The Miami Rental Market is HOT!
by: Ines.Hegedus-Garcia on August 27, 2007 23:15:39 14 comments »
I don't know what's happening in the Miami Rental Market, but I can tell you that rentals are flying off the MLS like hot doughnuts at Krispy Kreme!
If you look at real estate market trends this is a really positive thing. Historically, when there is more demand than supply of rentals, (rental vacancies go down), it's a sure sign that the real estate market is beginning to stabilize.
This is not just in the United States, this is the law of supply and demand - I picked an Australian Article that demonstrates the property cycle beautifully.
"The first sign of this change is in the rental market. The vacancy rate - that is, the proportion of vacant rental properties in the market - will fall and as a result rents will rise. With rising rents, investors are normally the first to be attracted back into the market.
As investors re-enter the market after a downturn, prices will start to push up again slowly. Home buyers see values rising and want to ‘get in on the ground floor’ of the next boom or, in the case of the first home buyer, before prices go beyond their reach. "
Does that mean that the Miami Real Estate Market is beginning to correct itself? Looking at history, this is a great sign....but don't expect a drastic change over night.
· http://www.PalmBeachRealEstateandLoans.comThings are certainly improving in South Florida- maybe not as fast as we'd like, but any improvement is fantastic.
Now, if the journalists would cut out the constant negativity......
Permalink August 29, 2007 09:39:04 · http://www.miamism.com/
Hi Marc - any improvement is welcome....I know you would agree and about those journalists.....bad news sells, good news is boring.Permalink August 29, 2007 10:30:20 · http://www.bawldguy.comKeep yer eye out Ines. Good catch.
Permalink August 29, 2007 19:01:50 · http://www.miamism.com/Hi Jeff - it's those small changes that let us know what the future brings - your article about Bernanke was right on!Permalink August 29, 2007 19:25:23 · http://www.longbeachrealestatehome.com/Here in Long Beach the sale of income properties has been flat for about 2 years, prices too high, rents too low. Our foreclosure rate is very high. I wrote an article a few months back indicating that these foreclosures will increase the demand for rental housing eliminating vacancies and driving rents up. This in turn will help support the prices of the income properties for sale.
With any luck it will also help stabilize the market some.
Good and timely piece.
Permalink August 29, 2007 19:56:13 · http://www.miamism.com/Laurie - I couldn't wait for the moment for the vacancy rate to be low - and I'm surprised we're here already (at least in Miami), hopefully the changes to follow will not occur at snail speed. Investors will be next.Permalink August 29, 2007 20:21:46 I would agree that there will be more activity now in the rental market due to the inaccessiblity of credit, but home prices are still in need of a serious correction...between late 2003 and early 2005 prices doubled - let me repeat myself...DOUBLED!
Where is the value? Basically, there is none...prices were driven up by the easy access to capital and the misguided ideas of many that they would be able buy a property to flip and make some easy money.
My feeling is that with recession looming, the overbuilding in the condo market and tight credit, we are in for at least 5 years of pain and a drop in prices of at least 25 to 50% to bring them in line with 2003 range, which was still 50% higher than 2000 prices.
Permalink September 24, 2007 11:45:19 · http://www.miamism.com/Luis - thanks so much for reading and commenting. The reality is that a lot of these condos were bought by speculators and not end users. By mid 2008 the condo inventory will triple in Miami - which can only mean prices dropping a great deal. I think you would agree that certain areas will remain strong, like oceanfronts because there's nothing like sand under your feet.As for the single-family market, it depends on location. Certain areas have not given in to the whole condo craze....Miami Shores, Miami Beach, BayPoint, Morningside....those are all areas that are holding values and now that the rental market is HOT, it can only be good for these particular home sellers.
I wish I had a crystal ball to tell you prices will drop to 2003 figures, but to tell you the truth, it will always have to do with who is buying, the location and the inventory.
Permalink September 24, 2007 14:22:42
On a sinking ship, any stray positive statistic gets catapulted to the top of the list. The reality is an undeniable one, Miami's skyline is filled with construction cranes as the current glut of condos goes unsold. Miami is not only far far from reaching the bottom, it is about to drop into a unfathonable precipice. For those looking for a bottom anywhere near these prices, hold on to your stomachs, the biggest drop in this unsavory roller coaster ride is yet to come. Look for a bottom around 2011-2012, at about 35 to 40% below today's prices. In terms of the rental market, mid 2008 will be the time when most speculators will start hitting their heads against the wall once again. This time, for not having rented before everyone else faced the music about resale market and decided to rent out their properties to wait it out.
Good luck everyone, that's what happens when you believe in demand fairy tales. Just ask the folks who learned this hard lesson 30 years ago. If it sounds too good to be true...well, you know the rest.
Oscar...
Permalink November 23, 2007 00:06:55 · http://www.miamism.com/Hi Oscar - thanks so much for commenting.
I do agree that the bottom of the "condo market" is not yet here and we still see prices dropping, especially when those buildings that in the process of construction are finished by mid to end of 2008. The condo inventory will triple then and we will see a lot of desperate owners (as we also see today).
This article though, deals with what we are seeing in the rental market today - not only condo but single-family homes. Properties are flying off the racks and rental prices are going up. Once you look at the historic statistics, including those from 30 years ago, you will see that this is the beginning of something good.
The question remains, how long will the down process continue for? 2011-2011 I think is a little steep - the market should be on the upswing by them (but at a very different pace).
Permalink November 24, 2007 16:17:11 Hello Ines,
I realize the rental market is picking up in Miami. However, it shouldn't be taken in any way as a sign of market stabilization. The very same thing happened in Japan right after the market started to correct. If sellers were taking that temporary rental market reaction as some kind of a sign, they would have had to wait another 8 years and another 40% price correction before seeing the bottom.
That's right, the japanese market correction took a full decade!, with lower prices during each and every year! Oh yeah, and with a rental recovery in year 2, which dissipated rapidly as rental inventories began to increase when sellers just couldn't get rid of their properties at any price.
If your sellers are not ready to absorb another 35% correction in Miami prices, they should take the next offer that comes their way. It'll be the best they'll see in many many years.
Miami has yet to see its worst years, and in terms of seeing an upswing, don't expect to see one when the market bottoms on 2011 or 2012. The market will remain flat for at least a couple of years before it starts showing signs of appreciation of any kind.
And with all due respect, I think real estate agents should be the VERY LAST PEOPLE on earth to give opinions on the direction of real estate markets. Not only are they largely to blame for the excesses of years past, they are also as ignorant about global financial trends as attendants at McDonalds. If I were you, I'd stick to selling "pretty" not to financial planning or the global macro economic trends that affect the pricing of every asset class INCLUDING real estate.
Oscar...
Oscar...
Permalink November 26, 2007 19:08:28 · http://www.miamism.com/Thanks for coming back Oscar and I do love a good debate - without of course having to get offensive.
I am not at all familiar with the real estate market in Japan - but I was making an observation based on historic real estate trends, although of course, this will always be an opinion.
The rental market has progressively gotten strong in Miami, starting with the beginning of the year (that's almost a year of a strong rental market which is only getting stronger...stats don't lie). As for how long or if there's a possibility of a downturn.....absolutely! There's also talk of a big hurricane wiping out the whole state of Florida and that would surely mark the end of our real estate market.
I do see a huge disparity between the single-family and condo market though, and that's important to point it out, because it seems like it's what you are focusing on.
As for blaming real estate people for the "excesses of years past", I find that argument a little ironic, considering that "real estate people" are not the end user - the price is set by what a buyer is willing to buy and a seller is willing to let it go for.
When I give "global financial trends" I back them up, just like I did this brief article which just says......A HOT rental market is a good sign....nothing more.
As for our background and education, I don't know if you have taken the time to look through our site and see that Rick has a masters degree in Accounting and I am an architect. We are not economist but we do see ourselves as an "educated bunch", who feel confident about giving realistic market trends facts to our customers. If we cannot give an opinion of value on real estate to our own clients, then who can?
As always, thanks for the discussion, I love when people pick on me and I appreciate the time you've taken to include your opinion.
Permalink November 26, 2007 19:44:41 · http://monikamcgillicuddy.com/wordpress/You have a good debate going. In the halls in Vegas at NAR the talk was 2010 - 2011 before we start to see any improvement....speculation I'msure but who really knows.
Permalink November 26, 2007 20:07:25 · http://www.miamism.com/Moni - I think jumping at a "date" is just as bad as all the speculation buying that went on in the Miami condo real estate market back in 2004-2005. I think our best bet is to look at those triggers that can show a change based on historic trends. It's interesting that it was discussed at the NAR convention, considering the local nature of real estate markets.Permalink November 26, 2007 21:13:16This post has no comments awaiting moderation.
