Tag: Investment Real Estate
Sellers and buyers of real estate often fixate on what the price of a property is and in doing so, lose sight of the more important factor, cost. Price is what you get for the property if you are a seller and what you pay for it if you are a buyer. However, what affects both seller and buyer on a monthly basis is the cost. In addition to principal, interest, taxes and insurance costs, there are maintenance costs and maybe association fees.
If you are a seller, consider how much it is costing you to carry that property each month you don’t sell it. Based on the inventory of similar properties in your area vs the number of sales, you can calculate how much it is going to cost you to continue carrying that property for the average number of months it is taking to sell properties in your area. I suggest you cut your sales price and take the loss upfront vs slowly cash out each month.
If you are a buyer, realize that there has never been a better time to buy than right now. You have a large number of options, the interest rates are the lowest they have been in decades and there is the government tax credit that expires at the end of April 2010. If you are waiting for prices to go down lower, consider the cost of owning if the prices go down but the interest rates go up. If prices come down 10% more, but interest rates inch up only 1% your monthly payments are going to be roughly the same.
The 2010 real estate market has started out all over the place, both nationally and locally. On a national level, the lousy weather has had a negative effect on the new home segment, with construction on new homes and apartments falling 4% overall in December (construction rose in the South by over 3%). Applications for new building permits, however, increased by 11%.
Locally, the market has been moving a lot, keeping buyers, sellers, renters, and Realtors, on their toes. There are constant price adjustments on properties already listed, both upward and downward; properties priced well are going under contract (last week the EWM office in Coral Gables that I work out of had $21,000,000 worth of transactions) and renters are snapping up deals as downward pressure on rents, especially in condos, has given tenants more negotiating room.
The good news is that sales on existing homes, both single family and condos, continue to increase and inventories are decreasing in Miami-Dade county.
The bad news is in the foreclosure numbers for 2009. The numbers include all properties that are in some stage of the foreclosure process.
- Palm Beach County – 30,870
- Broward County – 69,633
- Miami-Dade County – 72,391
- Monroe County – 1,275
Since the unemployment rate is so high in Florida, foreclosures are expected to continue to add to inventories on the market in 2010. Miami-Dade’s new on-line foreclosure program and the government’s Home Affordable Refinance Program should help keep the foreclosure rate lower than 2009’s.
I came across a great article that explains the effect of interest rates on your purchasing power so well, that I have to blog about it. Now that inventories are decreasing and we are running into an April 30, 2010 deadline for tax credits, you have to read it if you have been on the fence about whether or not now is the right time to buy real estate.
The article, If You Don’t Buy a House Now, You’re Stupid or Broke may have an offensive title, but the graphs that it contains illustrate historic interest rates and increasing trends and the explanation on how an increase in rates affect what you will pay in principal in interest are easy to understand. In a nutshell:
- For 30+ years interest rates ranged from a low of 7% to a high of 18% (my husband and I were paying over 16% interest when we purchased our first home in the 1980’s)
- Current interest rates are the lowest they have been in 40 years
- For every quarter-point change in interest rates you will pay an additional $6,000 for every $100,000 borrowed over the life of a 30-year fixed rate mortgage.
Categories
Miami Foreclosures Now On-line
In an attempt to work through the more than 110,000 open foreclosures and the 7,000 new ones that are filed each month, Miami-Dade County has put them on-line. Registration is free and allows you access to the county’s foreclosures. If you want to bid, you will be required to put down a refundable 5% deposit.
According to CNNMoney.com the national vacancy rate for rental apartments rose to 8% at the end of 2009 up from 6.7% a year ago. High vacancy rates translate into lower rents, so if you are getting ready to go into a lease or renew your existing one, negotiate the price. Keep in mind that many corporate landlords will not want to decrease the monthly rent because it hurts their books, but they will throw in a free month’s rent or some other benefits/improvements, that will bring your effective rent down.
Below is a quick snap shot of what the real estate market for single family homes looked like for the fourth quarter of 2009. These numbers are derived from the Multiple Listing Service and though they do not include For Sale By Owners and anything not listed on the MLS, they are indicative of what is going on in our local markets. The closed sales may be slightly underestimated due to the lag time in posting the sale in the MLS.
Coconut Grove
- Closed Sales: 23. 5 short sales, 3 REO. None of the closings in December were Short Sales or REO. Highest Sales Price: $2.2 million. Highest Price/Square Foot: $437.98. Lowest Sales Price: $154,900. Lowest Price/Square Foot: $82.97
- Pending Sales: 22, 14 of which went pending in the fourth quarter.
- Active Listings: 165, down from 217 at end of Sept. Highest List Price: $18 million. Lowest List Price: $65,900.
Coral Gables
- Closed Sales: 101. 6 short sales, 10 REOs. Highest Sales Price: $5.15 million. Lowest Sales Price: $250,000.
- Pending Sales: 74
- Active Listings: 421, down from 450 at the end of the third quarter. Highest List Price: $49.5 million. Lowest List Price: $89,500
Key Biscayne
- Closed Sales: 13. 0 short sales, 1 REO. Highest Sales Price: $6.15 million. Lowest Sales Price: $820,000.
- Pending Sales: 3.
- Active Listings: 122. Highest List Price: $24.950 million. Lowest List Price: $985,000.
Miami Beach
- Closed Sales: 41. 5 short sales, 7 REOs. Highest Sales Price: $9.75 million. Lowest Sales Price: $240,000
- Pending Sales: 53
- Active Listings: 380. Highest List Price: $29.9 million. Lowest List Price: $181,000.
Palmetto Bay
- Closed Sales: 42. 8 short sale, 4 REO. Highest Sales Price: $1.45 million. Lowest Sales Price: $140,000.
- Pending Sales: 63
- Active Listings: 139. Highest List Price: $2.85 million. Lowest List Price: $165,000.
Pinecrest
- Closed Sales: 45. 4 short sale and 5 REOs. Highest Sales Price: $3.5 million. Lowest Sales Price: $236,000.
- Pending Sales: 29
- Active Listings: 199. Highest List Price: $5.9 million. Lowest List Price: $265,000.
South Miami
- Closed Sales: 24. 3 short sales, 9 REO. Highest Sales Price: $870,000. Lowest Sales Price: $87,500.
- Pending Sales: 21
- Active Listings: 71. Highest List Price: $1.899 million. Lowest List Price: $57,270.
Now that the residential real estate market appears to have stabilized, investors are starting to look at U.S properties as potential investments. According to Kevin Brass of the Wall Street Journal, groups of investors from Mainland China are still touring properties in the U.S.
With the decrease in real estate prices and the drop in the dollar in relation to other currencies, foreign investors are taking advantage. Shouldn’t you be?
Miami ranked third in the nation in the number of distressed commercial properties. Miami has $7.6 billion worth of properties that can be considered distressed, according to Real Capital Analytics, a real estate research firm. Las Vegas was the worst off with $17.7 billion and Manhattan was third with $12.3 billion. Since the total nationwide is estimated to be $180 billion of distressed properties there is plenty of pain in other states. It makes sense that the sectors of commercial real estate hardest hit are the retail and hotel sectors, followed by apartment buildings and finally, the industrial sector, which wasn’t as heavily leveraged as the other sectors.
| RCA’s Market Stats for Miami, FL Past 6 months | Reported closed/in contract |
|---|---|
| Volume ($mil.) | $872.2 |
| No. of props sold | 75 |
| Avg. price in mil. | $11.6 |