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Wednesday July 25, 2012

What's up with housing prices?

edgewater development

First, a quick recap: here’s what I said on February 13, 2006:

Privately, I’ve been advising home-owning friends and family thusly for the last six months or so: find a moment (and find it soon), to sell your house, put your stuff in storage and rent an apartment for a year (maybe two or three), then buy your house (or one similar) back, for a maybe $200,000 profit. It remains to be seen whether my advice is worth anything (to date, everyone has emphatically ignored it), but for the first part, housing prices are finally starting to crash.

Then, on January 14, 2009, writing at Buildings and Food but in the voice of Critical Miami, I said this:

Now, listen carefully: it’s time to go shopping. Remember the factors that led to the bubble? Idiotic interest-only mortgages, gross overbuilding, and what seemed like terrifying hurricane seasons as far as the eye could see. The picture today? (1) mortgage idiotics universally recognized and being dealt with to the tune of trillions of dollars from the federal government, (2) overbuilding spectacularly finished, and (3) relatively calm winds for the last two seasons. To boot, (4) an incoming president that everyone seems to think Can Fix Things.

So here we are, another three years down the road, and time to check in and see what’s up. Heres the graph for housing inventory, which tells an interesting story:

housing stock in Miami

But for an even more vivid look, check out the plot of housing prices for the last 6 years. Both are from our friends at the Department of Numbers:

asking prices for Miami Florida

Yup: housing prices dropped steadily from 2006 to 2009, at which point they began to level off. The actual bottom came in the second half of 2011, and prices have been recovering fairly sharply since. For the record, anyone who sold when I said and bought when I said really did stand to pocket between $150 and $200 thousand. But so where are we now?

We’re at a very interesting time. Florida’s unemployment rate has dropped from over 10% to 8.6% over the last half year. (Not amazing I know! But an improvement over 11.4%, which is where we were in 2010.) From where I sit in Edgewater, development appears to have started up in full force. There’s one condo at the end of my block that was recently finished and is now selling, one across from me that’s being finished up, and an empty lot behind me where construction is just starting. A response to the low inventory I realize, but just a few blocks away is Paramount Bay, a positively huge building completed in 2009 that, judging by the number of lights on at night, sits over 90% empty. Drive around Miami and you see the same everywhere: construction cranes.

This suggests that a steep rise in prices, anyway, is not forthcoming. But remember that for the time being we’re in a world where the subtleties of European international relations will determine whether the world’s economy will recover or re-crash. (As evidenced, e.g., by this random news story from the NY Times. Oh, and since you’ll ask, here’s the Times’ resident Sourpuss’ most recent missive on the European economy. Grim, kids.)

So, what the hell is going on? Why are condos being built and sitting empty when inventory is relatively low? Peep this:

Interest is particularly strong from Venezuelans and even Argentinians, [Luis Marin, vice president of TSG Realty] said, because shifting government policies in their home countries makes investing in properties there more tricky. Basically, it’s a way for the wealthy in those countries to protect against domestic political uncertainty. “The good thing about investing in South Florida, you’re investing in the first, best country,” Marin said. “You have more security fiscally; you’re not going to have trouble.”

Could it be true that South American investors are buying up Miami condos to protect their investments? Believe it or not, South America is in the middle of “an economic boom.” Meanwhile, 65% of housing sales in Miami have been all-cash transactions (that’s 77% of condo sales and 46% of house sales).

So where does all this add up? If you bought a house in 2009 or 2010, give yourself a pat on the back. Otherwise, I’d be careful right now. Officially, prices are still low. But the condo market makes me weary. And Europe could collapse at any moment, sending us into the double dip that the Sourpuss has been promising us for years, just as Romney is taking office. On the other hand, Europe has been promising to collapse for months and hasn’t (despite pretty close to the worst case scenario w.r.t. Greece). It could shore itself up through the magic of German bonds and we could be in a rosy economic picture just as Obama takes his second oath of office. See? Uncertainty.

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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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Thursday January 31, 2008

Currently, in the Miami area: 689 foreclosure homes, 97 foreclosure auctions, 4341 pre-foreclosures. Yikes!

