Latest Report Shows Buying Property in Miami More Affordable Than Renting
January 25, 2011 by Lucas Lechuga
It is more affordable in Miami to buy vs rent, according to the latest Rent vs Buy Index released by Trulia.com earlier this afternoon. Miami and Las Vegas topped the list of metropolitan cities where it is more affordable to buy rather than rent. The report compared the cost of leasing a 2 bedroom home with the cost of ownership. An increase in demand from renters along with a shrinking inventory has caused the pendulum to shift in the opposite direction.
In contrast, the above list shows the top 10 cities where it is still more affordable to rent vs buy along with their associated price-to-rent ratio.
Are the outrageous condo fees and taxes taken into consideration. I agree that when you look at the sale price of the unit and compare it with the rent, it seems like a good idea to buy. It just seems that high condo fees are the deal breaker for me.
You can buy $80k condo in Miami now and rent it for $1200/mo within 2 weeks. It’s a no brainer, really. The only explanation for such a mismatch is impaired credit access. But it can’t last forever, and it won’t. 20 years from now people will not believe it happened.
Mike,
Call around and get quotes for insurance on a property near the water where the majority of these condos are and you’ll see that’s where a lot of the cost are.
$700 seems like a lot for HOA fees until I looked around and realized my insurance could easily be more than $400 for similarly priced house. You’re going to have to pay whether you’re in a house or a condo. Your complaint is about living in a coastal region that’s prone to hurricanes, not condo fees.
Same thing with condos. The taxes are based of the millage rates. How do they differ for condos? Besides condos allow you to live in a dense area like downtown cheaper than than single family homes. Just about every single family home in Brickell has higher taxes that the majority of the condos.
Miami Herald article about renting:
http://www.miamidda.com/pdf/1.18.11%20Miami%20Herald.%20Raising%20the%20roof.pdf
Gixxer, 5K a year for property insurance? what kind of SFH are we talking about?
that sounds a bit high for a 400k house.
If rent prices continue rising then it can’t be long before those sales prices begin to rise.
papercut said: “You can buy $80k condo in Miami now and rent it for $1200/mo within 2 weeks”
can you show us an example of this? are there any 80K condo’s that not in foreclosure ravaged buildings where maint has been scaled back to bare minimum. Are you goning to be able to find a sucker to rent it out at $1200/month when there are safer cleaner buildings renting for less?
Guess I have to keep jabbing at Gixxer on this one when Case-Shiller reports. You called the bottom on Miami RE in Spring 2009. Still standing by that call?
Makes me Think,
Here is one example.
Sale (no units are available now, I wonder why?, but you can see what was sold recently):
http://condosforsale.miamicondolifestyle.com/gateway-to-the-grove-condos-for-sale
Rent in same building:
http://condosforrent.miamicondolifestyle.com/gateway-to-the-grove-condos-for-rent
If you apply some effort instead of just asking other people to show stuff to you, you can find plenty of opportunities.
Took me few minutes to find another one.
Short sale approved for 65k:
http://condosforsale.miamicondolifestyle.com/miami-mls-listing/M1459393
Unit one floor above just rented for 1150/mo:
http://condosforrent.miamicondolifestyle.com/midtown-lofts-condos-for-rent
Gixxer 1000 — The idea that a 25th-floor condo in a new building should have to pay $5,000 or more per year for hurricane insurance is just flat-out absurd. (Hell, it’s high for a house, but at least a house can get leveled or flooded out by a hurricane. A brand-new high-rise should be all but impervious to hurricane damage, especially above the first floor.)
Joe, Units above the first floor are still very vulnerable in a high rise building. Plenty of debris still floats through the storm, even at higher elevations. Its takes a very small object at 100 mph to penetrate the envelope of a building. And once the envelope is penetrated, very bad things happen because it blows out the windows of other areas in the building which were not subject to the initial broken window. The larger the building, the greater the probability of a weak point in the envelope-and resulting failure. First floor flooding would also result in serious damage to elevators, electrical systems, water system, etc which affect the entire building. High floor units are not isolated from possible insured damage. Just saying…
gables — I know the first floor is vulnerable to significant damage; that’s why I said “above the first floor.”
