Miami’s Boom to Bust

During the condo boom of the last decade, Miami justifiably earned the nickname “Crane City”. I think at one point we had over 60 construction cranes dotting the downtown Miami skyline. Developers aggressively marketed their projects, each trying to create a sexier marketing campaign than the other. Supermodels were the face of the developments touting an unimaginable lifestyle of fun and success.  For most of them it was a similar theme, buy a small one bedroom condo for $350,000 on Brickell Avenue, and experience la Vida Loca, “the Miami lifestyle!”

The only problem with this pitch was not the weather, beautiful infinity pools, beach volleyball courts, indoor movie theatres, or convenient location to downtown and South Beach. The disconnect was that to own a small one bedroom apartment, one had to earn approximately $80,000 per year to afford the mortgage, real estate tax and maintenance fee payments. Now how many of these jobs are actually available in downtown Miami?

So like sheep in our consumer driven economy, a few jumped in, stories of rags to riches spread, and everyone followed suit. Did you hear the story of the buyer who borrowed $10,000 on his credit card as a down payment, purchased a unit sight unseen, and in a matter of months flipped the contract to the next speculator at a huge profit? Developers supported the practice and charged a 1% ”assignment” fee plus real estate commissions to profit on the flipsters. Sales agents licked their chops earning 5% on the purchase price each time the contract was turned over to the next believer. Developers hired whomever they could to finish the job and slap their buildings together.

At the same time, banks were giving away 100% financing to buyers of high rise condominiums with a 580 credit score. They also allowed up to 6% seller concessions, which would more than cover having to bring any cash to the table. Everyone was betting on appreciation and this huge influx of primary owners and renters moving to downtown. Developers laughed and did not think twice about spending thousands of dollars on weekly lunches at Prime 112. 

No one had any skin in the game.

Miami has seen similar booms and busts throughout its history. The terrible hurricane of 1926 that totally decimated Miami Beach, followed by the Great Depression of 1929, completely destroyed our local economy. Many lives were lost, buildings were completely destroyed, and fortunes quickly evaporated. Yesterday, I received an email from E*Trade Financial stating that “At the end of 2008, cash in money markets and bank accounts had reached nearly $9 trillion or 74% of the value of all publicly traded stocks in the U.S.!”  Does this ring a bell?

Today we are back to bidding on properties. It’s a seller’s market of bank owned real estate. There is much hype in the market as vulture investors with cash chase foreclosures and are determined to out-maneuver the next bidder. Listing agents require buyers to sign multiple disclosures to relieve them of any responsibility as they are in “multiple offer” situations. Banks say they are lending to buyers of condominiums, and while they may be underwriting many, they are funding very few. First time homebuyers are working hard to obtain a very attractive $8,000 homebuyer tax credit. The National Association of Realtors is claiming that we are ”near the bottom”. This is all feeding even further into the hype and creating more uncertainty.

So where does this leave you, the first time home buyer or investor?

The value of real estate in Miami today has much more value than what it offered as recently as 20 years ago. This is fact and you can ask anyone that has lived here even for the past 10 years. Yes, the Miami real estate market is much like the Wild West at the moment. However, in many instances we are witnessing an over-correction, and here is where you will find the real opportunities.

For further information or to discuss the opportunities in Miami real estate, please send us an email at info@miamiangelproperties.com.

The New Miami Icon

This month the much talked about high-rise residential development known as the Icon Brickell, located at 495 Brickell Avenue in downtown Miami, will start closing on units and open it’s doors to new residents. A couple of weekends ago, I visited the site to get a feel of this enormous condo project at the mouth of the Miami River.

The first thing that jumps out at me are the several gigantic heads, something reminiscent of the Maoi of Easter Island, staring at me as I enter the premises. Multiple shapes, colors, sizes, textures and even a few with lights in their eye sockets. The site is impressive from which the three Icon towers rise in the Miami skyline. I am drawn to the waterfront area and the historical Tequesta Indian settlement, or better know as the Miami Circle. Here it sits directly in front of the “north” tower, almost invisible and certainly not representative of a 2,000 year old archaelogical site. 

So this is Icon Brickell. Three modern glass towers as high as 57 stories tall, all containing 1,800 units and 148 hotel rooms. Spas, fitness centers, movie theater, club rooms, cabanas, pools and multiple sun decks. It’s now 2pm and the middle tower is lost somewhere in the shade of the north and south towers. I imagine that natural light is going to be a premium and so is getting the buyers in contract to close.

According to the Daily Business Review, buyers of 120 condos no longer want to be part of this architectural Miami Icon. They are suing to recover $13.7 million in down payments on condos with purchase prices totaling $68.4 million. The suit claims that the developer failed to complete the project on schedule in 2007.

I cannot help but wonder the fate of this Icon. How many buyers will close and how many will follow that dreaded path to foreclosure? Hopefully these Easter Island heads will not become the living faces of sacred Icon Brickell owners.