. Thousands more, like the one bought by this poor sap, are facing the near-certainty of foreclosure. So you have all these cumulative effects driving down housing costs. Now, this is great for locals who have been waiting to buy a home. I told you over two years ago to sell your house. The market was at the top then (just starting to decline, really), and if you listened, you have some fraction of a million bucks sitting in CDs right now. Well, the bottom we’ve been waiting for will be upon us in early 2009. If you played your cards right maybe you can re-buy your old house and bank a 6-figure profit. Or buy one of the spectacular new condos and make even more (and join us in our new space-age metropolis from the future). If you’ve never owned a home this goes for you too — start saving now, have your twenty grand ready for a down payment a year from now, and you’ll thank me later. (Check out Housing Tracker: between August/05 and March/08, median home cost dropped from $425,000 to $316,900. That’s more then 25%, but the decline is still accelerating.)

But I digress. The point is that even if all the renters in Miami suddenly started buying condos we’d still be in a jam as a city. Empty buildings are good for laughing at greedy developers, but they are not so good for the economy. We need folks from out of town here to soak up a bit of the excess. I want them here adding to the economy, because I want a fancy new job with a 6-figure salary.

So, come on, folks, we’re looking forward to a brief window of opportunity. And you can help yourself, too: move here. If you’re thinking about it, just come. The bubble’s popping, and you can get in on the ground floor with the rest of us.

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  1. Rick    Thu Mar 13, 08:51 AM #  

    A few things.

    One, I appreciate you doing the “vias,” and recognizing where you first saw the info. Thanks.

    Two. I believe Amy’s post was slightly tongue-in-cheek. I may be wrong, but that’s the feeling I get.

    Three. With all due respect, predicting that housing prices had ballooned out of control and would eventually make their way back to more reasonable levels was not exactly cutting edge information. But, indeed, you and millions of other people got it right.

    Four. If you’re planning on buying a condo, be reeaaal careful where you invest.

    .



  2. alex    Thu Mar 13, 10:19 AM #  

    Her logic does make sense for YOUR goals, if you are serious about saving 20k and get on the bottom floor. The only way prices will drop more than 200K (on average) from the boom years is if the bubble keeps bursting at this rate.

    In other words, if people move in now to help the economy, the market stabilizes a little bit and your plan doesn’t materialize.

    BTW, you sell-your-house-buy-it-later idea didn’t take into account the property taxes increase in the new house, bigger HOA fees, rent costs (which means equity lost) and storage costs which can wipe out that six figure profit in a few years.



  3. alesh    Thu Mar 13, 01:00 PM #  

    Rick~

    I’ll go along with points 1 to 3. Not sure I follow #4, though… what areas would you recommend avoiding?

    alex~

    You’re right. I think the bubble will keep bursting at this rate, or faster, for about another year. Then a gradual bottoming out, followed by, I predict, a rapid bounce back. Yes, people buying in mitigates the effect, but I’d be happy for them.

    Of course moving has lots of expenses associated with it, as does the other stuff you mention. Presumably by moving out of an expensive house and then later into a cheap one, and renting in the meanwhile, you at least save a lot on property taxes. But it’s complicated. It’d be interesting to hear personal stories from people who’ve, deliberately or otherwise, done something like this. But it’s a little early to solicit those stories right now.

    BTW… are you the same alex from formerly of SOtP?



  4. noneemoose    Thu Mar 13, 01:42 PM #  

    Technically, bubbles can only burst once. The rest is just exhausting. Just like all this babble about bursting bubbles.



  5. Mikhail    Thu Mar 13, 02:44 PM #  

    Areas to avoid when buying in a tumbling market…

    Downtown Miami
    Miami Beach
    Sunny Isles Beach

    And all other areas that have been excessively overbuilt. Basically if there is a plethora of new towers, stay away from buying there. At least until the market stabilizes!



  6. alex    Thu Mar 13, 03:15 PM #  

    LOL yes, same alex.

