South Florida Real Estate Trends: What to Watch for in 2016

By Sunny Isles Real Estate Expert on February 2nd, 2016

Miami real estate for sale

In virtually all industries, January is the time to look into the future and make a prediction regarding what the next 12 months has in store. This allows businesses and industry leaders to take the right steps so they can capitalize on the trends that are anticipated.

If you are interested in the South Florida real estate market (view website here), then the trends to watch for in 2016 that are highlighted here.

The Rental Market will Start to Stall

After the 2007 crash of the condo market in South Florida, one of the main benefits that residents saw was cheap rental rates. This was the result of easy financing and overbuilding. At that point in time, owners of new construction were converting condos and slashing lease prices to help and attract tenants, which would generate more revenue. When the units were inhabited, the economy began to stabilize.

This also resulted in landlords increasing prices at an aggressive pace to get back some of the money that was lost. The higher rental rates that are now seen in South Florida have resulted in quite a bit of new construction in 2015 and this is a trend that is going to continue for, at least, the next three years. With more rental units available, it will likely mean lower costs for rent in the near future unless the economy in South Florida adds an industry that will result in higher paying jobs.

Increase in Real Estate Commissions

Due to the supply of resale and preconstruction condos in Miami being high, developers are at a point where they need and want to sell the planned and existing units. The last element that most are willing to revise is the price. Watch for commissions in the real estate market to increase in 2016 thanks to an early attempt to sell the units prior to having to reduce prices.

Cancellation of Proposed Projects

Since the current real estate cycle started in 2011, the plans for almost 20 new condo towers in South Florida, which hold over 2,800 units have been changed. These are projects that were revised for a number of different reasons, which range from the changing market conditions to the developers being able to flip the land to get a big return.

Chances are there are going to be more proposed projects that will pivot if they do not meet the pre-sale requirements.

Financing for Mortgages is Increasing

The current real estate cycle in South Florida has mainly benefited because of the cash investors that are coming in from out of town and buying up the property with the intention of renting them out to the local residents who are unable to purchase due to financial limitations.

The main question that needs to be answered is whether or not 2016 is going to be a time of transition to a period of slower growth for the real estate market in South Florida.

December saw Impressive Home Price Growth for Miami & South Florida Real Estate

By Sunny Isles Real Estate Expert on January 28th, 2016

Miami real estate for sale

While the residential real estate market in South Florida is experiencing a slight battle with the global economic crisis, this has not put a damper on housing prices in the region. These prices are steadily appreciating and there is no end in sight for this upward trend.

The prices for Miami and South Florida homes grew by 8.1 percent year over year in November. This data was gathered from a report published by S&P/Case Shiller.

In Palm Beach County, the median price for pre-existing single-family homes hit $305,000, which was an 11 percent increase from the previous year, even more than the average of 8.1 percent. However, there were several other areas that saw this kind of growth, as well. Broward County had a median home price that was also $305,000, which represents a seven percent increase from the prior year. This was the first time that either of these county’s crossed the threshold of $300,000 since over the summer.

Faster Growth in SoFla

This means that the tri-county area saw a faster pace of price growth than almost all of the remainder of the United States. In fact, the only areas that were ahead of South Florida were Dallas, Texas at 9.4 percent, Seattle, Washington at 9.7 percent, Denver, Colorado at 10.9 percent, San Francisco at 11 percent and Portland, Oregon at 11.1 percent.

It is not the entire economy that is suffering. In fact, the consumer portion, which includes automobile sales and housing, was actually quite strong in the previous year. In fact, this improved economy has provided homebuyers with the confidence necessary to actually enter into the market; however, there are some who have been less than overjoyed with the options available, specifically in the range of $150,000 to $400,000 homes. Thanks to strong sales in the past few years, a large number of listings have been depleted all throughout the region. The current owners are still unable or unwilling to test the market, with some not understanding what they could actually get for their home currently.

Economic Struggles in Miami

However, other parts of the economy are not doing quite as well. For example, businesses in the energy and oil sectors have begun to suffer from the significant drop in oil costs over the past 18 months. The strong buying power of the U.S. dollar is also resulting in slower exports. Unfortunately, the housing market is not big enough to help and offset these weak areas.