I also know that damage is possible on the higher floors, but 90-plus percent of that possible damage could be preempted by a solid design and hurricane-proof structures, glass, etc. (rather than by going cheap, as happened on a lot of new buildings).
My point is, $5,000 per year times 100 or 200 units per building is upwards of $1,000,000 per year per building for hurricane insurance, when the odds of any given building actually suffering substantial hurricane damage is maybe one in a 100 (i.e., once in 100 years), if that. The rates/expense is outrageous relative to the risk.
Has anyone figured out if the above chart includes condo fees and/or taxes? It seems almost unbelievable that total cost of r.e. ownership is now lower in Miami than it is in Phoenix, Arlington, El Paso, etc.
Joe, major hurricanes are more than one in 100 year events. In fact, following the risk calcs, a 100 year event has over a 60% probability of occurring in your lifetime. Miami-Dade has had multiple hits in the past 100 years. They are not infrequent. Even a well designed building will suffer damage during a major hurricane. Winds find the weakest point in the structure and attack it. So unless you are sure you had sound material and construction technique on your entire structure-can you find this in miami?- most likely you will have a problem to some degree. thus you need to pay quite a bit of insurance to cover this risk over the lifetime of the structure. unless you want to build a highrise concrete bunker with no glass openings.
Joe,
The whole point of the HOA is to divide the costs equally to the proportional amount of space you own. Even if the damage is limited to the bottom few floors all the units have to pay to cover it equally. Under your logic only the penthouse owners need to pay for repairs to the roof. Again were talking about hazard insurance not personal property insurance.
If you think that HOA fees are out of whack then look at the actual balance sheet and break down where the cost are going. I’m sure we could argue every single item up or down a bit but they are pretty much in line with the rest of the country when you factor in the additional insurance cost.
And they are definitely in line with the cost of owning a single family home in the same are.
So to all the people yelling that HOA’s are just insanely ridiculous then show me how you can live in the same area, in a single family home for less total cost.
I can see how someone sitting in another state or country can see an HOA fee of $900 and think that’s crazy. That is until they come here and try to buy a single family home. Your problem is with Miami and Condos.
“Unless property insurance costs drop or management fees are slashed, it is difficult to see how the condo association fees will go down.”
“As a general estimate, condo associations charge about $0.50 per square foot per month at projects located on the mainland in each of the seven largest South Florida markets east of Interstate 95. On the barrier island, associations tend to charge about $0.70 per square foot per month due to more expensive insurance coverage and added amenities such as towel service on the sand.”
gables,
Yes I’m sticking with the 2nd quarter 2009. If you actually had access to capital this was the best time to buy the best units. Bulk buyers came in, bought all the best units at a discount and now the crumbs are left.
And I thought we talked about this around xmass. The case shiller index for Miami includes Dade, Broward and Palm Beach counties. I will readily admit before moving to Miami I relied heavily on data like case shiller that considers the entire area from Homestead up to Palm Beach all Miami. Now that I live here of course I know better.
Looking at 3rd Q10 data the median value in Dade County is down 16% but the areas I would live in are actually up. Here is another admission of guilt, the traffic is worse than I though. IT’s mainly US1. And there is simply no other way to SW. So for me and a lot of the younger generations that doesn’t care about white picket fences, the suburbs are simply less desirable. So unless we have jobs out there the most of the outlying suburbs are now simply obsolete. Some will be restructured using techniques like building town centers, and many will simply wither away. So they’ll continue to pull down the average but its pointless because they’re not real competition. When a seller in Brickell is looking at prices of similar units going up they’re not going to drop the prices because prices in homestead are going down.
