Allied Realty Group Blog

Late cycle behavior

Late cycle behavior is back in the South Florida residential market.  For the last decade it appeared as if this slow grind higher in prices would not abate.  There is evidence of peaking residential prices in the South Florida market and a reversale might be right around the corner.  today we will highlight some of the Broward County residential activity in houses and condo properties.

Late cycle inventory

Inventory declined in the Greater Fort Lauderdale area over the last few months, which has boosted sale prices.  As the spring selling season wrapped-up, the single-family home inventory dipped to 5,317 listed homes in the month of May.  Condo inventory declined to 7,900 condos listed for sale during May.

late cycle inventory

Late cycle prices

Will residential real estate prices move higher from here?  There could be a few months left in this rally.  An alarm will not sound at the top of the market, so we will continue to monitor the charts.  By looking at this first chart, you will notice that the average sale prices of single-family homes in the Greater Fort Lauderdale area have been trending higher, with the average sale price reaching $456,861 during the month of May.  The average sale price of a condo was up slightly to $231,238.

late cycle real estate prices

Late cycle debt

Over the past several years we have warned our readers about the dangers of keeping interest rates so low for so long.  Consumers tend to borrow much more than they should.  You will see in this next chart that foreclosures are making a big comeback.  Many of these are from the last housing crash, but now we have new ones piling-up thanks to the massive accumulation of debt.  We haven’t seen this many foreclosures in Fort Lauderdale since the last crash.  It’s really fun buying stuff, but eventually the bill comes due.  By looking at this chart, you should be able to see that people are facing some challenges in paying their mortgages.

Late cycle debt problems

This foreclosure problem isn’t just an issue in Fort Lauderdale.  The last chart shows how Miami-Dade and Palm Beach County see mortgage defaults climbing also.  We used the appropriate color red for this chart.

South Florida mortgage forelcosures

Good reads

Real estate is local and the South Florida real estate market is certainly unique.  However, real estate is also cyclical and here is a good article we found discussing various signs that the current real estate bubble/ market cycle  might finally be turning.  We haven’t seen the inventory climb or prices drop in South Florida yet, but the level of distressed properties in the tri-county area is disturbing.

Posted in Fort Lauderdale foreclosures, Fort Lauderdale real estate | Tagged , , | Comments closed

A tale of two markets

A tale of two markets is the title for today’s post.  We are noticing a large increase in foreclosure filings across South Florida while prices remain at multi-year highs since the financial crisis.  First, we will look at the foreclosure filings.

A tale of distress

The first chart today will highlight the monthly foreclosure filings in Miami-Dade, Broward and Palm Beach counties.  We have discussed this topic at length since the last housing bust.  All of the foreclosure halts over the last decade have only prolonged the crisis and there still remains a massive overhang of distressed residential real estate in South Florida.

tale of distress in Miami, Fort Lauderdale and Palm Beach

You will notice from the chart that we haven’t seen this level of new foreclosure filings in years.  The FEMA halt in the fourth quarter of 2017 just helped stockpile additional distressed properties.  The stats are below, with the numbers for the last four years.  You don’t have to be an expert to see that there are tons of people not paying there mortgage down here!

Annual Monthly Change
2015       9,557            796
2016     15,194         1,266 59%
2017     13,071        1,089 -14%
2018      8,290         1,382 27%

A tale of high prices

The trend in sale prices has been strong over the last few years thanks to low mortgage rates.The problem with keeping rates so low for so long is that it encourages people to take on much more debt than they should.  Hence, the rise in foreclosure filings.  Just like the last housing bubble, people are somehow convinced that house prices only go up.  Once you remove the cheap money, it should be interesting to see where prices settle.  During the month of May, the average sale price of a single-family home in South Florida dipped slightly to $521,886.  The average sale price of a condo in South Florida actually increased in may to $335,258.  Moving through the summer months we will keep an eye on foreclosures, sale prices and mortgage rates.

