Well boys and girls, important to start somewhere so here we go . . . .

This is more hearsay than fact, but from a second source, it can’t be far off base . . . . Had breakfast with a Realtor this morning, one of the snowbird type who flutters between Miami and New York depending on the thermometer. In discussing a high end ($600k to $5MM price range) new construction high rise condo building, he described an outright panic amongst speculators. The project is across the street from the American Airlines Arena, and designed by a famous architect named Chad (if you’re in town, you’ll know, otherwise, you can research this). Apparently, the going price for a condo there is falling to below purchase price to buy from a naked investor (someone who can’t cover the bet, but did put 20% down a couple of years ago) is starting to dip below the pre-construction price.

It’s easy to say here, now, after the fact, “I told ya so”, but the pre-construction prices on these apartments were sky high when they were released 2 to 3 years ago, and the speculators on the next years worth of inventory are going to get creamed. Still, If You’re Planning to Live There, The Prices are Somewhat Reasonable. Florida is still an unlimited homestead state, still has a 3% cap on tax increases and great weather. This is what I started telling my people 2 years ago. Keep in mind, the Median condo price in Miami-Dade County is $273k right now, and was lower when these people speculated their way into this particular project . . . . .

On a happier note, the affordable housing market down here remains strong based on the unlikely reasoning of: If the price is low, lots of people can afford it!, go figure . . . . At the moment, my brokerage is shopping a 70 units + condo conversion project with prices that are 65% of the median condo price in Miami and aimed at the workforce marketplace. We have strong interest from 3 local Banks to do this condo conversion. Of course, the buyer is getting the units at a rental income property price, but the owners are Long Experienced property managers (Multi-Family buildings and Shopping Malls) and aren’t looking for a conversion premium. At this time the Affordable segment is still bullish and unit resales are happening at a 10% premium to 6 months ago’s sales. In summary, what goes up, must come down, but what’s in high demand seems to be less of a roller coaster, more of an escalator. Common sense, but something that’s been lacking from housing markets lately.

For the sophisticated investor, the brakes are still on for high end real estate properties, but the low end is vibrant as ever. From an economic standpoint the numbers make sense:

Miami-Dade County Median Income 2003: $36,089

For a $600,000 condo purchase price
with a $120,000 down payment
borrower takes a $480,000 loan amount
at 6.5% for a 30 year fixed Jumbo loan

$3033.93 Monthly Payment
$11,000 Monthly Income to comfortably afford this apartment (28% Housing Expense Ratio, Taxes and Insurance not included, just too much variance to speculate on this so we’ll keep it simple)

% of Median Income Needed to Qualify: 367%

For a $150,000 condo purchase price
with a $7,500 down payment
borrower takes a $142,500 loan amount
at 6.5% for a 30 year fixed loan with a .5% additional mortgage insurance premium

$948.06 Monthly Payment
$3,400 Monthly Income to comfortably afford this apartment

% of Median Income Needed to Qualify: 113%

As one might imagine, there are a significantly larger pool of individuals in our 2.3 million person county earning 113% of the median income (like perhaps 45% of the working population) compared to individuals earning 367% of the area median income (say perhaps 3-5% of the population).

Until next time, Happy Hunting!