I’m now working for a local developer and I’m pretty sure you they didn’t hire me to not work on new developments. I attended a conference today at the Hard Rock and the sentiment was that things were getting better. On a more macro level residential still has a ways to go but at the same time where and how people are choosing to live is changing.
gixxer, still stubborn about your bottom call. there have been plenty of good deals on nice units since then. i would not say crumbs are what’s left. and i don’t dispute the variation in prices around the metro area, although i am not really convinced the good areas are indeed rising in price. at least not from my experience. the building i moved out of last year (and would have bought in), had its 2 best units go on the market in the past months at prices below inferior units of the 09-10 stretch. don’t confuse developer sales with resales in downtown area, either.
sorry you learned the traffic lesson the hard way. until you experience the parking lot of us1, you don’t understand how a major us city cannot have a major highway system to distribute traffic evenly. there exists no real distribution system south of downtown. add to that poor drivers and its bad. your best bet is actually bird road to the UM campus-at least you avoid half of us1. driving up the coast to brickell also works. now that you are down there, you should take time to explore downtown coral gables. you will find it is superior to living in brickell-at least for now.
gables,
And I see you are still stubborn as ever. Maybe crumbs wasn’t the best choice of words. But the exception doesn’t disprove the rule. I’m sure you’ll be able to find deals lower than 09-10 for years to come. That’s the nature of a deal. I’m not saying everyone should run out and buy right now. But on average the price of condos in areas that most people want to buy were at the lowest point around that time.
As far as the traffic you seem to be missing my point. I have friends who live downtown coral gables and they have already admitted to me that they made the wrong choice. Unless you work way out in the suburbs the only places that most young professionals hang out are Brickell, South Beach, Coconut Grove, Midtown and maybe Coral Gables. Brickell obviously puts you in the best position to access all those places. I was agreeing that the traffic on US1 sucks but that was to prove a point. No one really wants to live in Kendall anymore unless they have to. So the traffic only servers to separate the suburbs and the city even more.
Coral Gables isn’t bad and I’d possibly live there if I were 40+ with kids but I’ve got a while before that. The nightlife is extremely better in Brickell. Not to mention other things like being able to simply take the metromover around the corner to Heat games. Basically all my friends who don’t live Brickell come early in the evening to either my place or my buddy staying at Icon and then we simply branch out from there. Then at the end of the night we end up back at either on of our places and were done for the night while everyone else has to either stay the night or head home at 5am drunk.
I actually take the metro to campus. It takes me 5 min to walk to the metro station, 10 min metro ride and maybe another 5 min to walk to class.
gixxer, can a bottom actually be called in a time period with no transactions? what i mean is if the number of today’s “exceptions” exceed the number of transactions from 2009, you really have to wonder where the bottom is defined. at any rate, seems to me i can buy at the same price today as i could have in spring 2009. just like to yank your chain every once in awhile, since you were so adamant about spring 2009 being a bottom. and coral gables isn’t just for 40+ with kids-not great for condos anyway. consider 30+ without kids as well. at that point you wont have the need to go drinking at the clubs until 5am either. walking home at 2am will be quite sufficient.
so what are the developers talking about for price points of new developments? and do they have any near term plans for downtown area?
gables,
“seems to me i can buy at the same price today as i could have in spring 2009”
Your quote really highlights the point I was trying to make back then. Prices were falling and people were talking like they were going to keep falling. My point was that around 2nd quarter 09 they pretty much went as low as they were going to go. That doesn’t mean that they are going to start going higher or that people are actually buying at that point. But the reemergence of the rental market pretty much set the floor.
If you can rent a place within a couple of weeks are a price point that covers a $250k mortgage then its probably not going to be sold for less than $250k. That doesn’t mean its going to start going higher or that anyone is going to actually buy it at $250k but at the minimum the seller isn’t going lower than that.
So many people here are in a hyper real estate world where prices are either raising or falling by 20%. So if you say prices aren’t falling they pretty much hear prices are rising. Also there is a difference in the change in price and a change in the sale value. If you drop your prices in May but no one buys the median value wont show a change until months later when people actually start buying. This is partly the case with case shiller. The sales prices today simply reflect prices drops that happened a while ago and now those sales are going through.