In December, the national housing market also saw a number of similar gains. In fact, prices increased by 5.3 percent year over year, which accelerated quite a bit from the 5.1 percent jump seen in October.

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Lions Gate, Domino Sugar, and Goldman Sachs Big Wigs Purchase in Faena House

By Sunny Isles Real Estate Expert on December 21st, 2015

Faena Condo Miami Beach

Faena House, the first of four ultra-luxury condo towers being constructed on Collins Avenue in Miami Beach, represents the ultimate in extravagant living. With its modernized lines and amenities like a state-of-the-art fitness room, multiple pools, beach club, and children’s playroom, it’s no wonder the project has attracted prominent buyers like Lions Gate Entertainment chairman Mark Rachesky.

Rachesky, who also heads MHR Fund Management – a $6 billion investment company – closed on his brand new pad in September, for the tidy sum of $13.5 million. Unit 11-BD now belongs to the entertainment mogul, according to public deed records. Earlier this year Rachesky sold a fifth of his holdings in Lions Gate for a reported $320 million, bringing his stake in the company from 36% to 28%.

An Elite Group

Rachesky joins an impressive group in his purchase at Faena. The chairman and CEO of Goldman Sachs, a global multi-billion dollar investment firm, has also bought into the luxury condo tower. Lloyd Blankfein, along with wife Laura, purchased unit 8-A for $9.5 million. Blankfein became CEO of Goldman Sachs in 2006, after joining the company in the early ‘90’s. According to Bloomberg the investment kingpin is now worth over $1 billion. Blankfein is rumored to have been one of the first buyers in the Faena project.

Yet another unit in the exclusive building solid to Jose F. Fanjul, Jr., manager of Sobe 8-C LLC. The Fanjul brothers, owners of Fanjul Corp., play a major role in the American sugar industry; subsidiaries of the company include Domino Sugar, Florida Crystals, Redpath Sugar, and the California and Hawaiian Sugar Company. Florida Crystals itself has become involved in development, breaking ground last year on a 395-unit project in Delray Beach called Atlantic commons.

The Finer Things

Faena House has been drawing much attention in the real estate world of late, particularly when the $60 million penthouse sold earlier this fall. The 12,000+ sq. ft. residence, which features nearly 10,000 sq. ft. of outdoor space (complete with rooftop infinity pool) was purchased by Citadel CEO Kenneth Griffin.

The rest of the building, while not quite as over the top as the penthouse, still offers the luxuriant beachfront living that is becoming all the rage as Miami developers continue to build up high-end condo inventory in SoFla. Every unit has a wraparound terrace that the developers call an “alero”, floor-to-ceiling windows, marble flooring, Miele appliances, and an automated touchpad that operates the thermostats, lights, motorized shades, and more.

This first completed complex is just the beginning. The developers, a Delaware company led by Alan Faena and Len Blavatnik, now turn their attentions to the construction of Faena Hotel Residence, Faena Versailles Contemporary, and Faena Versailles Classic (see website here). The hotel will feature 13 penthouse residence units, while the Versailles buildings will house 41 and 22 condo units, respectively.
Questions have been raised about whether the projects can attract enough upscale buyers to support such extravagant developments. Considering Faena House was sold out before it even opened, the complex’s future looks pretty bright.

How Miami’s Economy Has Become Dependent on Brazil

By Sunny Isles Real Estate Expert on December 6th, 2015

Miami real estate Brazil

There are more than 44,000 Brazilians living in Miami, not including tourists. Brazilian buying power has increased over the last several years, giving a boost to Miami’s economy. Real estate plays a pivotal role as 11% of all international deals are with Brazilians. They are also known to spend more on average per property according to NAR research.

Miami-Brazil Connection

South Florida by the Numbers is a column that reports real estate statistics in Miami (see Miami real estate website here). This column reported on the “Miami-Brazil Connection” and its future in light of Brazil’s economic downturn.

Here are a few of those statistics:

• Brazil is ranked number one for searching for real estate online in South Florida. In the last 18 months, Brazil has topped the list for all but three months. Brazilians spend the most on South Florida properties, averaging $495,000, compared to other international buyers.

• Brazil’s currency is dropping in the exchange rate. According to the Miami Harold, investors may begin to look elsewhere for properties that are less expensive. Brazil’s currency, the real, has dropped by 30% since last year. The Dow Jones is estimating that Brazil’s gross domestic product will decrease by 1.01% in 2015.

