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.

Property Taxes Front Lines

A few weeks ago, I published a blog on Florida’s property tax issues titled Florida’s Property Tax Conundrum. In addition to the ever rising cost of property insurance in our state, the real estate tax debate is now on the front lines. Currently faced with severe budget cuts, the Florida Legislature, Department of Revenue, local cities and counties, are in no rush to change the way they assess real estate property taxes.

However, there is some light at the end of the tunnel. The Florida Department of Revenue (“DOR”) recently issued an advisory opinion that foreclosures in general should not be used for assessment purposes, but that Property Appraisers may “calibrate” property assessments to “adjust” for foreclosures. The term “calibrate”, which does not exist in the DOR  rules and Florida assessment statutes, means that Property Appraisers may potentially qualify foreclosure sales that were sold on the open market, or more specifically, those that were listed on the MLS. Additionally, based on the October opinion issued by the DOR, short sales are now believed to reflect the market and may also be used for 2009 assessment purposes.

Property assessments in Florida are always done a year in arrears, therefore, this is good news for 2009 assessments.

Lori Parrish, Broward County’s Property Appraiser, is being very open about her interpretation of the DOR’s latest opinions and has publicly issued her 2008 assessments guidance on short sales and foreclosures. Let’s just hope that our new Miami Property Appraiser, Pedro Garcia, will answer to the voters who put him in the position. In a recent interview with the Daily Business Review, Garcia stated that his “primary goal” is to “establish the right value for all properties in Miami-Dade County.” Additionally, he stated that the “department will take a look at comparable sales, foreclosures and short sales in a community to establish the right value of properties in each market area.”

Let’s make sure that we hold him to this.

If you would like a FREE consultation on the value of your property or to discuss your real estate tax situation, please feel free to send us a request at info@miamiangelproperties.com or call Ross at (305) 673-5300.

Florida’s Property Tax Conundrum

Working with buyers of Miami residential real estate can be a lot of fun and full of adventure. We have so many unique neighborhoods, eclectic architectural styles, and such a diverse culture, including homes from tropical bohemian bungalows in Coconut Grove to high-tech modern waterfront homes on the Venetian Isles. Eventually, however, you have to cross that shaky old “real estate tax” bridge. PROPERTY TAXES ARE WAY TOO HIGH, and are a major factor in the property buying decision process.

YES, prices have come down considerably, and in some cases way below the threshold that any of us in this business imagined. Fantastic, that $2.1 million home in the Grove is now available at $850,000!

YES, unless you are in the $5 million and up range, there is a huge inventory of properties to choose from across the board. Superb, short sales and foreclosures galore!

YES, with only a minimum required down payment of 3%, attractive FHA financing is available. Wooohoo, my bank offered me is an amazing rate of 5.5% on 30YR fixed rate mortgage!!

SAY WHAT? Although my purchase price is $129,900 and I am purchasing a wonderful foreclosure property at 40 cents on the dollar, the property appraiser is not going to adjust my market value down to the purchase price in 2009!

According to the Miami Dade Property Appraiser, the current market value of this home is $322,205, and the 2007 real estate taxes were $8,113. This means that I am required to pay as much in real estate taxes as in principal and interest. Does that sound reasonable and workable to ANYONE?

There is some silver lining in this box. Several proposals are out there to drastically reduce the cost of real estate taxes in Florida. People we need to get with the program and talk to our Florida legislators. Check out one proposal out there called Cut Property Taxes Now, for example. They propose capping property taxes to a maximum of 1.35% of market value.

No matter which direction you think best, let your voice be heard and let’s push for CHANGE!

If you would like a FREE consultation on the value of your property or to discuss your real estate tax situation, please feel free to send us a request at info@miamiangelproperties.com or call Ross at (305) 673-5300.