As far as Coral Gables myself and most of the young professionals I hang out with are in the 25 – 35 age group. I agree that there are a few people in this range in Coral Gables but unfortunately the nightlight isn’t much. Its not really about walking home at 2am or 5am. In Brickell there is always a lot more to do at either time. Coral Gables has some good restaurants and couple of decent bars but that’s about it. Brickell has all that plus clubs and is closer to other areas as well. And it pretty much gets better by the month. I can think of 4-5 restaurants that have opened up since I moved here. And there is one of those new trendy Aloft hotels that going up right now and should be done by December. With Whole Foods back on track and the entertainment at Met 1 its going to get a lot better in the next couple of years. Then you have the new thing going on at the Macy’s building downtown this summer. I’ll be able to ride the metromover right to it.
As far as developments to be honest you can expect pretty much everything that will get going in the next couple of years will be multifamily rental. I believe the next time the DDA report will come out occupancy will be over 80%. The only for sale product I can see in the next couple of years is Skyline on MBV. I bumped into those guys not to long ago and they were taking trips to get additional foreign investors and I believe they had 70% of the pre-sales they need to get started.
Other than that there is the Jazz club, wine bar, coffee shop, etc at the Macy’s building that I talked about. Met 3 is back on without the tower for now along with the entertainment portion. The MDC student center being built at the old Loft 3 site. I’ve seen drawings for two residential towers of affordable housing just south of 395 on 1st ave.
Yes I’m sticking with the 2nd quarter 2009. If you actually had access to capital this was the best time to buy the best units. Bulk buyers came in, bought all the best units at a discount and now the crumbs are left.
====> agree 200% – that is what I did when buying my unit,
====>best unit on the 50/51th floors, best view direct east ocean/bay/city view, discount price $200 per foot
gixxer and owner, just curious when the bulk buyers were most active? they set the bottom, so to speak. when in 09 and 10 were they making their deals? my guess is it after spring of 09. probably mid 2010?
gables — I find it very hard to believe that the average structure in Miami suffers substantial hurricane damage more than once per 100 years. I was in Miami for Katrina and (Wilma?) and 1-2 others, and while there was damage, there’s no way the average condo building suffered $1 million in damage, which is roughly how much each building pays for hurricane insurance if $5,000/year is the true average cost. Even if it’s once every 50 years, that’s still the equivalent of paying about $100 million in insurance premiums (adjusted for inflation, etc.).
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Gixxer 1000 — I never said it was cheaper to live in a single-family home. That’s absurd. My point, for years, has been that it should be substantially cheaper to live in a high-rise than in a SFH. Pooling costs and sharing risk is supposed to yield savings, efficiencies, and economies of scale. But those savings never seem to materialize, either in Miami or anywhere else, because governments rape condo dwellers in terms of taxes, and HOAs, like governments, tend to get big, bloated, and inefficient.
The problem with your argument is that it IS substantially cheaper to live in a condo that in a single family home. Here we are only discussing the cost of insurance or taxes and how they relate to the price of the home. If you have a $500k single family home or a $500k condo in the same area yes your taxes and insurance are going to be similar. But that is only one component of ownership.
The problem is that comparing a $500k single family home to a $500k condo is a false comparison. If you wanted to live in Brickell (or just about any urban area) there is a huge difference between the two. The land value is usually the most expensive part of the property. An empty lot for a single family home in Brickell probably runs over $700k and that’s before any construction. There is simply no way that you’d be able to get a 2/2 as cheap as you could with a condo.
You’re comparing apples and oranges. If you don’t think owning a condo is much cheaper than a single family then show me how you can get a water view downtown cheaper in a single family home than in a condo.
If you live in a $500k single family home and you move into a $500k condo no you’re not going save money. But that usually is not what happens. You usually sell you $500k single family home in the suburbs and downsize into a $300k condo in the city.
Joe, Katrina and Wilma were not major hurricanes when they struck the South Florida Coastline. They are not close to the 100 year storm period. Think of all the damage occurring from Andrew, and that was a small area storm centered around Homestead. Imagine the damage of a major storm which has a more direct strike on the metro area. And that is not an infrequent occurrence. Structures will handle Cat 2 and below with limited damage, but as you push Cat 3 and beyond, damage increases quite a bit. Wind forces do not increase linearly with wind speed. Its just a game of probability. It’s not hard to rack up $1 million dollars of damages on a high rise.
gables — Nothing you have said has refuted any of my points above. A condo that pays $1 million per year for hurricane insurance will pay $50 to $100 million over a 50-year period (adjusted for inflation, etc.). There’s simply no way the average condo building in So. Fla. racks up $50 to $100 million in storm damage every 50 years. No chance.
