Advice

Hello friends and fellow Real Estate Investors, In the past, I have kept in touch with you and have always given you my best advice. For those of you that remember, I recommended that you should liquidate your Real Estate holdings and take your profits almost 7 years ago! I was able to save some of you a lot of money and grief. For those that did not listen, I am sorry, but don’t feel too bad... as no one saw or believed what was coming, would ever be so severe. Below is my latest take on the current state of affairs in the South Florida Real Estate Market‌ and a bit of good news!

Over the past 40 years, there have been four major cycles in the South Florida Real Estate market according to the "National Association of Realtors". Each of the down cycles bottoming out in the years: 1974, 1982, 1992, and most recently, 2007. Each downturn in the past 40 years

has had its unique issues like high interest rates, oil prices, demographics, and the recent financial meltdown. One thing we noted that has always been a constant; all of the South Florida Real Estate downturns have been amplified due to overbuilding. In addition, the downturns have always proved to be temporary. These cycles begin with a strong rental market as buyers are on the sideline and concerned with the slower market. Then, the renters begin to move into “first time homebuyers” as they see prices stabilizing. This begins to fuel an increase in prices and the market cycles up. Over the next 4 to 8 years, until there’s a feeding frenzy on the high end and the necessary correction to make prices affordable once again. So based on this historical track record, South Florida is poised for a run up that has already started, and will continue until prices are at an all time high again!

Historically, from the 60's to the early 2000's, South Florida’s Real Estate prices increased 5%, doubling every 15 years. From 2002 to 2006, we saw 20% per year increases, which raised the 45-year average of appreciation to 7%. We must remember that these increases are on the total value of the property, which was normally purchased with usually less than 20% cash down. So in effect, a 5% price appreciation on a 20% cash down purchase is a 25% return on the money invested. “Nice”, but unsustainable.

Note: In an upward cycle - inventory drops. In a downward cycle inventory rises. We have seen inventory triple in the past four; however, in the fourth quarter of 2011 we started to see a stabilization of inventory and even some declines in certain markets.

"The good news is that when we have positive increase in unit sales, An increase in prices will surely follow!"

*Current Highlights of South Florida's Real Estate market, Data by Miami Realtors:* Miami home prices increased for the fifth consecutive month in April. The median price for condos increased 30% to $150,000, from the previous year. The price for single-family homes rose 8.2% to $183,000.

The median sales prices for non-distressed properties sold in April in Miami-Dade were $253,400 for single-family homes and $246,250 for condos.

Price appreciation should continue due to limited supply and strong demand from both U.S. and international buyers.

The Miami residential real estate market continues to show remarkable

strength compared to the rest of the market. Miami is the top market in the Nation for foreign buyers and investors.

In Miami-Dade, 64% of total closed sales in April were all-cash sales. Nearly 90% of international buyers in Florida purchased properties all-cash.

For those of you who have been waiting four or five years for home prices to stabilize and start edging back upwards, we are essentially there.

What does all this mean to you?

NOW IS THE TIME TO BUY! In my opinion, we will slowly see this market stabilize over the next few months and slowly gather strength over the next one to two years. If you have thought of buying or investing in real estate in South Florida, the timing is right! As interest rates are still at record lows, remember the old axiom "Buy Low & Sell High".

The unfortunate ones that were caught at the end of the high cycle in 2007 are the ones currently in trouble. Those of you who want to maximize your return on investment, the timing could not be better, but the window is closing quickly!

My final recommendation, if you have decided to purchase real estate and diversify your retirement portfolio, is to find yourself a competent Realtor to represent and assist you in your buying process. Don’t make the mistake of calling a random phone number from a yard sign, because that person is representing the seller and will not be looking out for your best interests. As a buyer, you have the distinct advantage of FREE professional assistance and advice, since the seller pays all commissions and fees.

Thanks for reading, and good luck out there!