The Q1 2020 Miami Real Estate Report: The 5 Best Miami Neighborhoods for Great Deals
Part 2: Five Submarkets of Miami that show weakened performance allowing for opportunity!
The 5 Best Miami Neighborhoods for Great Deals
Welcome to Part 2 in our 8 Park Series of the ‘Q1 2020 Miami Real Estate Report and Forecast.’ This blog addresses the neighborhood sub-markets that have not only weakened in terms of: a dropping dollar per sqft sales prices, days on the market to sell or ballooning inventory, but MOST IMPORTANTLY are fundamentally desirable neighborhoods to live in! With other words these are the 5 best Miami neighborhoods for great deals. It is often hard to get deals in markets that are very strong – and jumping on the bandwagon with everyone else with yield the same results as everyone else. We sometimes forget that very strong performing neighborhoods already have their financial upside baked into the price. If you want to vulture a really good deal you need to bet against the market and be the minority not the majority. As Mr Warren Buffet philosophy of “When others are fearful be bold and one others are bold be fearful”. This does not mean you have to act with total market recklessness and buy in markets that are undesirable, it means finding deals in fundamentally good buildings in soft markets that will come back strong.
With the highest amount of inventory or the biggest drop of price per SqFt off their previous peak sales figures (most commonly seen in 2015) these neighborhood submarkets are in a weakened state economically. If they are a good buy pre-Corona you can imagine the opportunities that will exist after! Much as the lion will focus on the weakest pray to take down, so buyers and investors can focus on these areas too. This does not mean there won’t be opportunity elsewhere, but it is a good start. Understanding our analytics dashboard will help you move into other areas and show you how to identify not just those areas, but specific properties too. Consider this a master class for ‘digging up real estate gold‘.
Supply demand performance: There were just 22 sales in the period between Oct 1st 2019 and March 31st 2020. As of 1st April 2020 there were 232 current active listing. What does this actually mean? It means just an average of 3.6 sales per month in a market of over 200 listings. Simply put this is a very weak market that hugely favors buyers. Inventory is at 63 months which means that it will take just over 5 years to sell all the units currently listed in the current market at the current speed (absorption rate is 3.6 sales per month). The entire market shows an inventory of 54 months for that neighborhood (as shown on below screen shots) but specifically within this price range we see much more at 63 months, which gives us more options to choose from relative to the sales. The conclusion is that sellers will certainly be feeling the pinch of the current market and this can only increase.
What sold of recent? 3 bedroom units are the most likely to sell at this price point. Sales at: Jade, Carbonell, SLS Lux, Bristol and Asia have been the top choice sales.
Price per SF Costs for units and the story so far: It is useful to know how the price per SF in the Brickell condo market between $1M and $2M has moved and changed over the entire economic cycle. As we look poised to drop into the beginning of a new era of the economy, reflecting back on the last 12 years can be supremely useful. We know there were 22 sales in the last 6 months, exactly one year before we saw 17 for the same period, but this does not tell us enough. As per the first table below we can see the previous bottom of this market was 2010 at $491 per sqft. It rose to a peak in 2015 then dropped and stabilized in 2017, 2018, 2019 between $630 and $640 per SF. In 2020 we saw a sudden jump to $711 per SF, but this could be an exception with the few sales coming from bigger units in well-recognized buildings such as Asia, Bristol Tower and Jade. Aside from the dollar per sqft movements, the velocity of sales in the market also tells a story. If you look on the top right corner of the screen on the first dashboard screenshot you will see how the peak of sales occurred in 2013 where there was 89 sales of Condos between $1m – $2m, this dropped to a lowest point of 41 sales in 2016, it then interestingly rose again as prices dropped. What do I take away from this? Buyers like Brickell – at the right price. Its a great, vibrant and developed neighborhood to live with a good number of very appealing condos, great restaurants and better shopping and entertainment than ever before, and it is certainly not going out of vogue. Given the patterns over the last 12 years where can we expect to step back to?
Forecasting and identifying the deals: The ultimate question of any buyer is; “How do I identify a good deal?”. In my experiences its going to work best to first identify the Condo / Condo unit you like then allow us to help you work backwards through the economic cycle performance of that Building or even that line in the building to a point in time that we think could be the new ‘bottom of the market’. We will factor in current inventory, the % discounts achieved historically and even the $ per sqft in relation to the peak and trough of not just the building but of the neighborhood market it sits in. This is ALL now possible with our advanced Condo dashboard as seen below. In part 4 of the report we discuss the best condos to vulture a deal in and this will include a number of Condos in Brickell – so make sure you read that section too!
When it comes to your search it is also worth mentioning that with pressure in the economy we could well see Condo product that has previously been sitting comfortably in the $2-2.5m range (big units and units at elite Condos like Four Seasons) coming into the $1-2m range.