• There is an amazing amount of millionaires coming out of Brazil each week. Twenty-two new millionaires each week and many are finding homes and opportunities in Miami. It was only five years ago that Miami was in the real estate crisis and Brazil’s economy was beginning to grow. In 2015, Brazilians account for most of the cash purchases made in real estate in Miami.

• Giraffas Brazilian Grill has ten franchises in Florida with a goal to bring 150 stores across the nation by 2020. This fast growing company is helping to boost the economy in Miami. Giraffas has given Re/Max Advance Realty the exclusive power to handle lease negotiations, site selections, and market studies, among other tasks crucial to opening franchises during a dramatic growth period.

• The New York-based company, HFZ Capital Group, purchased the Shore Club for $175.3 million. Plans to reopen the hotel and residences are underway. The opening is set for the end of 2017 under the new name Fasano Hotel and Residences. This will be the first hotel opened in the United States by this brand as they currently own and operate four hotels and fifteen restaurants.

Brazil’s Economic Future

Brazil’s economic upturn helped to rebuild Miami after the real estate crisis. However, experts worry that Brazil’s upcoming economic troubles may fall over onto Miami like a domino effect. As President Dilma Rouseff faces impeachment and the economy falls into a recession, the unemployment rate skyrockets in Brazil.

The Miami Harold reports that in the first nine months of 2015, as many as 657,761 people lost their jobs. Even worse, it is forecasted that 1.5 million more Brazilians will lose their jobs in the remainder of 2015.

Miami Home Sales Break Records over the Summer

By Sunny Isles Real Estate Expert on November 24th, 2015

Miami homes for sale

This past June was a record breaker for home sales in Miami. 1,390 single-family homes were sold. This was a record-breaking month as the highest month totaled 1,310 in June 2005. The month of July 2015 closed almost as many with 1,354 homes sold.

This is exciting news in the market as the prices for these homes have continued to rise year-over-year. Currently the price for a single-family home in Miami is up 8.6% and up 2.6% for condos. A single-family home that may have sold before for $255,950 is now $278,000. Condos that sold for $190,000 will now sell for $195,000.

Miami condos this summer also saw an increase in sales growing 4.8% year-over-year. 1,471 condos sold in July compared to last year’s number of 1,403.

This rise in home sales is thought to be from the city’s improving job market and low mortgage rates. Christopher Zoller, the 2015 Residential President of Miami Association of Realtors, refers to Miami as being “a global city with the second largest financial hub in the country.”

Mortgage Loans

The interest rate is down for a 30-year fixed rate mortgage. In July 2014, the rate was 4.13%. In July 2015, it had dropped to 4.05%.

The Miami Association of Realtors had this to say about mortgage loans in Miami in a recent report, “Despite the rise in sales, access to mortgage loans for existing condominium buyers remains limited. The lack of Federal Housing Administration loans for a large number of existing Miami condominium buildings is preventing further market strengthening.”

“Of the 8,523 condominium buildings in Miami-Dade and Broward Counties, only 29 are approved for FHA loans, according to statistics released earlier this year from the Florida Department of Business and Professional Regulation and FHA.” The statement goes on to report that only 0.0034% of local condos are approved for FHA loans. The U.S. average is 30%.

More Affordable Condos

Although the prices have seen increase year-over-year when compared to condominiums in global cities, Miami’s condos are quite affordable. A Miami condo which sells for $149,900 is comparable to condos in London ($960,840), Hong Kong ($776,280), and New York ($1.6 million).

The homes tend to sell near asking price. The Miami Association of Realtors reports that the average amount of days on market is only 41, compared to 43 in July 2014. The original list price received was 95.6%. As for condominiums, the days on market remained at 59, the same as July 2014 and the average list price received was 93.8%.

Cash Buyers

Cash purchases accounted for 48.2% of total home sales in July 2015. The national average is 23% in comparison. Miami’s number of high cash purchases is due to the fact the city attracts international buyers that tend to purchase properties in cash, according to the report.

The outlook for the housing market continues to be bright as increases in home sales continue despite the lack of FHA and price increases.

