Investor's Business Daily

By MarketWatch
Last Updated: 12/23/2005 3:17:04 PM

Wealthy Americans don't appear to be too concerned over the state of the housing market. Nearly two-thirds of those with incomes over $150,000 and investable assets of $500,000 or more say they expect the value of their primary home to increase by double digits over the next five years and nearly one-third think the increase will be 20% or more, according to a survey this week from PNC Financial Services Group. More... (http://www.investors.com/breakingnews.asp?journalid=33681027&brk=1#top)

^^ Sorry to be ignorent, but whats that going to mean? More rich people buying houses? I'am confused... :?

but whats that going to mean? More rich people buying houses??The local paper has been writing lots of doom and gloom articles about how all the luxury high rise buildings with water views are going to be empty if the owners don't find renters. I've said so what, IF that happens and I still doubt that it will.
The IBD article is saying that wealthy people don't really care about the quick buck.
Condos in Marina Blue, for instance, may be second or third properties. Most buyers of those units are not "speculating" that they are going to make a quick buck. As the article notes, wealthy people consider real estate a small part of their investment plans and are satisfied to hold property for a significant period of time.
Again, the doomers and gloomers that write for the local papers don't really have their finger on the pulse of the luxury condo buyer, so we skyscraper afficionados shouldn't fret that the tall ones on Biscayne are going stop construction or the that the sky will fall on the area!

Contrary to the above opinion, the fact that many people expect to see huge gains in the value of their real estate assets may be a cause for concern. While wealthy people may not be "flipping" properties to make money, they most likely wouldn't buy into a market that is performing well below their expectations.

That said, if the real estate market takes a turn for the worse, these wealthy people will probably be among the last to bail out. Many people (myself included) think that the market will begin to weaken at the low-end, where higher interest rates do the most damage. It may take a couple years to then permeate into the high-end market where these wealthy people are buying. Remember, it doesn't take a big selling spree to cause a decline. If demand slackens enough, prices (and new building) will start to drop.

IMO, if we keep the interest rates low then there would be no reason for the lower end investors to bail out. The lower end investors are those living in their investment properties. If the real estate market "crashes" then these people will not have turned a profit but will still have a home and will hopefully be able to pay for their homes assuming the interest rates don't change. However, if the rates climb then these people may not be able to keep up with the interest and will have to bail out. I know that I'm basicly saying the same as CU_rak, but I just wanted to say that with careful controlling of interest rates there won't be that big of a problem, IMO.

I don't think it'll be interest rates that crash the South Florida real estate market.

It's going to be hurricanes and the increased costs associated with insurance.

All it'll take is a Cat 4 or 5 hitting Miami. And the chances of that happening over the next 10 or 15 years are very high. Miami like New Orleans is living on borrowed time. It's been almost 80 years since the 1926 hurricane. We are due.

1926?.... and Andrew in 92 was nothing, right?

we kinda got lucky with andrew... it hit homestead and although miami got hammered it didnt get destroyed, we got lucky there... and homestead then wasnt what homestead is now, if it hit homestead now the damage would have been twice as bad...

Andrew didn't hit where most of the people lived. I was living on Miami Beach when Andrew hit. There were trees down, a few shingles off of roofs, and power was out for maybe a week. It was nothing.

South Dade was devastated but the scale was not what it could have been because Andrew was a small compact storm.

Now, if you get a storm with the power of Andrew but a large wind field hitting Downtown Miami and then moving North West over Broward and Palm Beach counties...

Well, let's just say I hope it never happens, South Florida would never be the same.

xxx

Contrary to the above opinion, the fact that many people expect to see huge gains in the value of their real estate assets may be a cause for concern. While wealthy people may not be "flipping" properties to make money, they most likely wouldn't buy into a market that is performing well below their expectations. Hold up. The article says that wealthy buyers don't expect to see huge gains. I contend that wealthy people are continuing to buy into the Miami market because of realistic expectations. The IBD article says that 2/3 of the people surveyed expect double digits in five years. Not double digits every year. I don't think many people would say 2% per year for the next 5 years are huge gains.