Supply Demand Performance. As of the 1st April we have on recorded 500 active listings through the MLS. A total of 113 closed sales in the last 6 months, and 112 Sales in the same period one year before. With the current stats we calculate an inventory of 27 months, this means that if the current inventory remains static it would take us close to 2 years 3 months to sell all the units. The entire Edgewater market across all price points show 55 months of inventory. In short a balanced market would be around 6-9 months, so we are well are truly in a buyers market. Also do not forget that Edgewater is part of the same system that we refer to as the ‘Urban Core’ which includes Downtown and Brickell and these markets also have the same systematic characteristics of high levels of inventory within the $0-$1000,000.
What sold of recent? From the 113 sales in the last 6 months, 55 of them were 2 beds, 49 were 1 bed units or studios, 9 were 3 beds. If you drill down into the newer buildings built post 2015: One Paraiso, Paraiso Bayview, Biscayne Bay, Icon Bay and Aria on the Bay, these blend out at $463 per sqft, everything else that is older and blends out at $320 per sqft sold.
Price per SF Costs for units and the story so far. This market is highly affordable with the average sale price being $368 per SF, as mentioned above the newer Condos (post 2015) sold higher at $463 per sqft and everything older sold out on average at $320 per sqft. These prices have remained stable over 2019 and Q1 2020 and they are up from 2018 ($360 per SF) and 2017 ($350 per SF). This low starting point has made it good value over the rest of the urban core: Downtown which is around $350 per SF in 2019/Q1 2020 and Brickell at $390 per SF in 2019/Q1 2020.
The appeal of Edgewater is a fast growing neighborhood with unbelievably breathtaking views over the inter-coastal waterways. Combined with absurdly easy access to Miami’s food and shopping meccas: Wynwood and the Design District. The actually velocity of sales has increased over the last couple of years, so the appeal of the neighborhood is definitely there and it has most likely stolen purchase traffic away from downtown, which saw not only a drop in sales but a drop in prices per SF, resulting in Edgewater over taking Downtown. With 257 sales last year, sales was up from the year before with 218 sales and up from the year before that with 180 sales.
Forecasting and identifying the deals: So once again: “How do I identify a good deal?”. Factoring in current inventory, the % discounts achieved historically and even the $ per sqft in relation to the peak and trough of the neighborhood market it sits in. 2012 figures run at average of $328 per sqft and 2013 figures came in at $363 per sqft. With that said its important to recognize that the best buildings in Edgewater: The 3 Paraiso Condos and Biscayne Beach did not get introduced on the resale market until 2017 and these have all traded over $500 per sqft. It is important to see that if you want a newer Condo your not going to be able to run with the same numbers as the rest of the market. Allow us to give you analysis specific to the ‘New Condos of the Urban Core’ by calling me direct at: 305 508 0899 or shooting me an email: David@siddonsgroup.com.
Supply Demand Performance: The Aventura condo market below $1M shows 29 months of inventory with 46 number of sales and 221 number of active listings. The Aventura condo market between $1M and $2M shows 57 months of inventory with 15 number of sales and 142 number of active listings. Clearly the higher-end of the market is a stronger buyer’s market than the lower market with room for price reductions.
What Sold of Recent? In the price range below $1M we see 2 bedrooms units being sold at Marina Palms Aventura Marina, Alaqua, The Atrium and Uptown Marina Lofts. In the $1M+ range we see larger units (mostly 3 bedrooms) being sold at Prive, Echo Aventura, Peninsula II and Porto Vita South.
Price per SF Costs for units and the story so far: A very low entry point to this market at just $304 to $311 per SF (in respectively 2019 and Q1 2020) for sold properties under $1M. In this market we saw a peak in 2015 with the market touching it lowest point in 2017, which it it recovering from again in recent years. The amount of days on the market is substantial with listings in 5 of the condos in Aventura averaging over 300 days on the market!
We are seeing an average of $428 per SF for product between $1M and $2M. This price point saw a 2016 peak at $474 per SF, followed by some years with lower sales prices. The first quarter of 2020 shows a higher price again at $482 per SF, although this is simply due to sales at Prive. The amount of days on the market is substantial with listings in 5 of the condos in Aventura averaging over 300 days on the market!
Demographic Observation: This market was heavily driven by purchases in new condos from the South American market through 2014, 2015 and 2016. When the South American economies collapsed or currencies weakened these condo owners have of recent accepted lower sale prices, because their mental arithmetic has been done with their domestic currency in mind, which even at a price loss equates to gain in ‘Pesos’ or the Brazilian ‘Real’.
Forecasting and Identifying the deals: This market is still driven by a majority of second home owners from other countries and this means it will continue to offer units at suppressed prices. The $ per sqft in sales has not changed much since 2014/2015. Interestingly if you change the closed data to reflect newer buildings you see the $ per sqft pattern change drastically on closed sales. $450 is the average $ per sqft in 2019, and only went up due to 2 sales at the Condo ‘Prive’ in 2020. Not so much ‘if’ but more like ‘when’ the South American economies strengthen or the US dollar weakens these buyers could come back in force and snap up this real estate.