Tale of house and condo prices

Posted in Foreclosure activity, Fort Lauderdale foreclosures, Miami foreclosures, Palm Beach foreclosures | Tagged , , | Comments closed

Lofty numbers all around

Real estate prices remain lofty in South Florida as we move into the summer months.  The spring is usually an active season for transactions and prices are still holding up for now.  The average sale price of a single-family home in South Florida was down slightly to $521,886 and the average sale price of a condo rose to $335,258.

Lofty sale prices

Transaction volume gained some steam during the month of May.  If you look at the next chart you will notice that this is usually an active month for sales.  there were 4,535 condo sales closed in may and 4,469 houses sold for a total of 9,004 closed residential transactions in Miami-Dade, Broward and Palm Beach County.

Lofty sales volume

Transaction volume was dragging during the first quarter of 2018, but the month of May helped bring the average up.  take a look at this next chart which shows the average monthly volume in South Florida since 2012.

Average monthly volume

Year Monthly Average
2012         7,167
2013         7,598
2014         7,603
2015         8,034
2016         7,581
2017         7,352
2018         7,593

Lofty foreclosure numbers

Although the market looks healthy from the standpoint of transaction volume and prices, the number of monthly foreclosure filings has been lofty also.  It sure looks like we will be making up for the cases that were halted last fall.

Foreclosure filings

Today we will provide a snapshot of the filings in Miami-Dade County.

Miami forelcosures

We searched by city throughout Miami-Dade and found where the distressed properties are located.  Our max is 5,000, so the city of Miami exceeds that number.  We counted over 23,000 houses and condos in some stage of foreclosure throughout Miami-Dade County as of June 8, 2018.

Miami foreclosure count

Miami Dade Foreclosures 6/8/2018
Houses Condos
Aventura                        15                340
Key Biscayne                        35                  42
Coral Gables                      319                  81
Hialeah                  1,857            1,409
Homestead                  1,524                492
Miami Beach                      152                736
Miami Lakes                      256                111
Pinecrest                        85                  10
Sunny Isles Beach                        10                238
North Miami Beach                      384                205
Surfside                        31                  38
Miami Shores                      124                  17
Doral                      247                442
Miami Springs                        99                     8
*Downtown/Brickell                        50                470
Opa-Locka                      164                  28
Miami Gardens                  2,052                346
North Miami                      554                181
North Bay Village                        13                  76
City of Miami                  5,000            4,642
Hialeah Gardens                      141                  96
South Miami                        68                  24
Totals                13,180          10,032

Good reads and more

With higher real estate prices, affordability comes back into focus not just for buyers, but for renters in South Florida.

Posted in Foreclosure activity, Market Insight, Miami foreclosures, Miami real estate | Tagged , , , | Comments closed

Palm Beach market update

Today we will take a look at the Palm beach, Florida residential market with charts of average sale prices, transaction volume, inventory and distressed properties.  Our first chart shows the average sale prices of houses in South Florida and you will see that Palm Beach led the pack in April with an average selling price of $617,407 for single-family homes.

Palm beach sale prices

As for condos, Palm Beach prices climbed in April and reached $314,139, up 9% from the previous month.  Prices in Miami and Fort Lauderdale condos remained level to a slight increase.

Palm Beach condo

Transaction volume had some strength in the last few months after a quiet start to 2018.  During the month of April, there were 1,690 house deals, up from 1,669 in March.  Mortgage rates were still very low at that point, so that may have served as a stimulus to get deals closed.

Deal volume on houses

The condo market showed similar strength during the month of April.  In Palm Beach County there were 1,407 closed sales in the condo segment, up from 1,347 in March.  You will notice that condo property sales were on the upswing in Miami and Fort Lauderdale as well during the month of March.

Condo sales in Palm Beach

As for the distressed property market, we have seen a steady climb in foreclosure filings since the FEMA hold expired.  Before foreclosures were placed on hold in August of 2017 (before Hurricane Irma), there were 332 residential foreclosure filings in Palm Beach County.  In May, we counted 320 new foreclosure filings so far and will update the number if it changes.