The point of the post was to show that wealthy people aren't as afraid as the Miami Herald would lead readers to believe. They aren't buying with the expectation that they will make 100% cash on cash returns, even though that has been the case for the last few years, they aren't going in with those expectations. 2/3 expect double digits in 5 years, that is a very reasonable expectation.
Sidenote: For some interest rate perspective, remember that the average 30 yr fixed rate was 8% in 2000. According to Bankrate.com it is 5.74% now. Let's say, at the low end of the market, a person buys a $350,000 house with 20% down.
At todays rate the principle and interest payment is $1,632 per month.
In the ungodly event of a 200 basis point spike to 7.74% it's $2,004
That's a $378 difference per month in a pretty wicked scenario. It's going to hurt some and definitely slow things down, but even 200 basis points probably won't send the housing market into depression era crash mode.
Here's a 5 year chart. Notice that even when national interest rates were at their highest, the local Miami real estate market's median prices were increasing by double digits. Real estate is local.
http://www.restainer.com/skyscrapers/5yrchart_30yrfix.png

Double digit gains in 5 years isn't a very lofty expectation, I know, but it is also a very vague representation of the attitude of buyers in S. Florida. "Double digit" could mean 10% for one investor and 50% for another. Once again, I always like to bring up the point that it doesn't take a massive exodus of investors to end a boom, but rather just enough to slacken demand and increase supply to the point where prices will stagnate. If only a fraction of these people were expecting unreasonable returns, it could drive down demand enough to make an impact.

Notice that even when national interest rates were at their highest, the local Miami real estate market's median prices were increasing by double digits.
This was actually true of many areas in the US at this point. Even though interest rates were high, the real estate market was in a boom phase b/c prices and supply were too low and still recovering from the early 90's. Also remember that the stock market crash and september 11th drove many investors to look to real estate as a safe place for their money.

Don't get me wrong with these posts, I think Miami is well positioned to ride out a slump without a "doom and gloom" scenario, but I don't think it is immune to cyclical trends in the real estate market.

Me ? I'd be satisfied if we'd quit bandying about that ridiculous term 'bubble'.

I think Miami is well positioned to ride out a slump without a "doom and gloom" scenario, but I don't think it is immune to cyclical trends in the real estate market.I'm with you 100% on that.

Me ? I'd be satisfied if we'd quit bandying about that ridiculous term 'bubble'.I'm with you a 104% on that.

As long as these developers keep attracting these wealthy investors and the towers keep going up, then I'm happy. The day I can afford on of those units, I'll be even happier! Whoever keeps mentioning the "B" word should have their own (bubble) popped.

As long as these developers keep attracting these wealthy investors and the towers keep going up, then I'm happy. :) THAT is the spirit!!! Build tall and inspire men to reach new heights!!!! :cheers2:

All I can say with today's market are the following:

- Hurricane threat is real but what can you do. Protect and have adequate insurance....earthquake thread hasnt stopped California. If such a storm does hit, if you are well prepared it will take a year or three to build up again but I presume it will. New Orleans will too and if those crazies living under sea level come back up then Im sure as heck that Miami will too. We should really focus on those building codes.

- Cost of living can be tricky. Interest rates will only hurt those who cant affordt to buy but not those who bought fixed. What can be tricky is (as mentioned above) insurance rates and taxes (specially downtown).

- Finally, with the popular and obnoxious Bubble talk all I can say is dont buy if you cant afford to close and maintain. Dont invest more than you are willing to risk as any wise Vegas gambler would say.

Pawnmaster ---- new to posting not new to forum.

All I can say with today's market are the following:

- Hurricane threat is real but what can you do. Protect and have adequate insurance....earthquake thread hasnt stopped California. If such a storm does hit, if you are well prepared it will take a year or three to build up again but I presume it will. New Orleans will too and if those crazies living under sea level come back up then Im sure as heck that Miami will too. We should really focus on those building codes.

- Cost of living can be tricky. Interest rates will only hurt those who cant affordt to buy but not those who bought fixed. What can be tricky is (as mentioned above) insurance rates and taxes (specially downtown).

- Finally, with the popular and obnoxious Bubble talk all I can say is dont buy if you cant afford to close and maintain. Dont invest more than you are willing to risk as any wise Vegas gambler would say.

Pawnmaster ---- new to posting not new to forum.

Quoted for truth, and welcome to the forum man. I hope you enjoy it here!

http://www.benengebreth.org/housingtracker/location/Florida/Miami/

Wow, prices are dropping.

Thats interesting. Those are asking prices by the way not sales prices. Sales prices are still going up but asking prices seem to be dropping.

roark,

your perspective please.

While we're on the subject:The South Florida Business Journal (http://www.bizjournals.com/southflorida)

http://img.bizjournals.com/u/f/southflorida/20060109/coverimage.jpg

and the stories...

http://www.bizjournals.com/southflorida/stories/2006/01/09/story1.html

http://www.bizjournals.com/southflorida/stories/2006/01/09/story2.html

Awesome Rendering. I can't wait 'til '08!

isn't that rendering this one?

http://i8.photobucket.com/albums/a31/BornInTheGrove/Highrises%20and%20Construction/SkylineFutureII.jpg

Yep. Although it isn't that accurate, it fairly shows the way Biscayne Blvd. will look in about 3 to 4 years.

