October 31st, 2008

Miami, Florida

When people visit www.MiamiCondoLifestyle.com and contact me about buying in the Miami & Miami Beach market, they ask the following question…“How far back in time have the Miami and Miami Beach condo prices dropped?” Today we are going to find out.

The charts below show data from October of 2003 until September of 2008, for the months on inventory on hand and the average price per square foot. For those of you who have been talking with me for a while, you already know how I feel about average and median prices…for the rest of you, let me re-iterate that each real estate transaction is between two separate parties…a willing buyer and a willing seller. Therefore, I feel that average and median price are misleading in that each property is unique as is each transaction. But here goes any way!

Figure 1 and Figure 2 are charts of the Coastal zip codes which include Key Biscayne, Fisher Island, Miami Beach, Surfside, Bal Harbour and Sunny Isles. This data includes all condos in the area whether they are waterfront or not.

Figure 1 shows the Months of Inventory, which is the Absorption Rate that is calculated by dividing the total for sale inventory by the number of units which have closed that month. As you can see, back in November 2004, we had just 7.4 months of inventory…a seller’s market and now in September 2008, there are 41.4 month… a buyer’s market, which is down significantly from December 2007′s high of 70 months. This inventory has grown from a low of 28.8 months in May 2008 during the Summer months. Given that the “season” is just starting, we expect the inventory levels to drop again as buyers come into the market to take advantage of the buying opportunities available now. This data is from the Southeast Florida Multiple Listing Service (MLS) and does not reflect any closings that happened outside the MLS which often includes developer preconstruction units.

Miami Beach Condos Market Sales Trends

Fig. 1 – Coastal Zip Codes Months of Inventory

Figure 2 shows the Average Price per Square Foot for the units sold in the same zip codes over the same period. The Avergae Price per square Foot for September 2008 is $369.00… we have to go all the way back to November 2004 to find the same Average Price.

Miami Beach Condos Market Sales Trends

Fig. 2 – Coastal Zip Codes Average Price per Square Foot

Figure 3 and Figure 4 are charts of the Bayfront zip codes which include Aventura, Miami Midtown, Miami Downtown, Brickell, Coconut Grove, Coral Gables and Pinecrest. This data includes all condos in the area whether they are waterfront or not.

Figure 3 shows the Months of Inventory, which is the Absorption Rate that is calculated by dividing the total for sale inventory by the number of units which have closed that month. As you can see, back in September 2004, we had just 5.6 months of inventory…a seller’s market and now in September 2008, there are 46.9 month… a buyer’s market, which is down significantly from September 2007′s high of 79.1 months. This inventory has grown from a low of 34.2 months in May 2008 during the Summer months. Given that the “season” is just starting, we expect the inventory levels to drop again as buyers come into the market to take advantage of the buying opportunities available now. This data is from the Southeast Florida Multiple Listing Service (MLS) and does not reflect any closings that happened outside the MLS which often includes developer preconstruction units.

Miami Beach Condos Market Sales Trends

Fig. 3 – Bayfront Zip Codes Months of Inventory

Figure 4 shows the Average Price per Square Foot for the units sold in the same zip codes over the same period. The Average Price per square Foot for September 2008 is $260.00… we have to go all the way back to September 2004 to find the same Average Price.

Miami Beach Condos Market Sales Trends

Fig. 4 – Bayfront Zip Codes Average Price per Square Foot

Often, the hardest obstacle to making a decision, is the feeling that the market will continue along it’s prevailing trend…going up…it’ll never stop…going down…it’ll never stop. Obviously, the real estate market cycles but generally appreciates over time due to inflation. To identify actual opportunities, one must break out the sub-markets within each area and understand that in reality the real estate market boils down to one buyer and one seller striking a deal. There are tremendous opportunities in all price ranges here, we can identify and find them for you.

The real question is how far back will the pricing need to go to start to solidify..maybe we could use Mr. Peabody and his boy, Sherman’s, “Wayback Machine” to find out. As inventory levels continue to come down, prices will tend to strengthen. Right now could be the best buying opportunity available.

When is the right time to buy? Well, it’s the time that makes the most sense for you. What is your time horizon for holding? Are you planning a retirement in the next few years along with 60 million other baby-boomers? Are you relocating to Miami for a job? It is a buyers market. I suppose one could wait until the market turns back to a sellers market. Then, for sure, one would know that prices have started back up!

Our next issue will discuss the same areas but in reference to only the waterfront properties.

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