Palm Beach foreclosures

Here is a city-by city look at the existing foreclosures scattered throughout Palm Beach County.   We haven’t run this search in awhile, but the numbers have increased since we last conducted a search in 2016.  On today’s search, we found 14,010 houses and 2,327 condos in some stage of foreclosure scattered across Palm Beach County for a total of 16,337.  Take a look at the raw numbers, followed by a chart.

Palm Beach  Search date:  6/7/2018
Houses Condos
Boca Raton                  1,958                503
Boynton Beach                  1,881                244
Delray Beach                  1,065                348
Jupiter                      659                  76
Lake Worth                  2,092                156
Lantana                      157                  25
North Palm Beach                        80                  60
Palm Beach                        29                  30
Palm Beach Gardens                      484                  43
West Palm Beach                  2,540                563
Wellington                      890                  20
Royal Palm Beach                      785                  53
Riviera Beach                      592                  45
Greenacres                      527                  93
Palm Springs                      261                  39
Highland Beach                        10              29
               14,010            2,327
Total          16,337

 

Houses and condos in foreclosure

Here is a snapshot of our last few searches:

Search dates and property count – existing foreclosures
11/17/2014 1/1/2016 6/7/2018
         27,120          13,621          16,337

We had a short blip of lower mortgage rates for a week or so, but it looks like they may be heading higher again.  Check out this chart from Freddie Mac showing the latest mortgage rates.

Posted in Foreclosure activity, Market Insight, Palm Beach foreclosures, Palm Beach real estate, Shadow Inventory, South Florida Real Estate | Tagged , , | Comments closed

Pump it up

Pump it up!  Memorial Day weekend is here and it’s time to kick back, relax and look at a few charts of the South Florida residential real estate market. Today we will look at the average sale prices, transaction volume, mortgage rates and foreclosure filings.

Pump up the prices

The April existing home sales data was released this week and prices continued to climb in the Miami-Dade, Broward and Palm Beach residential markets.  Keep in mind that these properties were most likely placed under contract in February or early March before the latest spike in mortgage rates.  Single-family homes reached a peak of $535,433 and condos reached $311,381 during the month of April.  Is this a blow-off top?  Only time will tell.  We always say that one month doesn’t make a trend and we will have to sift few a few more months of data to see if this was the peak for the cycle.

Pump up the sale prices

Transaction volume

The monthly average transaction volume has been trending lower after it reached a post-crash high in 2015.  Through four months of 2018, the average monthly volume is down 2% from 2017 and 10% from 2015.

Year Monthly Average
2012         7,167
2013         7,598
2014         7,603
2015         8,034
2016         7,581
2017         7,352
2018         7,240

Deal volume still low

Pump up the mortgage rates

Mortgage rates made a big move in the last few weeks, but may be settling down again.  Our next chart shows how the 15-year and 30-year mortgage rates compare to the 10-year treasury yield which has been on the rise.  It will take a few months to see the impact of these rates moves, but they will certainly be seen in transaction volume and sale prices as we move into the summer months.

Pump up the interest rates

Pump up the foreclosure filings

This last chart is just bananas.  Take a look at this massive move in the monthly mortgage foreclosure filings in South Florida.  After taking a brief hiatus from the FEMA hold after Hurricane Irma, the pace of new filings has really spiked and we anticipate high volume through the remainder of the year.  This should come as no surprise, since many of the lending practices that led to the last crash seem to be back in full force.

Foreclosure filings

Have a nice weekend!

Don’t forget to have some fun over the holiday weekend & enjoy this classic tune!

Posted in Condo market, Market Insight, Single-family homes, South Florida Real Estate | Tagged , , , , | Comments closed

Real estate speculation is a risky business

Real estate speculation is a a risky business.  Markets lose liquidity very quickly once rates increase and transaction volume starts to decline.  Ignoring some of these warnings will prove costly for some in this cycle, just like it did in the last one.  Take a look at this chart of transaction volume and you will notice that it has been declining since reaching a cycle peak in 2015.  To put it simply:  There are fewer buyers this late in the cycle, so you need to do your homework before investing in this market.