Gixxer 1000 — If living in condos was so much cheaper than living in single-family homes, then all of the condos would have been sold out 5 years ago and there would be vast areas of SFH Miami that are ghost towns (which, even accounting for foreclosures, isn’t true).
Please, get serious with your arguments and comparisons. One minute you’re comping Miami and Manhattan; the next minute you’re talking about SFH in Brickell that don’t even exist. Give us a break.
Also, something like 80% of the zip codes in Miami-Dade saw decreasing prices in 2010, so your continued insistence that the bottom was reached in early 2009 is childish at best and stupid at worst. This is an anonymous forum; it shouldn’t be that hard for you to admit an error.
Joe,
What in the world are you talking about??? SFH don’t exist in Brickell???? So I guess all the houses I see on S. Miami ave with the condos towering over them are just illusions. I’m beginning to think your extent of Miami knowledge is that you visited south beach a couple of times.
I work in development, in Miami. I also study real estate development, in Miami. So I have access to pretty much most professional and academic real estate professionals, in Miami. And while not all of them agree, none of them have your opinion. Yes the overall Miami, ft. Lauderdale and West Palm Beach market is down. But a lot of the urban areas are not. There is a key shift in demographics and behaviors. The Miami DDA is reporting that downtown prices were up 15% in 2010. If prices went up in 2010 then they were obviously at the bottom in 2009.
So I personally think that you’re childish to keep arguing that the market is still going lower when you’re well aware that the majority of the people who would come to this website are concerned with urban condos and not SFH in the suburbs that are pulling the overall market down.
You’ve been calling me things like childish and stupid since I started on this forum. But in the meantime I’ve managed to move to Miami and excel well in the field of real estate. I have great grades, excelled at real estate competitions and landed a great job all with the same thought process that I explain here. So I’ll continue to excel and prosper here in Miami and you can continue to criticize me from the outside looking in.
To put it in perspective I attended a ULI conference at the end of January. Here are the topics and some of the presenters:
http://seflorida.uli.org/events11/2011Outlook.htm
At the conference the consensus was that 2009 was the last worst year, we started growing very slowly in 2010 and stopped the bleeding and then every one predicted additional slow steady growth in 2011. So I guess I should ignore economist, consultants and CEO’s because of some random lame guy on the internet that doesn’t even live in Miami? And many of them cited the calculated risk blog, only they used the same information to show how things are getting better.
Gixxer 1000 — You’ve been “in Miami” for, what, five months? And you think that makes you a big expert on all things Miami? Give us a break.
As for SFH in Brickell, I didn’t literally mean that not a single SFH exists in Brickell. My point was that for every new SFH built in Brickell in the last 20 years, there’s probably been 200 condo units built. Thus, this hardly makes for much of an apples-to-apples r.e. comp. (Hell, I’d love to know how many SFH have been built in Brickell in the past 20-30 years. I bet it’s a very, very small number.)
—
Gixxer 1000 said: “If prices went up in 2010 then they were obviously at the bottom in 2009.”
— Um, really? Is that how it works? There couldn’t be issues of sample size, number of transactions, bulk sale activity, etc., that skewed the numbers one way or the other? And how do you define “prices [going] up”? The numbers I’ve seen showed that something like 80% of the zip codes in Miami-Dade saw r.e. price declines in 2010.
Regardless, when the owner-occupied numbers are as putrid as they are in downtown Miami, it seems like you might be honest enough to acknowledge that the market has shifted away from the owner-occupied paradise advertised in the glossy brochures to a massive rental colony. Of course, if you want to invoke your silly Manhattan comparison and say, “But most people rent!” then go right ahead.