Marina Palms has the most amount of inventory, and the most sales in the last year for new buildings. My advice, is to focus on the new Condos like Marina Palms with great views and good services and pick up deals like never before. We already know of a couple of these, so please call me to discuss!
Supply Demand Performance The Sunny Isles market of $3M+ condos had 7 closed sales in the last 6 months with as of April 1st 156 active listings. That is an ENORMOUS amount of inventory and simply put at the current absorption rate of selling just over 1 unit per month it would take 11 years to sell at the inventory. There is however a large difference between the sub-markets of $3M-$5M and $5M+. The Sunny Isles condo market between $3M and $5M shows 82 months of inventory with 6 closed condos and 82 active listings. The $5M+ Sunny Isles Beach condo market shows 150+ months of inventory with 1 sold condo in the last 6 months and 6 closed sales in the total of 2019 and 75 listings.
Comparing this with other high-end condo markets we see that South of Fifth, Miami Beach and Surfside respectively show months of inventory of 70, 76 and 14 we can clearly tell that Sunny Isles Beach has more inventory than any other neighborhood in Miami.
What Sold of Recent? Jade Signature, Jade Ocean, Trump Design Tower and Turnberry Ocean Colony
Price per SF Costs for units and the story so far Sunny Isles without a doubt offers the most affordable ‘beach front’ living in Miami within this price range. Not only does it provide the most affordable condos, but it is also home to the most affordable ‘new’ ocean front condos in Miami. This market was propped up again with offshore money; second and third homes that were bought during the 2015 peak. Foreign nationals who once again lost currency values, the Ruble and Real being two big offenders.
The $3M-5M market saw a 2015 peak ($1,183 per SF) after which prices dropped to $895 per SF in 2018. In 2019 the market recovered a little and went back up to $1,000+ per SF with $1,081 per SF in Q1 2020, although that was in part due to solid resales at Jade Signature with average sales in that building at $1,411 per SF. The $5M+ market saw steady prices around $1,450 per SF till the market went down in 2018 to $1,183 per SF. 2019 Saw a large sales price per SF with some strong sales at Porsche and Jade Signature. 2020 Has not recorded any sales yet.
Jade Ocean, Trump Palace, Porsche Design Tower and the Mansions at Acqualina saw the biggest discounts of 15%+ off asking price (These asking prices were likely already reduced given that properties stay on the market for an average of 240 days before being sold).
Opportunity and what to buy?
An initial glance at Sunny Isles may have you thinking you should be running for the hills on this but look closer and you will see opportunity. Sunny Isles is home to a number of new Condos like the new Ritz Carlton, Turnberry Ocean and Armani. Sales have still been occurring at these buildings so to think that we have only have 7 people interested enough to buy in Sunny Isles you would be wrong. If we track back and look at 2019 there were a total of 13 sales in Condos over $3m and built in Condos constructed post 2015. Look at the average these units were sold at and you see $1306 per sqft was the average.
Regalia, Porsche and Jade Signature make up the sales in these markets for 2019 and these were selling at a discount average of 20% for Regalia, 14% for Porsche and 8% for Jade Signature. Now if you look at the time the current active listings are running up days on the market for we see averages well over 350. In the current climate we at DSG are aware of deals coming in below the discounted rates EVEN achieved in 2019: deals floating between $1100-$1200 per sqft for a very well finished unit, which is a further 1o% or more off last years already heavily negotiated sold prices. Call me and I can give you details. In short its a buyers market where buyers can get far below what these original owners paid and even back to the average 2013 prices before these high level Condos were ever delivered. A neighborhood where ultra luxury Condos exist, and where an equivalent Condo in other beach front neighborhoods can cost you 50% more.
It is also important to recognize that much like Aventura, Sunny Isles has been driven by foreign national purchases. The strong US dollar and weakened economies of those countries has pushed inventory up and sales prices down. If the dollar weakens, and it’s argued by many global economists that with so much US debt and the enormous burden of billions dollars of economic relief needed in the face of the Corona pandemic the question is not a question of ‘if’ but ‘when’ this will happen. These buyers will then arguably come roaring back into the market, re-igniting demand and pushing prices back up. Definitely one of the 5 Best Miami Neighborhoods for Great Deals!
This sub-market in Miami Beach is one of the 5 Best Miami neighborhoods for great deals. Supply Demand Performance With just 1 sale and 2 pending deals across Miami Beach for single family homes in the $3M to $5M range you can only imagine the pinch home owners are feeling. This is definitely a different feel to the sales you see on the mainland and notably when we look south of Sunset Drive and go into Pinecrest and Ponce Davis (In these areas we see 16 sold and pending homes for the period). Why are there less sales on the Beach ? Simply put, relocations are driving the single family market and mainland Miami is where the best private schools are found. Additionally the prices per SF on the Beach are higher. For example 2535 Shelter Ave was a 5,400 SF newly built home, which sold for $4.875M (That is $907 per SF). Compare that to 7615 Ponce De Leon Rd, a newly built home which sold for $1M less, but offered 7,300 SF of adjusted living space.