Faena House Attracts Big Name Buyers

By Sunny Isles Real Estate Expert on November 13th, 2015

Faena Miami Beach Penthouse

In early September the first of the four highly anticipated Faena condo towers (see all available Faena condos for sale here) reached completion. Faena House, or the 3315 Tower condominium, stands 18 stories and houses 44 ultra-luxury units. Transactions for the project started to be recorded on September 3, according to deed records in Miami-Dade County.

It wasn’t long before names of buyers started coming out in the world of real estate news. It certainly comes as no surprise that many of those buyers are highly recognizable players in finance and other high-powered industries.

Timeline of Early Faena Sales

On September 25, real estate publication The Real Deal reported that the rooftop penthouse at Faena had sold for an astonishing $60 million, a price that shattered the existing Miami residential record by $13 million. With eight bedrooms and 9900 sq. ft. in exterior living space alone (featuring a 70 ft. rooftop infinity pool), the 12,516-sq.-ft. luxury pad went for just under $4800 per sq. ft.

By early October TRL learned that the penthouse had been purchased by Kenneth Griffin, the billionaire hedge fund manager and CEO of Citadel, an investment company. This revelation shouldn’t have come as a surprise as Griffin has reportedly spent nearly $300 million on luxury real estate in New York, Chicago, and Miami Beach over the past couple of years.

On the heels of Griffin’s massive purchase came the sale of unit 9-B, to Brian and Randye Kwait of Greenwich, Connecticut. Brian Kwait is one of the founders of Odyssey Investment Partners, a private equity firm that has raised over $5 billion in funds since its inception in 1998. The Kwaits will enjoy 5400+ sq. ft. of luxury, including four bedrooms, five bathrooms, and an elevator that serves as the unit’s entrance.

On September 30 TRL revealed that yet another one of Faena House’s premium condos had sold. This one, on the sixth floor, was purchased by Aventura-based company ABF6A LLC for $11.75 million. Unit 6A boasts four bedrooms, six bathrooms, and more than 4700 sq. ft. of living space, plus a terrace nearly a third the size of the condo itself.

TRL again reported on a Faena buyer on October 12, this time the CEO of a London-based transportation company called Addison Lee (a competitor of Uber). Daryl Foster, also a shareholder in Infinity Creative Media Ltd., shelled out $8.8 million for a handsome 5466-sq.-ft., four-bedroom, five-bathroom piece of the Faena pie. Unit 7B has 4165 sq. ft. inside and 1301 outside. Foster’s address on the deed was listed in Monaco.

Faena Miami Beach condo for sale

The list of elite buyers into the luxury condo building continues with names like Mark Rachesky (CEO of Lions Gate Entertainment), Goldman Sachs chairman Lloyd Blankfein, and sugar mogul Jose F. Fanjul, Jr.

With this phase of the project sold out, developers Alan Faena and Len Blavatnik turn their focus to the remaining towers – Faena Hotel (the former Saxony Hotel), Faena Versailles Contemporary, and Faena Versailles Classic.

Second Quarter Sees Growth of Home Sales in Miami

By Sunny Isles Real Estate Expert on October 3rd, 2015

Miami real estate for sale

There is no question that Miami is one of the hottest cities when it comes to real estate, and it has been doing quite well every since the economy and the real estate market started to recover. They city and surrounding area has seen a nice increase in the number of sales, as well as the price of homes, in the second quarter of 2015 when compared with the previous year.

Miami Is Still the Place to Buy

During the second quarter (April, May, and June) of 2015, there were 3,913 homes sold in Miami. This number marks an increase of 7.2% over the same months in 2014. During that time, the median home price happened to go up as well. It rose 10.6% from $245,000 to $271,000. Normally, when the prices go up by more than 10%, you don’t see the number of sales go up as well. People tend to slow down and consider other areas. Of course, Miami doesn’t have that trouble at all.

People want to live in Miami, even if they might be paying more than they would have a year ago. The vibrant city, the proximity of the beach, and the fact that the real estate value has such a potential to keep rising is encouraging more and more people to buy in Miami. Some of the buyers are from the United States, but there are a number of foreign buyers as well. Canada and China are just two countries that have a lot of residents looking at Miami property.

Another thing to keep in mind is that the number of homes offered between last year and this year has remained about the same. Even though there is approximately the same number of homes on the market, the sales have picked up, and that means that buyers are going to be competing for properties. Naturally, this has the potential to push the prices higher, as it becomes a seller’s market.

