Will killer B's sting Miami's housing boom? Experts waffle
By Michael Lewis
Will Miami's housing market keep booming or bust? Expert panelists last week agreed that it will.
What they couldn't decide is which.
Everyone recognized skyrocketing prices. Nobody pointed to a retreat. But nobody denied one might be just around the corner.
That aligns panelists at Thursday's Florida International University event with most observers of Miami-Dade County's housing surge. While the three killer B's - balloon, bubble and bust - are in everyone's active vocabulary, so is that rosier "B" word, boom.
The rationale for the boom continuing is the nature of Greater Miami, which panelists see shielding us from trends including rising interest rates that will constrict housing demand throughout the US.
Real estate is becoming a more important global investment but so far represents less than 10% of all equity, attorney Neisen Kasdin told guests at FIU's MetroForum breakfast at the Miami City Club. The shift from stocks and bonds to real estate, he said, is paramount.
That capital, he said, is most likely to flow to cities such as Miami that are entry points to key slices of the globe. That distorts our market, he said, because most of our real estate buyers are not local.
Indeed not. Europe, particularly Germany, is investing major funds in South Florida properties due to the strength of Europe's currency, the euro, said Michael Cannon of Integra Realty Resources.
Foreign buyers account for more than 60% of South Florida real estate buyers, Mr. Cannon said.
But it's not just foreign demand. Wealthy US Baby Boomers, panelists agreed, target us for second, third and fourth homes.
In fact, according to Miami Commissioner Johnny Winton, this is the first time since the first wave of Cuban immigration in 1959 and 1960 that Americans other than New Yorkers have been moving into Miami in greater numbers than have been moving out. "They're from mainstream America," he said. "That segment has found Miami."
But will a bust follow the boom, as has happened here over and over?
"You can't use historical data to predict the future because we are in uncharted territory," Mr. Winton said.
Panelists cited four classes of Miami buyers - investors, speculators, end users and buyers of second, third and fourth homes. The investors buy and hold for appreciation while speculators try to flip for fast profits.
Without categorizing clientele, Dario Moreno of FIU's downtown Metropolitan Center hinted at distinct buyers at two Miami developments, each on the market for two years.
The Four Seasons' 186 units at 1425 Brickell Ave. were once the city's most costly. Dr. Moreno said that of the 46 sold so far, owners of only two had secured homestead exemptions - available only for primary residences - and only three had voters registered there. Developers reportedly just refinanced more than 100 unsold units. Two-bedroom units up for resale start at $1.1 million.
At the 199-unit NeoLofts at 10 SW South River Drive, Dr. Moreno found more than 30% of units have homestead exemptions and 46% registered voters. Resales of two-bedroom units, much smaller, start at about $380,000.
NeoLofts residents clearly work locally while Four Seasons buyers don't live there. But can we infer anything about booms and busts from markets at individual developments?
"We are having a recession with certain developers right now," Mr. Cannon said, "because they're out of business." But that's not a trend because others are doing well. Experienced developers, teams and lenders in the right niches are bound to succeed, but not everyone is in the right niche.
That's for sure: 11,000-plus unsold units sat on the market at the end of last year.
Meanwhile, more than 72,000 housing units are in the pipeline for the City of Miami, and tens of thousands are planned elsewhere in the county.
How much of this is speculative selling versus sales to investors, end users or second-home buyers?
"We don't know," Mr. Cannon said.
So are we in for a session with the killer B's - balloon, bubble and bust? Or is it to be boom? Will new condos succeed? Or will they, like Four Seasons units, remain on the market for years?
"Build 'em," was Mr. Winton's sage advice. "If they fail, we're going to end up with affordable housing."