Risky business house flipping

 

Here are the actual transaction volume numbers since 2012.  If you are buying properties to flip at this stage of the game, you might be holding them for awhile or taking a loss.  To quote Warren Buffet: “What the wise do in the beginning, fools do in the end.”

Year Monthly Average
2012         7,167
2013         7,598
2014         7,603
2015         8,034
2016         7,581
2017         7,352
2018         6,751

 

Does everyone remember how fun it was to play on the see-saw when you were a kid?   This analogy helps to explain the correlation between interest rates and real estate prices.  Our simple drawings of a see-saw in each rate scenario should clarify various stages of the real estate market cycle.  Our first illustration shows the current state of the real estate market after the Fed has artificially suppressed rates since the 2008 financial crisis.

Risky business – Low rates fuel speculation

The first see-saw represents the current market.  Rates have remained low due to central banks buying everything in sight to reflate the economy.  They merely reflated another bubble.

Risky business - Prices & rates 1

Risky business – Normalized rates limit speculation

The second see-saw represents a “balanced” market after rates begin to normailze.  We aren’t here yet, but as rates continue to rise we could be there by the end of 2018 or during 2019.

Risky business - normal rates and normal prices

Risky business- Higher rates crush speculators

The third see-saw illustrates a market where rates increase and prices decline.  This could take place during 2019 and last a few years.  Remember that it took eight years (since 2009) of crisis level interest rates to create this last bubble, so the deflation, or popping may take some time as well.

Risky business higher rates / lower prices

Good reads/ good tunes/ good movies

We cannot use “risky business” in our post without including a link to this great movie Old time rock & roll

 

Posted in Fort Lauderdale real estate, Investment Property, Market Insight, Miami real estate, Palm Beach real estate, South Florida Real Estate | Tagged , , , , | Leave a comment

Break on through

Rates have finally decided to break on through (to the other side) to quote The Doors.  We have been talking about how rates have been knocking on the door for awhile now and it finally happened.  This week the 10-year bond yield crossed 3.03% and the 30-year bond crossed 3.22% today.  Real estate agents need to be aware of this change and if they are not, the market will gladly teach them a finance lesson.  Here is a look at the treasury bond rates as of today on CNBC .  As for mortgage rates, this first chart today shows that we haven’t even been charting long enough to see the 10-year bond and mortgage rates at these levels.  We saw a 30-year mortgage rate of 4.58% on 8/22/13 and today we reached 4.61%.  The fact that we cruised past crucial resistance just reinforces that rates are going higher.

Mortgage rates on the move

Break in prices on the way

To put it simply, real estate prices were being propped-up by fake rates.  Maybe you haven’t believed us, but you will start seeing sellers and their agents wondering why their properties aren’t selling.  Here is a quick look at Fort Lauderdale area residential real estate prices through the month of March.  Over the next few months you will see the prices slide.  Just wait!

A break in Fort lauderdale real estate prices is coming

Break in transaction volume

Take a look at this next chart of transaction volume in Broward County, Florida. This area includes Fort Lauderdale, Pompano Beach, Hollywood, Weston, Plantation, Coral Springs and other cities.  Transaction volume has already been declining, even with rates at historically low levels.  What will happen as rates begin to normalize?  As deal volume drops, prices are usually next to decline.  Things are about to get very interesting in the residential real estate market.

Break in transaction volume Fort Lauderdale

No break in foreclosure filings

Foreclosure filings have been on the rise again in Fort Lauderdale.  This metric has been ignored as most people have been touting the “housing recovery”.  It’s probably not a good idea to ignore the recent climb in foreclosure filings, as this is yet another factor that will impact the South Florida market.  Low rates allow people to make purchases they really shoudn’t make and housing is no exception.  There are still thousands of mortgage default cases lingering from the last crisis and new cases are being piled on top of them.  After a brief hold on new filings after Hurricane Irma, the banks are filing their cases at a good pace again.

Good tunes / good reads

We couldn’t make this post without including this classic from The Doors .