Both buyers and sellers are confident in the market, and that is really helping to push the sales to the next level. Considering the fact that mortgage rates today are actually very low, and that the price of the homes, even though they’ve been rising, are still affordable for many buyers, and it is easy to see why the sales have been growing this year.

While the single-family homes have been doing very well, the sale of condominiums has slowed down slightly. According to reports, even though the sales prices for condos increased, the number of sales dipped by about 1.8%. New listings for condos dropped as well, but that certainly doesn’t mean condos are necessarily struggling.

The Miami condominium market is faring decently when compared with many other areas, and with the increased interest in Miami, it is possible that the sales will pick up between now and the end of the year. With all that Miami has to offer, it is no wonder the desire to live in the city is continuing to rise.

South Florida Home Price Growth Is Slowing

By Sunny Isles Real Estate Expert on August 20th, 2015

Miami real estate

While the homes in South Florida have seen nearly continual increases over recent years, a new analysis by RealtyTrac shows that those rises are starting to slow. The analysis showed that while home prices increases grew by 20 percent year over year in 2013, they dropped to only 10% in February of this year.

While Pompano Beach and Fort Lauderdale also saw the same drop to only a 10% increase, this is actually reflected on a national level as well, with other major cities seeing the same rates of slowing appreciation. Overall, however, some experts feel that this decline is not necessarily a bad thing.

Potential Issues with Continued Increases

Ob Jacobi, who is the president of Windermere Real Estate in Seattle explained that “if homes were to continue appreciating in the double digits for too long, we could run into the same boom/boost market of years past”. Considering that the wages have not kept up with the increases in home prices, this may be a very true statement in Miami. The report also indicates that future expectations for home prices is that they will rise only single digits, rather than the double digits that realtors and investors have come to expect in the area.

Other Statistics

The report also provided other notable statistics as well. While average home prices have seen a decrease, those that have a $1 million price tag or higher have actually increased in the percentage of sales by 4.25%, which is higher than the previous year’s 3.46%.

The report also showed a few interesting changes in median home prices and foreclosed properties. As of February, the US median home price was $183,000, which is an increase of 14% over the previous year. Foreclosed property prices also increased by 17%, leading to an average price of $127,000. This jump shows that the previous savings seen on foreclosed properties after the 2013 mass distressed buying is waning, which will also help slow appreciation levels down to single digits as home buying returns to a more even market.

New Highs in Other Cities

While Miami and a majority of other major metropolitan areas saw decreases in home prices, there are others that fared much better. Denver, Colorado, San Jose, California and Austin, Texas all saw historic median home price increases over the last year.

Increase Drivers in Miami

The reason that there is not much concern over the 50% decrease in Miami is simple. The boom in Miami luxury condos and residences, many of which were purchased with foreign cash, is one of the main reasons the home prices were increasing so dramatically. As these multi-million dollar homes were moving in and being sold, it was driving the prices of single-family homes up, as well. This was since many middle-class residents started moving further inland.

Even with these on-going changes, there is little doubt that the Miami real estate market is still growing strong, and as far as luxury homes go, doesn’t show any sign of slowing in the near future.

Foreign Real Estate Investors in the US

By Sunny Isles Real Estate Expert on August 13th, 2015

Miami condos for sale

The top five foreign retail investors in United States real estate have invested over $17 billion as of the first quarter in 2015, but the numbers show that Singapore is overall leader.

First Quarter Investments

Real estate in the US has become a major investment for foreign countries, with Manhattan proving to be the most popular choice. The current NGKF Capital Markets report shows the breakdown of the more than $17 billion, and the results are surprising:

• Germany – $1.4 billion
• Australia – $1.7 billion
• China – $2.5 billion
• Canada – $3.6 billion
• Singapore – $8.1 billion

Singapore’s massive investment is staggering on its own, but considering they did not make it to the top five list at all in 2014, these rankings become even more impressive. At the current investment pace, and with Singapore’s stunning investment increase, 2015 could prove to be a record year for foreign real estate investment.

