I’m unbelievably proud of where I’ve gotten to in life and with my company. Its gives me great joy to help people find homes.
US Home Prices Rise, but not in Miami
Throughout the Fall, the nation saw a rise in home prices. The Standard&Poor’s/Case-Shiller 20-city home price index rose 5.5 perecent between October 2014 and October 2015. Home values rose about 5% during 2015 and while they did so, unemployment decreased down to 5%. A better job market is making for more people buying homes. However, home listings haven’t been able to keep pace. So what we’re getting is not necessarily in increase in homes sold, but an increase in the price of each home sold given competition for what few listings are available. This limit in inventory seems to be serving newly listed homes better than existing homes. Existing homes dropped 10.5%. Mortgage rates are looking stabilized thanks to 30-year fixed-rate mortgages averaging less than 4%, whereas mortgage rates have traditionally hovered closer 6%. This increase in housing prices has primarily affected San Francisco, Denver, and Portland, Oregon. Miami, in addition to Tampa, Detroit, Minneapolis, and Cleveland, is still maintaining lower pre-recession prices.
Matheson Estate Goes for $47 Million
The picturesque Matheson Estate located on Key Biscayne just sold for $47 Million. The anonymous new owner has built a modern mansion on the property. The Matheson Estate was once home to the wealthy industrialist W.J. Matheson during World War 1. In 1908, Matheson bought a 1,700 acre estate and built an opulent mansion he called Mashta (“resting place” in arabic) House. in the 1930s the house was badly damaged by storms and was eventually abandoned. Years later in 1989 it was acquired by Fernando Caballero for $1.3 million. And just the other day it was acquired for $47 million.
“This beachfront neighborhood wasn’t the place where Art Deco was created, but between the spacious, sleek hotels and pastel colors, its appear like one of the truest expressions of the form.” The real estate website Curbed.com recently listed South Beach as one of 10 Neighborhoods that Influenced US Architecture. Some highlights to see include The Webster, The Carlyle, Cadillac Hotel, The Delano, and the Bass Museum.
Miami is a hot market. Whether it’s the trendy Design District or the bustling Ocean Drive, real estate is one of the most attractive elements of the Floridian city. The city’s glamor is quantified in its subsequent real estate trades: everyone wants to own a part of Miami.
Last month, one of the richest people in the world purchased an entire block of the city in one of the largest real estate deals in Miami-Dade history According to an article from The Real Deal, an entire block of Miami Beach’s Lincoln Road traded hands for $370 million to the 79-year-old self-made Spanish billionaire Amancio Ortega.
In 2012, Forbes wrote that Ortega “seems to be using more of his free time to invest in real estate. He has pulled money from Spanish investment funds and poured it into buildings through his Ponte Gadea real estate investment firm.”
Investors started leasing the property in 1999, paying a total of $12 million for spaces that now go for $300 per square foot. Michael Comras was one of these investors who sold the property, saying, “It’s a project that we started 16 years ago, and Jonathan and I felt that we had really created one of the most incredible retail blocks on a High Street around the world,” The timing was right, and “it made sense to sell the asset.”
The sale to Amancio Ortego occurred this August. The Real Deal scoured the Ponte Gadea buyer until they traced the address to Amancio Ortega, who keeps a low-profile in Spain and abroad.
This is a great development in the Miami market. People notice where influential buyers such as Amancio Ortega put their money. And if that’s in Miami, then we are moving in a great direction.
Local real estate industry leaders recently gathered in Miami to discuss the real estate market in South Florida. Interest in South Florida real estate from both the United States and abroad has made the real estate market attractive for developers. Due to the increased interest in real estate development in Miami, the luxury market has followed suite and thrived along with the increasing real estate costs. Commercial real estate prices have skyrocketed, as they have doubled over these last six years.
Although the real estate market is looking great in Miami, as buyers are making 50% down payments on condos, experts still believe that there will be volatility. As Miami is becoming a hot bed for real estate, and prices are soaring, developers are turning their focus on under developed neighborhoods with potential expansion. Developer’s favorite so far is the Biscayne Boulevard corridor. The area is right on the bay, close to the beach, has a major road, and there is plenty of empty land for real estate development.
There have also been discussions to create public green spaces in the Miami-Dade area. One potential project in the rumor mill is a 10-mile bike path under the Metrorail line that goes from Dadeland to Brickell Station. There is plenty of unused space in the area, and public officials are interested in re-purposing that land to give back to their community and increase the allure of living in South Florida. Other proposals have been put forth to convert unused railway tracks into lush pedestrian walkways as seen from the skyline in New York City.
