Last week, our Licensed Broker David Landau and Realtor Wenjun Lin were interviewed by Zongkai Wang from Xinhua News Agency, the largest news provider in China, talking on the boom and expansion of Miami real estate market.
5 years after financial crisis, housing market boom back to Miami
by Wang Zongkai
WASHINGTON, Sept. 19 (Xinhua) — Driving his new electric Tesla along Bayshore Drive in a Miami neighborhood, real estate broker David Landau was cheery and satisfied when picturing his future golden years in the Sunshine State of Florida.
Landau, though in his late fifties, is not planning to retire anytime soon.
Miami, a city located on the Atlantic coast in southeastern Florida, is experiencing a fresh wave of the housing boom, also seen elsewhere in the United States.
“Every morning I put my breakfast on my office desk, and it will still be there when I feel hungry for lunch at noon,” Landau told Xinhua. “Sometimes I only have one meal each day, as there is always so much work to do.”
Amid an increasing demand of Chinese buyers, Landau partnered with a Chinese realtor Wenjun Lin in setting up a special real estate team with all members coming from China to serve this niche market.
Chinese students in Miami were among the first clients of Landau and Lin. The rental market is so strong that more Chinese students preferred to buy a condo rather than rent one as they have done before, said Lin.
“I bought one condo last year, which is 900 square feet and cost me a little more than 140,000 dollars,” Susan Su, a Chinese student at University of Miami, told Xinhua. “The condo is now worth about 200,000 dollars.”
The average home price in Miami spiked 7.19 percent in the second quarter this year, according to the latest Samp;P/Case-Shiller FL-Miami Home Price Index.
Su is a lucky investor, so is Landau, who not only helps his clients buy properties in Miami but invests for himself.
In 2010, Landau purchased a condo for 155,000 dollars and in the same building a condo almost identical is sold for 345,000 dollars a month ago.
“Every morning having coffee, I high-five with my wife,” said Landau. “Even better, I have another four condos and a single- family house which I bought from 2010 to 2012.”
Landau’s fortune is dwarfed compared with the institutional investors like the real estate investment trusts (REITs) and hedge funds. They pool investors’ capital and then invest collectively in the real estate market.
When the housing bubble burst in 2007, REITs accumulated huge amounts of capital and waited for the bottom of the price decline.
Andrea Heuson, professor of University of Miami, told Xinhua, ” This time money came back to the market much more quickly, and when money starts to come back into the market, that stops the price decline.”
The home prices in Miami bottomed out in 2009. Five years after the financial crisis, the housing sector is climbing upwards and way ahead of the overall U.S. economic performance, as the latter expanded at a modest rate of 2.5 percent in the second quarter and the unemployment rate is still painfully high at 7.3 percent in August.
Consequently, as most local Americans in Miami haven’t fully recovered from the crisis, international investors are filling the void.
“Ninety percent of my clients do not live here at all,” said Miami-based realtor Andy Katz. “I work everyday in my underwear and a T-shirt in front of my desk. I am doing video conferencing with all my clients. We run numbers together.”
“Then I go out and shoot the video of five properties that they may like. If there is one that they really like, they get on a plane, but most of my clients do not get on a plane, they just say ‘hey I am going to purchase let me wire the money,’” he said.
The inflow of foreign investment into Miami has been significant. Some investors are buying 20 to 40 condos in a building and then renting them out to generate positive cash flow.
“Real estate only has value subject to its economic use,” said William Hardin, director of the Hollo School of Real Estate at Florida International University.
The U.S. real growth rate is now in a 2 percent to 3 percent range, which limits property value appreciation and makes renting a more viable option. Investors desire for consistent positive cash flows and the likelihood of positive appreciation.
But the more important reason that rents have increased in Miami is a lack of rental inventory. The imbalance between supply and demand is driving rental prices up.
“We have not built any new condo or apartment buildings here in Miami in five years,” said Hardin. The main legacy of the sub- prime crisis was foreclosure and short-sale properties. Many of these were sold at discounts between 25 percent and 45 percent from 2007 prices.
There are now very few unsold units from the boom period and a mismatch of supply and demand is notable in many areas.
The months of inventory, number of units for sale divided by sales per month, are now less than six months. Back to the low point, real estate experts said the inventory was going to take many years to clear.
The shortage also prompted developers to sell pre-construction properties.
In general, buyers need to deposit 20 percent of the purchase price with the developer at contract signing and put up another 30 percent once the construction reaches the top floor as opposed to 5 percent or 10 percent in the old days.
“Seventy-five to 80 percent of our projects are being sold right away in reservation,” said Karine Carvalho, sales representative for several pre-construction condo projects.
The reservation usually lasts for four months before the developer breaks the ground. It means individual owners are paying collectively to build the condo project, so it is less risky for the developer and less risky for the market.
“This time we will not have the same problem we had in the previous crisis,” said Katz. “Most people are purchasing with cash. There is no lender, no financing, no possibility of foreclosure.” WebErik
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