    It wasn’t really moving out of an expensive house and later to a cheaper one. It was moving out of a house that has appreciated (but you bought cheap) into one that has depreciated. Theoretically it makes sense but in FL reality you were living in that house at a lower tax rate, courtesy of SOH. Maybe you saved enough during the two years renting to offset some of it, but I doubt it. (Oh and I forgot the closing costs and realtor’s commissions) I’m not saying you can’t get ahead in the deal but you have to be in the right property.



  7. alex    Thu Mar 13, 03:17 PM #  

    Yes nonee, meant “deflating at the same rate”.



  8. Eye Witness    Fri Mar 14, 07:34 PM #  

    If I might add my 2 cents. I have made a lot of money in the last 5 years buying and selling real estate in Miami. In excess of 2.5 million dollars. I cashed out in November of ’05 and have sat on my cash until now. Now I’m buying. Mostly vacant land and commercial, but if I needed a house, I would be looking now. First quarter ’09 is a good bet, but just as one can’t call the top, one can’t call the bottom. There are some incredible deals right now. There is a condo project on 121 street off of Biscayne where you can pick up 1200 sq ft 1 bedrooms for 50 to 60k. A house with a cottage and pool on half an acre in S. Miami for 379K. Yes, there will be more deals, but find a place you want to live in that is cheap and settle in. This is looking eerily like 1982 when drug dollars fueled a surge in prices here. In ’83 prices tanked and by ’84-‘85 had rebounded to about halfway where they’d been. As for the chap who said to avoid downtown, he is way off base. There are some beautiful buildings there and people do want to live downtown.



  9. firrealz    Fri Mar 14, 09:54 PM #  

    dear rich or upward mobilizing professionals:

    stay out of wynwood, overtown, and for the matter, most of little haiti. keep design district, i guess.

    i need a place to live bro!



  10. Eye Witness    Fri Mar 14, 11:31 PM #  

    I should clarify one point. True, I made a lot of money in the last 5 years, but I had also been making a decent return for the previous 6 years. Consequently, when prices started to skyrocket I was in a good position. The only reason I ended up making so much was because when the buyers knocked on my door with ridiculous offers, I said yes. Unlike many of my friends who held out for another 10 grand.
    Also, Alesh’s comment to start saving your pennies is dead on. I started saving 11 years ago. The way I did it was very simple. I bought US Savings Bonds. They can be purchased for as little as $25.00, a weeks worth of your favorite latte. The beauty is they cannot be cashed for at least 6 months. By the time I was able to cash some in, I had saved a good portion and therefore felt as though I’d actually accomplished getting ahead a bit. It also fueled me to save more. Ultimately I ended up with 20K which was the down payment on my first place.



  11. Juan Navarro    Wed Mar 19, 04:22 PM #  

    Having Grown up in Miami and now living all around the country (San Francisco, Chicago, Miami) simultaneously, I can see where and how Miami lacks in economic support and the problem with housing. Now I’ve heard some of these things more than seen it, so maybe they’re wrong, (anybody got facts out there?)
    1. Retirees: The don’t spend money, and live on a budget, o give very little to the economy
    2. Immigrant: Many already live on piss poor salaries and what little they have, they send back.
    3. The Rich: Sure they buy ass houses and such down her, but spend maybe 2-4 weeks of the year here and then are gone, pumping no money into the local economy
    4. No large manufacturing: Even though we have huge amounts of import/export the lack of real manufacturing jobs, the kind that pay well and need skilled labor of some sort, sorely hurts us and the burgeoning housing market by not supplying the right buyers.
    (I hear that certain Medical manufacturing does make a home here and more maybe coming due to Bankruptcy and certain protection they have in this state but I have no clue about that)

    One of the things that get me about the whole situation is that it may become a larger version of the problem in the Keys: the land is too expensive for the average worker to make a home, so then they have to bebusse d in, 4 hours away. They even have a problem with retaining police officers; young and out of the academy Key West is great for a single police officer living on their own, but once they have are married and want a family he/she will have to move away somewhere they can afford to have a real home.
    Maybe these are all symptoms, or maybe they all check out, but living in other parts of the country I see how it can bee seen as such.