—
Gixxer 1000 said: “You’ve been calling me things like childish and stupid since I started on this forum.”
— The insistence that the bottom was hit in 2009, when 80% of Miami-Dade zip codes saw a decline in 2010, is childish.
I don’t believe I’ve ever called you “stupid.”
—
Gixxer 1000 said: “But in the meantime I’ve managed to move to Miami and excel well in the field of real estate. I have great grades, excelled at real estate competitions and landed a great job all with the same thought process that I explain here. So I’ll continue to excel and prosper here in Miami and you can continue to criticize me from the outside looking in.”
— A big talker and a self-promoter! You’ll fit right in in Miami. Bienvenido!
Joe, you said “There’s simply no way the average condo building in So. Fla. racks up $50 to $100 million in storm damage every 50 years. No chance.”
Joe, obviously you do not understand the point of insurance. it does not really exist to cover small damage occurring on a regular basis-although you can gain some of that benefit every few years. It exists to avoid catastrophic loss of your structure, particularly in the early years of ownership. Most condo associations could dig themselves out of $1 or $2 million in damages in a given year. What happens if/when the structure is basically totaled and needs rebuilt? What do you think the replacement cost of a 40 story building is? You can self insure for the lighter damage, but you cannot typically self insure for catastrophic damage. So you make a hedge with insurance-or take the chance of either no storm or bankruptcy. You pay more in insurance than you would to fix average storm damage over a given time period, but much less than it would cost to rebuild the structure. Or you don’t buy insurance and take on the risk yourself. You gripe about $5k a year for a $300k housing asset. People pay $2k a year in Miami to insure a $25k automobile!
Joe,
Spin it if you want. It’s apparent you know nothing about Miami. It’s obvious from your post that you didn’t know about the SFH along S. Miami ave. If you knew they were there then you would have know that they are all more expensive to own when compared to a condo.
As far as pricing goes you simply want to argue. I have conceded that many areas have not only hit bottom when I predicted but that many will also continue to go lower. I don’t know how to say this any clearer. I was tracking urban areas and therefore concluded that they bottomed in 2009. Was I wrong, yes. The overall market did not bottom in 2009. But regardless the areas I was looking at did bottom in 2009 and started going higher. After further studies and speaking with local professionals and professors I learned more about the local trends and how things were vastly different when comparing suburban vs urban. The result is that we have excess inventory in the suburbs where we don’t need and a shortage of inventory in the urban areas where we do need it.
So you can argue about how many zip codes are down but it doesn’t matter to the person who wants to live in a zip code that is up. And all you arguments against this are pretty lame. Bulk buyers buy at a discount not at a premium. The bulk buying decreases values, which it did during the peak of bulk buying activity in 2009.
And again if you disagree then provide facts.
If a condo cant rack up $1 million in insurance if a year then how much???
Show me the total carrying cost on a SFH in Brickell that is close to the carrying cost of a condo.
You like to talk in random abstract arguments. HOA fees are overated, the Government is corrupt, housing values will continue to drop. But none of those arguments mean anything to someone looking to buy a 2/2 in Brickell today.
I’m not saying the right decision is to rent or buy. It’s obviously different in every case. You on the other hand just argue in generalities.
You don’t know how much HOA fees SHOULD be, just that they are too much in your opinion.
You don’t know how much insurance for these condos does cost, just that you cant understand why it would cost as much as people who have looked at it say it is.
Gixxer, just a couple of comments from above.
“The result is that we have excess inventory in the suburbs where we don’t need and a shortage of inventory in the urban areas where we do need it.”
Where is the shortage of inventory in the urban areas? Still have thousands of unsold, unlived in units.
“The bulk buying decreases values, which it did during the peak of bulk buying activity in 2009.”
I asked this of you and owner previously, but may have missed the reply. Are you certain the bulk buying was occurring then, particularly your bottom spring 2009? Seems to me the bulk buying was occurring after that time period. My memory is a little hazy on the bulk buys however, since they are not a primary interest of mine.
gables,
“Where is the shortage of inventory in the urban areas? Still have thousands of unsold, unlived in units.”