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Tuesday October 2, 2007

What's up with mandatory PIP car insurance?

The state’s law requiring personal injury protection (PIP) insurance expired Sunday, though the fight is not quite over yet. What does this mean?

First, a primer on the exact changes (and please correct me if I’m wrong leaving out something important). The PIP law required every driver to carry $10,000 worth of protection for anyone injured by or in their car. It made Florida a “no-fault” state: if you’re in a crash with another driver, each drivers’ insurance covers his medical expenses, regardless of who caused the accident. Hence “no fault.” The logic behind this is that it allows everyone to get medical treatment without bureaucratic worries, and theoretically keeps costs low by minimizing lawsuits.

The downside of this is that if you already have medical insurance, you’re paying for double coverage. Many people who are in accidents that are not their fault also unsurprisingly report their insurance rates going up afterwards. So, the new law allows drivers to carry insurance for property damage only, should they so desire. Under the new system, if you’re in an accident, your regular health insurance will pay your medical bills, presumably recovering their costs from the person who caused the accident, in court if necessary.

This would be great if 1) everyone had health insurance and 2) everyone was smart enough to get insurance to cover injury they cause to others. To the extent that those two things are not true (only 80% of Florida residents currently have medical coverage; and don’t even get me started on #2), the new law is going to wreak havoc. The upside is savings for those that are properly insured, yet drive carefully enough not to actually cause accidents. More importantly, it will tend to hasten a state of affairs where we are forced to confront the larger medical/insurance disaster facing the country, as a much larger proportion of car accident victims arriving in hospitals will have no insurance covering them.

This highlights the real clusterfuck aspect of this change, which is that medical/insurance lobbies are essentially behind both sides of the issue. On the anti-PIP side are companies who are concerned about insurance fraud under the old system, which could easily pump money out of the system, $10,000 at a time, with simple staged accidents and shady doctors. On the other side are the doctors and hospitals worrying about the uninsured trauma cases they’ll be forced (god forbid) to treat and not be able to collect payment for.

That these are the two sides battling over something this important (rather then what’s best for people who’s just been in a serious car accident) is a sure sign of a broken system. I’m almost tempted to let them do away with it, let the situation come to a head, and then fix it from the bottom up.

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Thursday September 27, 2007

What's so great about a housing crash?

platinum condominium Platinum Condominium has had some trouble selling units, so they decided to try selling 20 units off at a live auction. The results? Well, as Lucas put it at Miami Condo Investments, “the auction was a disappointing failure and Miami condo developers should soon be seeing brown stains appear in their underpants.”

Only 9 units were auctioned, and most came in hundreds of thousands less then what identical units have recently closed for. Luis has more analysis (plus videos of the event), and leaves open the question of whether this is the bottom. Well, folks, it’s not. Reports on the sub-prime mortgage meltdown have that fiasco continuing for about another year, so it’ll be feeding coal to this fire well into next year.

I still say this is great for Miami. The housing crash is nation-wide, and steps are being taken to fix the situation, but because it’s worst in Miami, those steps will do little more then soften the landing a tad. Consider the internet bubble of the 1990’s: one of the results was that insane amounts of fiber optic cable were laid down, much more then it made financial sense to do. The result is cheap broadband for everyone (and a hosing for greedy companies). The result here? Well, a hosing for greedy developers, but cheap condos for everybody! (With fancy lofts and primo stainless-steel appliances, natch.) Workforce housing? Give me a few more months, and I’ll have all the workforce housing you need on tap for ya.

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Tuesday September 18, 2007

A completely fascinating article about changes in the insurance industry which I haven’t finished reading yet but wanted to get out there.

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Tuesday July 31, 2007

You will be delighted to hear that FPL is feeling flush.

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Monday July 23, 2007

It’s all doom ‘n gloom over at Bloomberg, where Bob Ivry predicts a recession for Florida by October, resulting from the condo glut. I see the point, but surely a 30% drop in condo prices has some positive repercussions for the economy as well? The developers will get stung by this, but they can deal. (thanks, KH)

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Monday May 21, 2007

Unemployment continues to drop: 3.6% in Miami-Dade and 2.9% in Broward.

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