Posted in Foreclosure activity, Fort Lauderdale foreclosures, Fort Lauderdale real estate, Market Insight, Mortgage rates, South Florida Real Estate | Tagged , , | Comments closed

Capitalization rates matter

At Allied Realty Group, we understand that all asset classes experience market turbulence and fluctuations in value.  Each segment of the real estate market will at some point be impacted by various economic conditions and cycles.  If you are looking to dabble in the commercial real estate market as an investment, you need to understand what a capitalization rate is. Here is a sample spreadsheet that we use to help our clients evaluate investment properties.  This one is for a 10-unit apartment building that may have made sense with lower rates, but now it is seeing red.  Investment property analysis

Calculating the capitalization rate

The capitalization rate or “cap-rate” as it is commonly named, is the ratio between the net operating income(NOI)  produced by a real estate asset and the price you paid to acquire that asset (Price).  It can be calculated by dividing the NOI by the price.  You may apply this tool in order to analyze the investment value of multi-family, industrial and office properties.  In this latest cycle (and last cycle) when the commercial real estate market was booming, most people figured that cap rates didn’t matter.  Those are the same people that found out that just like the P/E ratio matters to stock investing, the capitalization rate matters to real estate investing.  You can copy the template we attached, or just create your own spreadsheet.  In a snapshot, the math is as simple as this:

  1. Begin with the purchase price of the property you are looking at.
  2. Calculate the total annual rent for all of the units in the building, which is called the Potential Gross Income (PGI).
  3. Subtract 5.00% of the PGI for your Vacancy and Collections Loss and you now have the Effective Gross Income number (EGI).
  4. List your annual operating expenses for the property, which include the following:
  • Real  Estate taxes
  • Any Miscellaneous Fees
  • Insurance
  • Electric, Utilities , Water and Trash Expense
  • Repairs and Maintenance (Typically 5.00% of EGI)
  • Reserve for Replacement (Usually 2.00% of EGI for larger building repairs)
  • Any Miscellaneous Expenses
  • Management – Usually between 5-10% of EGI, (even if you plan to manage it yourself, there is still a value placed on your time)

Now, subtract your total operating expenses from the EGI to obtain the NOI figure. Divide the NOI / Price and you will now have the capitalization rate for the property. If you would like to see your annual net income figure, just subtract the annual cost of your debt service on the property and what’s left over is the Annual Net Income figure.

Keep in mind that the lower the cap rate, the lower your investment return is on the property.  With that being said, a 10 CAP is much more attractive than a 6 CAP.  Some of the prime, class “A” properties trade at a lower cap rate due to the higher quality.  As an owner or prospective owner of real estate assets, you need to need to understand the fundamental analysis that drives market pricing. Regardless of any current market turbulence, Allied Realty Group will provide sound advice and help you formulate a long- term real estate investment plan.  Buying commercial real estate requires substantial due diligence.  After all, you don’t want your commercial property to look like this:

Capitalization rates matter

Cool Reads and Tunes

If you enjoy listening to podcasts, you may want to give this one a try:  Bloomberg Real Estate Report .  They have a variety of topics on commercial and residential real estate.

Posted in Commercial Real Estate, Investment Property | Tagged , , , , | Comments closed

Hot in the city

Summer is here and it’s getting hot South Florida.  Every few weeks we like to update the average sale prices, transaction volume, inventories and foreclosure activity.  Today we will provide a snapshot of the Miami, Florida residential market in comparison to it’s neighbors down here.

House prices remain hot (in Miami)

Miami house prices

House prices in South Florida have remain elevated through the early part of 2018.  Here is a look at the average sale prices in March for each county:

  • Miami-Dade – $535,462
  • Broward – $432,001
  • Palm Beach – $580,913

Condo prices – not so hot in Miami

Not hot condos

Condo prices in Miami appear to be on the decline.  Here is a look at the March average sale prices for the tri-county area:

  • Miami-Dade – $407,489, down from $435,262 in February
  • Broward – $218,241, down from $220,316 in February
  • Palm Beach – $288,058, up from $258,179 in February

Transaction volume got hot after a break

Transaction volume climbed during the month of March.  This next chart shows transaction volume for houses in Miami, Fort Lauderdale and Palm beach markets:

Hot houses in South Florida

The transaction numbers were as follows:

  • Miami-Dade – 1,104 deals closed, up from 820 in February
  • Broward – 1,338 deals closed, up from 1.024 in February
  • Palm Beach – 1,669 deals closed, up from 1,216 in February

How about the condo market?