Very Nice, Born in the Grove :) !!!, I'm Back from Las Vegas vacation, a remarriage honeymoon, at the Stratosphere Tower hotel. I missed all you Great men :) and any women :) out there, lol. I have lots of pictures and good news about tower projects in Las Vegas, its just like Miami, but of Course, Miami has more construction then Vegas, but the one I looked at the most was Ivana Trump's condo tower at 82 floors at 925 feet, check the pictures at www.ivanalasvegas.com
:cheers:
Again Everyone :) , I'll back and just tired, but will regain strenght soon,

Happy New Year Everyone !!! :cheers:

Very Nice, Born in the Grove :) !!!, I'm Back from Las Vegas vacation, a remarriage honeymoon, at the Stratosphere Tower hotel. I missed all you Great men :) and any women :) out there, lol. I have lots of pictures and good news about tower projects in Las Vegas, its just like Miami, but of Course, Miami has more construction then Vegas, but the one I looked at the most was Ivana Trump's condo tower at 82 floors at 925 feet, check the pictures at www.ivanalasvegas.com
:cheers:
Again Everyone :) , I'll back and just tired, but we regain strenght soon,

Happy New Year Everyone !!! :cheers:

Hello Chuck,

Ivana was cancelled as was Jorge Perez's Icon Las Vegas.

Wow, prices are dropping.Nooooooo....www.benengebreth.org is predicting that asking prices are dropping starting next month.

As Birthdayboy/Marriedguy Dave noted, "The numbers provided here are asking prices derived from MLS listings."
That really doesn't tell us much at all.
I'm not sure how benengebreth does their calculus or what their angle is, never heard of them, but it smells like fuzzy math to me.
Since Shaq decided to take his $22M home off the market in December, guess what? The average asking price in Miami Beach just dropped a lot!
Brickell on the River and One Miami are closing in the month of December and now people are allowed to put their units on the MLS...booom! 400 more units of inventory on the MLS.
Asking prices don't really give any picture of what's happening to the overall market.

yea the jorge perez annoucement made me quiver...it was the first time i ever heard the related group backout of a project which was already in sales,and its expected that they'll do the same for there las ramblas project to,the reason was suppose to be because of rising construction cost,could the same thing happen here?

HEck I say if they stop now (meaning whatever is approved and ready to go, it may not be a bad thing. Let it settle down and get ppl moving in. There is enough as it is. So let some cancel, let it slow down a bit. Wait and then it will pick up again.

Nooooooo....www.benengebreth.org is predicting that asking prices are dropping starting next month.

As Birthdayboy/Marriedguy Dave noted, "The numbers provided here are asking prices derived from MLS listings."
That really doesn't tell us much at all.
I'm not sure how benengebreth does their calculus or what their angle is, never heard of them, but it smells like fuzzy math to me.
Since Shaq decided to take his $22M home off the market in December, guess what? The average asking price in Miami Beach just dropped a lot!
Brickell on the River and One Miami are closing in the month of December and now people are allowed to put their units on the MLS...booom! 400 more units of inventory on the MLS.
Asking prices don't really give any picture of what's happening to the overall market.

What about the rise in inventory?

yea the jorge perez annoucement made me quiver...it was the first time i ever heard the related group backout of a project which was already in sales,and its expected that they'll do the same for there las ramblas project to,the reason was suppose to be because of rising construction cost,could the same thing happen here?

Perez has a better grasp of costs in Miami than anyone, extremely unlikely he will cancel anything because of rising costs. In Vegas he was out of the loop, and contractors were charging him extra since they prefer casino work.

Welcome back Chuck, thought you fell off the face of the Earth :) Congrats on your remarriage :), What did you think of the stratospher? I hated it, could feel it move the entire time I was up there (sensative to movement) the CN tower, now that was great (taller and stronger)

Welcome back Chuck, thought you fell off the face of the Earth :) Congrats on your remarriage :), What did you think of the stratospher? I hated it, could feel it move the entire time I was up there (sensative to movement) the CN tower, now that was great (taller and stronger)
:bow: Thanks, my friend, Rider of Rohan :wave: , marriage never changes a thing , hehe :wallbash: , but we did it again anyway, the Stratoshere hotel was okay, but the Casino's a rip off, lost all my down payment I had saved to buy a condo in the Biscayne landings project :badnews: . But anyway, the top of the tower was cool, took many pictures of Las Vegas from up there over 1,000 feet over the strip, You can see alot from up there, and the Hoover Dam was the best sight ever in my vacation travel out there, What a Project that was back in 1931, that killed 96 construction workers :eek2: , mostly drownings in the concrete, falling into it or just no safety back then, ropes broke and men just slipped off the mountains, very dangerous !!!, but what a sight !!!, I 'm glad to back in the Magic City of Miami, there's No place like Home :applause: !!! Go Cranes !!! :master: :banana2: :horse: