Are Prices Expected To Rise Or Fall?

Real Estate Prices Miami

-“Marcelo, Should I wait to sell or should I maybe list the condo now…What do you think? Are the prices going down?”

-“Hi Marcelo! I don’t really know what to do. Do you want to start looking at some units already or should I wait until next year?  I’m not really interested in renewing my lease again but I don’t know if I should wait and see”

-“Marcelo, we haven’t met but I wanted to reach out to you. I just wanted to know…are prices falling in Miami or will it be more expensive to buy next year?”

I get tons of questions like these on weekly basis. They’re often asked by neighbors, friends, fellow colleagues and last but not least, from my clients and readers.  The truth is, I’m glad people come to me for advice, even from someone not ready to buy or sell anytime soon. Having an intelligent discussion on what will happen to prices can sometimes be tricky, especially since I don’t have the ability to read into the future (not yet at least, but i’m working on it). Regardless, my initial answer at first is often the same:

It depends, Mr/Ms Buyer/Seller. It depends on what you’re buying/selling”. “Each building is its own separate entity, with its own individual levels of supply and demand. Building A may be selling x amount of units per month and have a very high amount of activity, Buildings B and C might not be as active”. ” Where do you own/Where are you interested in owning?

Once I find out where they own or where they wish to own, my last remark is always the same: “Let’s look at the numbers”. Maybe the language I say it in isn’t English. Maybe the wording is different. Regardless, the message is clear.  Numbers continue to be the most reliable source of information in this business and are fundamental when it comes to giving advice.

One of my favorite ways to do an analysis on prices involves looking at the months of supply (the amount of time it would take to sell all current units for sale) and the percentage of absorption (the rate in which units are selling). Both are very useful on any real estate market to determine the overall balance between supply and demand. In today’s case, I went 14 months back and included the charts for all three zip codes in Brickell, as well as the 33132 and 33137 zip codes for Downtown and Edgewater.

Below are the overall numbers for Downtown Miami and Brickell.

Brickell (zip 33129 33130 33131)


Condo/Coop/Villa/Twnhse
Curnt vs. Prev Month: Months of Inventory (Closed Sales) 3.6%
Curnt vs. Same Month 1 Yr Ago: Months of Inventory (Closed Sales) 13.1%

ZIP 33132, ZIP 33137


Condo/Coop/Villa/Twnhse
Curnt vs. Prev Month: Months of Inventory (Closed Sales) 47%
Curnt vs. Same Month 1 Yr Ago: Months of Inventory (Closed Sales) 27.2%

Brickell (zip 33129 33130 33131)


Condo/Coop/Villa/Twnhse
Curnt vs. Prev Month: Absorption Rate (Closed Sales) % -2.3%
Curnt vs. Same Month 1 Yr Ago: Absorption Rate (Closed Sales) % -12.4%

ZIP 33132, ZIP 33137


Condo/Coop/Villa/Twnhse
Curnt vs. Prev Month: Absorption Rate (Closed Sales) % -32.9%
Curnt vs. Same Month 1 Yr Ago: Absorption Rate (Closed Sales) % -22.4%

The difference between the numbers now and a year ago are quite significant in terms of how the demand shifted into a buyer’s market. Both charts, as seen above, show that overall months of supply as a whole (all inventory for sale) rose, with Brickell at a rate of 102.8% and Downtown/Edgewater at 83.1%

On the opposite end, absorption rates continue to show lackluster demand,  with Brickell at 2.7% and the rest of Downtown at 3.3%. These are very, very low rates for any urban city sector. With these rates, signals should be clear that activity is currently subdued when compared to the activity seen in 2015. The main takeaway should be easy to understand:

High months of inventory + low absorption rate = buyer’s market

 

So…Will Prices Rise or Fall?

The answer is simple: It depends.

It depends on what building/area of Downtown and Brickell we’re talking about. It depends on the product and it also depends on the price point. In addition, due to the vast range of diverse products within our real estate market, with units of all shapes and sizes, I humbly believe that there will never be a one size fits all answer to this question.

Overall, I believe that prices may continue to fall among listings where the demand is simply not enough to match the current supply. Whenever this happens, competition among properties drastically increases among condos and Sellers that need to sell within a certain period or out of necessity will cut their prices first in order to get the deal done. I see this trend already happening specifically in the luxury real estate sector, where the attention and business of a more limited buyer pool is fought every single day.

One undeniable fact, as shown above, is that there are various sectors in the market displaying an over-saturation of inventory. The absorption rates are too low and to put it simply, there’s too much for sale for the amount of buyers. Some may blame this on the difficulty on finding conventional financing below 25% down. Others might say that the dollar is too strong and other currencies aren’t, making it less than ideal for certain foreign buyers to invest at this time. Sometimes it’s neither one and it could be something completely different, like a special assessment or an issue within a specific building. If you were to ask me, my usual answer is that neither answer is wrong.

Opportunities:

On the other hand, many opportunities are also still available. For buyers looking to get a good deal, they’re there if you know where to find them. Certain buildings and price points in key areas still show a strong balance between supply and demand. In other cases, I’ve also seen extremely good products priced well below the norm from certain sellers looking to sell quickly for personal reasons. Below are some of the ones I’ve noticed as of late:

  • Inventory in lower price points, where demand in affordable housing continues to stay consistent
  • Certain developments, luxury included, that continue to sell extremely well due to its reputation, quality of product, or management. 
  • Other individual options one can find when least expected to be found.

Final Note

On a final note, I wouldn’t go as far as saying that we’re in uncharted waters. Nevertheless, it’s safe to say that the near future isn’t as crystal clear as before. For this reason, I strongly recommend to be very cautious and to make sure you’re working with a local expert if you’re looking to buy or sell. Downtown and Brickell are very unique real estate areas because they’re unlike anything else in South Florida. For this reason, working with any agent simply doesn’t cut it.

Miami Real Estate

As a local agent and author of The Miami Observer, I strive to provide the best level of service. My main specialty is to be the specialist when it comes to product and market knowledge in Downtown Miami and Brickell. Part of my daily routine, besides writing these articles among other stories, is to analyze the numbers and study the inventory in the area in order to stay ahead of the curve. Staying in touch with other businesses that involve themselves in the local community also helps. This is one of the reasons we advocate we also do our best to support local businesses and spread awareness about local event and opportunities.

If you’re looking to buy or sell in the area don’t hesitate to contact us at 305-305-3885 or send us a message here.

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