Condo sales got hot again in The Fort Lauderdale area and Palm Beach, but remained lower in Miami.

Miami condos

Here is a look at the number of transactions in march and the month over month change from February.  The numbers climbed significantly in Broward and Palm Beach county, not so much in Miami-Dade:

  • Miami-Dade – 1,043 closed sales, up slightly from 983 in February
  • Broward – 1,524 closed sales, up 22% from 1,252 in February
  • Palm Beach – 1,347 closed sales, up 41% from 953 in February

What else is hot?

Foreclosure filings continue to climb across South Florida, with the largest jump in Miami filings.

Foreclosures are hot in Miami

Hot tracks and hot reads

You may not consider this tune “hot”, but to stick with our theme we figured we would include this tune from Billy Idol .  Stay cool out there folks, summer is here!

Posted in Market Insight, Miami real estate, South Florida Real Estate | Tagged , , , | Comments closed

If it all falls down

What will happen if it all falls down?   I guess the housing “recovery” has been fun, but it looks like transaction volume continues to decline.  Today we will look at the Greater Fort Lauderdale / Broward County Florida residential real estate market.  The average monthly transaction volume has been declining since peaking in 2015.

Deal volume falls in Fort lauderdale

As for the monthly average transaction volume, here is a chart showing the numbers since 2012 in Broward County, Florida:

 Average Monthly Transaction Volume
2012          2,555
2013          2,647
2014          2,636
2015          2,829
2016          2,815
2017          2,668
2018          2,428

The annual transaction volume numbers show the same downward trend over the past few years:

Annual deal volume falls in Fort lauderdale

Broward residential  transaction volume
2012       30,657
2013       31,768
2014       31,629
2015       33,950
2016       33,782
2017       32,013

Median sale prices for single-family homes have held up through the month of March.  Take a look of this next chart which shows the following median sale prices for March 2018

  • Tradtional sales – $355,000, up from $340,000 in February
  • Foreclosure sales – $302,617 up from $225,000 in February
  • Short sales – $280,000 up from $242,500 in February

Note the sharp climb in median sale prices of short sales and foreclosures.  This shows that the higher-end distressed properties are finally making their way to market after spending nearly a decade in the court system.  Keep in mind that the property owners that have the money for an attorney have been able to delay the property sales for nearly a decade.  As we have discussed at length, the foreclosure problem in South Florida will continue to linger for years to come.

Foreclosures, short sales Fort Lauderdale

How about condo properties in the Greater Fort Lauderdale area?  There was a big jump in short sale prices.  Once again, this further illustrates that some higher-end distressed condo properties are finally being sold.

  • Tradtional sales – $165,000, up from $160,000 in February
  • Foreclosure sales – $110,000 falls from $144,500 in February
  • Short sales – $162,500 up from $140,000 in February

Fort Lauderdale REO price falls

Mortgage rate falls slightly this week

As for the mortgage rate, there was a slight decline from last week.  Transaction volume has been fighting an uphill battle since rates have climbed.  The path to normalization may be a bump one for housing.  If mortgage rates continue their path higher, you will certainly see the sale prices of houses and condos declining.

mortgage rate falls

Good Reads & Good Tunes

Instead of a “Good Read”, today we will leave you with a classic tune from Jimmy Buffet

Posted in Foreclosure activity, Fort Lauderdale real estate, Market Insight, Mortgage rates, South Florida Real Estate | Tagged , , , , | Comments closed
  • Meet the Broker
  • Commercial Listings
  • Residential Listings
  • Allied Realty Group, Inc
    2550 North Federal Highway
    Suite 200
    Fort Lauderdale, FL 33305

    Phone: 954-586-8400
    Fax: 954-586-8410
    Email: Contact Us