Manhattan Foreign Investment

Even though Singapore has seen a drastic increase in their US real estate investments, they don’t come close to any of the other major players when it comes to investing in Manhattan. A majority of the top five, as well as several other countries, spend their money in Manhattan, which made up 31.6 percent of the overall foreign investment capital. Over the past 12 months, investments in the city are as follows:

• Malaysia – 2.4%
• Germany – 3.3%
• Qatar – 3.7%
• Japan – 5.3%
• Brazil – 5.8%
• Norway – 12.3%
• Canada – 25.6%
• China – 26.6%

China and Canada are the foremost investors in Manhattan, and they have made a number of lucrative investments in premier skyscrapers in the city. January saw the Ivanhoe Cambridge investment firm spending $2.2 billion on the 3 Bryant Park office building in a deal with Blackstone. During the month of February, the Chinese Anbang Insurance Group closed a deal on the iconic Waldorf Astoria for $1.95 billion, making it the largest single Manhattan property investment for China.

Record New York Investment Levels Expected

According to the Preqin research firm, sovereign wealth funds have already shown a major increase in investments in the past year, with a staggering $6.31 billion growth. New York’s, and most importantly, Manhattan’s, popularity as an investment destination for sovereign wealth funds has already climbed to over $2 billion within the past 12 months. Those figures are expected to continue rising.

New York’s popularity as an investment destination is based on two things: its stability overall, and its ability to soak up massive sums of money quickly. Recent purchases in the Big Apple, such as the Norway-based Norges Bank Investment Management investing $1.74 billion in office buildings and the $337 million investment by Abu Dhabi Investment Authority on the Ian Schrager New York Edition Hotel, are impressive. These investments, along with others that are currently in negotiations, show that there is plenty of potential for a major increase in the amount of money that could be heading into New York in the coming year from foreign investments.

The Retro Revival of MiMo – The Miami Modern Biscayne Boulevard District

By Sunny Isles Real Estate Expert on July 31st, 2015

Miami real estate

MiMo is the name given to the Miami Modern Biscayne Boulevard Historic District, but it also describes the architecture found in the area between 50th and 77th streets that were built between the late 1940s and early 1970s as well. While the motels lining this strip were once the chosen locales for prostitutes and drug dealers, it has now become one of the hippest areas in Miami’s Upper Eastside. (See properties for sale in the area – http://www.sunnyislesmiamirealestate.com/Design-District/)

Leading the Way

The force behind this once downtrodden area becoming the MiMo hotspot it is today is former Miami Beach residents who’ve decided that home ownership and a yard to call their own is a better option than a beachside condo. Along with them are plenty of boutique and shop owners, modern office spaces, trendy new restaurants and period hotels that are transforming Biscayne Boulevard.

MiMo Players

There are a number of buyers and developers snapping up spaces or putting down roots in the MiMo district who want rehabilitate these retro locations, and change the perception of Biscayne Boulevard in the process. One of the major players in Avra Jain, whose purchases and renovations started with Vagabond Hotel. Since that purchase in 2012, she has spent over $12 million on real estate in the area, as well as untold renovation costs.

Greenstreet Real Estate Partners, which is a real estate investment fund valued at $1.5 billion, is another developer making strides in the area, with over $14 million spent on office properties and retail space.

The MiMo Attraction

So why are all these developers and transplants choosing a retro-revival of the Miami Modern District? Because the current costs of buying and renting are still a relative bargain. However, with the influx of interest in the area, rent has gone up as well for retail space. With a 50% increase throughout the area over the last three years, it has left some worried that the increased prices and the costs of renovation will eventually drive rents too high, and force businesses to close that can’t charge enough to offset the increasing costs.

Others in the area disagree with this fear, as they believe that the purchases are based on actual business plans, rather than simple speculation, and a desire to return Biscayne to its former glory.

Changes from 51st Street to 77th Street

Biscayne Boulevard has become an investment retro-revival from 51st Street all the way to 77th, with investors and developers truly trying to make a difference in the area. In addition to Jain’s Vagabond Hotel, there are 16 other major properties along the Boulevard that are either in the process of being renovated, have already undergone renovation, or are slated for building to start in the near future. All of this shows that there are plenty of people and residents that are discovering MiMo, and doing their best to return it to something more than its former glory. With all the changes, and the numerous businesses and developers flocking to the area, it’s clear that this is one area that is worth watching and considering.