Traffic is an issue in Miami, so city officials and real estate professionals agree that some major additions need to take place in the transportation sector if Miami wants to compete on an international level. To read more about the foreign interest in the real estate market in Miami, please refer to this blogpost from Raanan Katz.
Renters in South Florida should expect to pay 44.5% of their income to rent each month. Comparing this to homebuyers, renters are paying about 25% more of their monthly income than if they were a homeowner. Homeowners are estimated to spend about 20% of their monthly income towards their mortgages. Renting property in South Florida is currently 67.6% more expensive than the historical average after the housing crisis in 2008.
The national average spending on rent is about 30% of someone’s monthly income, whereas the national average spending on a mortgage is 15% of the average American’s monthly income.
Renting is usually more expensive than buying because the time-span associated with renting is typically shorter than purchasing a property. People normally start out their careers renting, but once they are able to afford to purchase either a property or a car, they jump right on it because of the costs associated with renting vs. buying.
Interest rates are at a historic low, but young Americans seem to still be hesitant on purchasing property. Factors that might contribute to this are the following: 1) Rent prices are slowing down. 2) Young adults are typically choosing to live in places where rent prices are stabilizing and property is expensive. They typically choose to live in big cities with large markets.
Young Adults are looking in cities like Texas, Honolulu, Austin, San Diego, and New York as potential places to purchase a home. Less than 30% of these homes are considered affordable for the typical average young adult in the United States. These are all cities where the average wages are considerably lower than the average monthly income it would take to pay a mortgage on a property.
November 3 marked the 20th anniversary for the Miami International Real Estate Congress, which drew over three hundred real estate agents and foreign professionals who focus on foreign markets, including 70 delegates from foreign countries.
The conference was a big success: speakers addressed hot-topic issues, industry experts shed light on current trends, and all attendees enjoyed a number of marketing sessions and gala receptions. But if there is one conclusion to draw from the event, it’s that the Miami-Dade and Broward real estate market is once again being heavily influenced by international real estate transactions.
These international deals actually comprise just under a third of all real estate transactions in the area. And that astounding number doesn’t even meet last year’s high of 35%. The foreign demand for Miami real estate is one of the most vibrant pieces of that market that has put Miami-Dade on track to break another record for residential sales this year.
Difficult economic conditions abroad have not stopped foreign buyers from spending big bucks in southern Florida. Florida home sales average $245,000 but international buyers spent an average of $444,052 on their Miami homes. Brazilians topped that international list with a mean payment of almost $500,000 per property, about two times the state’s average.
The tendency for foreigners to lean towards an upscale Miami market has made them an attractive target for realtors looking to cash in on a profitable trend. Alicia Cervera La Madrid, the managing partner of Miami’s Cervera Real Estate, explained, “We’re probably paying some of the highest commissions in the world — between 5 percent and 7 percent.”
Most of the real estate agents in the South Florida area either hail from a foreign country themselves or are at least multilingual and have a deep understanding of the language and culture of their clients. One of those cultural habits is the propensity toward cash purchases — a full 81% of foreign buyers in the area paid in cash, according to a recent NAR study.
After the 2008 market crash, internationally-focused agents are palpably excited by this recent foreign interest in Miami soil. The assumption is that Miami is a great place for foreigners to invest their money, but only time will tell whether that trend will hold up in the coming years.
51 percent of all of Florida’s real estate sales are cash home sales. This makes Florida the leader in the United States for cash home sales. On average, national home cash sales are around 33% which is higher than last years rate of around 20%. After the recession, there was a shortage of houses for sale as well as more strict regulations put on mortgage lending. Cash offers are a lot more attractive to sellers as they know that they will have the money right after the papers are signed. It surpasses much of the financing needed in a non-cash agreement, making someone paying cash a way to help them win a bidding war. This makes it very difficult for first0time buyers relying on financing. It it a lot more difficult to qualify for financing these days, and with the high demand and higher supply of cash buyers, young homebuyers are finding it more difficult to purchase homes.
The housing crisis was caused by poor mortgage lending tactics to buyers that were not able to reach their mortgage agreements. This was the era of sub-prime mortgage lending. In the wake of the 2008 housing crisis, banks were forced to put more strict regulations on mortgage lending, making it more difficult for people to buy homes who were on the fringe. Less and less people were then applying for mortgages because they were cut from being qualified. This lead towards a decrease in the supply of houses being built. This lack of supply made it even more difficult for people on the fringe since buying houses using cash became much more attractive to sellers and easier for buyers.
Purchasing a home in Miami (and essentially everywhere else in the United States) is much less expensive than renting. Take a look at Raanan Katz’s blog post on renting vs. purchasing homes by clicking here.