Just look at the number of people moving downtown and the number of units available. Downtown is poised to add another 10,000 people or 6,000 households by 2014. With almost nothing in the pipeline where are these people going to go? Even if developers wanted to, the earliest they could get additional inventory would probably be around 2014. During the condo boom a lot of rental buildings were converted to condos creating a shortage of rentals. So now if you want to rent in Brickell you have no place to turn but these condo owners. Places like Camden Brickell are fully occupied with waiting lists, charging the same price as the condos for rent even though they have crappy finishes. That because there you don’t need the first, last and security deposit up front.
So the main reason the rest of the units that are unsold isn’t due to demand its just because there needs to be someone to qualify for the mortgage at a price that is agreeable to by the developer or bank. If they released all these units onto the market they would be absorbed and filled with tenants rather quickly.
And this only benefits owners. As vacancy rates stay insanely low, rents will continue to rise. This increases the value of the units. If there is a supply of people willing to pay more and more to rent your unit its worth more whether you rent it or not. Which is why Miami is number 1 on the rent to buy list in the post.
“An increase in demand from renters along with a shrinking inventory has caused the pendulum to shift in the opposite direction.”
Not to mention as these renters fill up these condos the retail, restaurants, services and nightlife are following them creating a neighborhood that is more valuable.
“I asked this of you and owner previously, but may have missed the reply. Are you certain the bulk buying was occurring then, particularly your bottom spring 2009? Seems to me the bulk buying was occurring after that time period. My memory is a little hazy on the bulk buys however, since they are not a primary interest of mine.”
Bulk buying picked up at the end of 2008 and early 2009. This is when there were few bulk deals so the first ones were able to get the lowest price per square foot because of all the uncertainty. Examples of this would be the 60 unit bulk deal at Marina Blue in December 2008. They bought for essential $200 psf. Now Marina Blue is over $300 psf. That says it all.
Then as bulk buying activity picked up through out 2009 so did the price per square foot of the deals. So activity was greatest in 2010 but at higher prices.
So the bulk buyers in late 2008 and early 2009 got the best units and the lowest prices and then prices slowly went up from there.
gixxer, thanks for the recap on bulk buys. as i said, did not follow them close. hope there were other legit examples like the Marina Blue deal, rather than it being the anomoly.
“Just look at the number of people moving downtown and the number of units available. Downtown is poised to add another 10,000 people or 6,000 households by 2014.” These folks are moving there because there is an oversupply of units. Perhaps in 2014 there will be a higher demand than supply, but not today. There is not a lack of supply in downtown today, which is what you stated.
gables — You’re starting to sound like a shill for the insurance business. I understand fully that the purpose of insurance is to hedge against catastrophic loss. And for about the 10th time, I’m saying that there’s NO WAY the average building in So. Fla. suffers catastrophic damage every 50 years, yet EVERY SINGLE BUILDING is paying enough over a 50-year period to cover catastrophic loss.
At $1 million per year per building (just to use round numbers) and accounting for inflation, condos are paying well north of $100 million for insurance over a 50-year period. (Probably more like $150 or $200 million, even with a low inflation rate.) If one condo building out of 10 gets totally leveled, the insurance companies are still way, way in the black.
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Gixxer 1000 — I didn’t “spin” anything. Are you seriously telling us there’s more of a SFH market in Brickell than condos? There’s a great SFH on Pennsylvania Avenue in Washington, but it’s not a realistic r.e. comp. Give us a break with the nonsense.
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Gixxer 1000 said: “The result is that we have excess inventory in the suburbs where we don’t need and a shortage of inventory in the urban areas where we do need it.”
— Are you serious? It has taken almost a decade for Miami’s new condos to sell out and the vast majority are occupied by renters, and yet you’re claiming there’s a shortage? Seriously?
