MiamiRealEstateKing

MIAMI-DADE: INVESTORS WIN. RENTING MAY BE YOUR ONLY CHOICE – BUT NOT MAKE THE MOST SENSE FOR YOU.

In real estate on January 18, 2011 at 12:52 pm

According to an article published in today’s Miami Herald, the rental market is getting stronger.

Surely, with all the foreclosures taking place (23,000 in 2010 in Miami-Dade according to a recent article from Condo Vultures), and 34,400 foreclosure filings in 2010 according to Miami-Dade county records), these owners are unable to do anything other than rent these days and for a long time coming.

In fact, each foreclosure actually slows down our recovery since none of these previous owners will be likely able to buy for several years. That’s some 23,000 in 2010 alone according to the Condo Vultures report. Instead, lenders should be looking to facilitate short sales since these sellers would be able to qualify for a mortgage and buy again possibly in as few as 2 or 3 years, helping our recovery, stabilizes prices faster and costs everyone less.

Add the urbanizing young professionals emancipating, divorcing or divorced couples and other demand forces to the equation in addition to the fact that few if any new units are coming to market and others are being left vacant, converted to hotel or other use, and you have a perfect storm for investors to gain cash flow opportunities and net worth as property values improve.

The decision to buy or rent is often a difficult one. On the one hand, you get the guy named in the Miami Herald’s article whose rent went up 29% and wonders what in the world is the landlord thinking. After all, there are so many vacant properties out there, right?

The problem is that, lenders are keeping these vacant, foreclosed properties vacant, which is keeping the availability (supply) of rental units low. I mean, if lenders foreclosed 23,000 units in 2010, that means that there are 23,000 vacant properties which are neither occupied by owners or renters. In fact, this also means that there are 23,000 families now occupying that many rental properties somewhere else in town. This is what has kept many builders who have unsold inventory afloat, and paying their loans.

Buyers on the other hand have the opportunity to buy repossessed properties but, unless they are packing CASH…they’re out of the equation. Well over 80% of properties these days are selling for cash. Among the distressed properties sold (almost 72% of all distressed properties sold in December, 2010 were foreclosed properties – http://wp.me/p9Ggo-e4), this number is much higher and probably closer to more than 90% sell for cash.

This means that many would-be buyers who are unable to pay all cash and still have funds for repairs, etc will have to continue renting – at whatever the landlords want to charge these days and probably…for a few years to come.

Of course, builders are probably salivating and closely watching the time they’ll be able to come back and build for this under $200,000 price-point buyer (this is the most coveted and sought after market segment by investors and first-time buyers alike).

Just the same, don’t guess or take someone else’s word for it. If you are in the market to buy or you are tired of renting and watching your rents go up year after year, visit http://tinyurl.com/ShouldIRentOrBuy, enter your own numbers and see if buying instead would make better sense for YOU.

Typically, if you intend to stay in the property for AT LEAST 5 to 7 years or more, you are likely to do better buying. Still…do the math yourself using the above link.

Remember though that, lending is still shaky and you are likely to need an above average score, a 20-30% for down payment and closing costs (unless you are able to get into a Freddie Mac, Fannie Mae or FHA program – which there are still few properties that qualify for these), must be able to show all income sources and speaking with a professional Mortgage Broker or knowledgeable Bank Lending Officer BEFORE you start shopping, is critical in this market.

Investors and buyers with cash or access to cash for property acquisition and repairs, etc are going to be the new rich kids in town. These folks are buying at up to 65% discount over today’s Median Closed Prices (again, refer to my earlier post: http://wp.me/p9Ggo-e4).

The Average Closed Price* for REO’s in December, 2010 was $121,000 000 (down 4.9% from November, 2010 and down 7.5% from December, 2009), compared to Miami-Dade’s overall Average Closed Price of $271,000 (up 12.4% from 11/2010 and down 5.2% from 12/2009), this is a potential discount of almost 45% by buying REOs over others.

The Median Closed Price* for REOs in December, 2010 was $84,000 000 (up 7.7% from November, 2010 but down 11.6% from December, 2009), compared to Miami-Dade’s overall Median Closed Price of $130,000 which was down 3.7% from 11/2010 and down 18.7% from 12/2009.. This means that, as of the things are now, buying an REO may provide an additional 64.6% discount over non-REO purchases based on the Median Closed Price levels.

Therefore, cash buyers and any owner-occupant able to pick up one of these deals (especially from HUD, Freddie Mac or Fannie Mae), will be the biggest winners in 2011 – and the opportunity window is closing fast.

* All reports are published January 2011, based on data available at the end of December 2010. This representation is based in whole or in part on data supplied by Realtor Association of Greater Miami and the Beaches, Realtor Association of Miami-Dade County, Realtor Association of Greater Fort Lauderdale and Northwestern Dade Association of Realtors. Neither the Board or its MLS guarantees or is in any way responsible for its accuracy. Data maintained by the Board or its MLS may not reflect all real estate activity in the market.

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