You might want to skip some of the r.e. and urban planning classes and take a few economics classes. You don’t seem to understand what has been driving people to live downtown in recent years. (Hint: Their cost of living has been subsidized by their landlords.)
gables — By the way, for someone who is being so strident re: the purpose of insurance, you seem to be a little naive yourself. Absolutely no one in Miami is “pay[ing] $2k a year in Miami to insure a $25k automobile!” They’re paying $2k a year to insure the $25,000 car *PLUS* $100,000 or $200,000 or $300,000 in liability coverage. Quite a big difference.
joe, you prove my point. your insurance is not meant to cover yearly damage costs. it is protection against rare, but catastrophic, events. the condo buildings are not paying for insurance to cover regular wind damage. you pay to cover a significant event. insurance is a business, and it must collect more than it pays out over time or go bankrupt. not sure how a business model would work that paid out more in claims than it took in premiums each year. but when you gripe about the yearly condo premium being too high, you are implying insurers should do just that. the risk of a major hurricane in sofla is not insignificant over a period of time-hence the higher premiums.
joe, most of the current structures did not exist in Miami 50 years ago. Hardly even 25 years ago. Look at the damage from the storms that have struck since the 20’s. They destroyed large parts of the city-many of those structures never had the chance to get hit again. The storms will strike again. My guess is you have never seen the damage from a major hurricane.
gables — We’re going in circles here. I’ve acknowledged several times that insurance is protection against catastrophic events and not against minor year-to-year damage. Please move on from this nonsense.
As for the insurance rates, you seem unwilling to acknowledge that the amounts being paid by the condos over a 50-year period are more than enough to simply self-insure a catastrophe. What’s the point of paying $100 million or $150 million (accounting for inflation) over a 50-year period when the buildings could simply set aside that same amount of money (or less) and self-insure? (And before you come back with your car analogy again, that’s a poor comparison, since car insurance isn’t meant only to protect the driver or the driver’s car, but also to protect OTHER cars and/or other people that could be injured or damaged.)
Let’s say a hurricane comes along and knocks a condo to the ground. If the condo assn. has $10 or $15 million set aside, it could simply get a construction loan to rebuild. Why pay $100 million or $150 million upfront, when it’s far from a sure thing the insurance will ever be needed? It makes no sense.
Joe, over a fifty year return period, when will you get hit by that storm? in year 1? or year 50? you assume the latter. then your argument has some merit-insurance would not be needed. You are really paying for protection in the early years, and spreading out the cost over many years. you can only self insure if you already have the money to cover the replacement-or the property is owned outright with no mortgages, and you are willing to take on the risk of loss yourself. your lack of understanding of probabilities and risk is what leads you down unrealistic scenarios, ie just avoid paying insurance and collect that money as a means to self insure and/or rebuild after 50 years. what happens when you get dinged in year 1 with only $2 million in reserves? banks force you to buy insurance on property so you don’t just declare bankruptcy and leave them holding the bag on your uninsured property.
You really just seem to want to make a point that you feel insurance is unnecessary. Fine, live your life without coverage. But it is absolutely absurd to even think a building of 500+ individual owners could remotely operate under the direction of self insured. You could not even get a mortgage on a unit in the building without insurance on the building.
gables — I never suggested one individual condo could suddenly stop having insurance, although it probably could if it went about it in the right way (i.e., high reserves upfront). My point is that the entire system is broken, and there must be a better way. Just as with health insurance, it doesn’t need to be “one size fits all.” I’d love to know what the average deductible is on these condo policies. A smart condo would have a $10-plus million deductible to lower the annual cost, just as individuals can save thousands every year with a catastrophic-care health insurance policy instead of a full policy. (I’ve done the latter since the mid-’90s and have saved almost $100,000 so far.)
The current system is akin to paying for a $10 pizza with a credit card that charges 38% interest and takes 7 years to pay off. You avoid a little bit of pain on the front end, but you pay for it dearly over the ensuing years.
Joe, insurance is what it is. Not a big fan of it myself. To me, it has lead to overvalued assets and construction in dangerous locations (ie along California faults and eastern coastlines). Nobody in their right mind would buy a $500+k condo in Miami if insurance did not exist-unless you were filthy rich and could afford the risk. But we pay the price because there is too much tied up in the purchase to not protect the investment. Again, its nothing more than probabilities and risk you are willing to take.