Miami Beach Condo Market Prices in South Beach Increased 10.34% in Q3 2014

Miami Beach Condo Market Overview

Summary 1 – Miami Brickell 33131 12-Month Sales & Listing Activity Summary

Summary 1 – 12-Month Sales & Listing Activity Summary - Miami Beach, FL 33139

The Miami Beach condo market prices in South Beach (Miami Beach, FL 33139) increased 10.34% Year-Over-Year (Table 1) during Q3 of 2014. However the Avg. Sales Price decreased 6.34% from Q2/2014 all-time high of $620/SqFt of to $576/SqFt (Figure 1). Q3 is normally the "Low Season" for real estate in South Florida. The high demand for condos has been further fueled by local and international cash buyers, improving US economy and unemployment numbers. However the stock market has been on a steep decline the past two months, which could translate into lower sales in Q4/2014 and Q1/2015.

 

Miami Beach Condo Market Sales Price Analysis

Figure 1 – Avg Sales Price Per SqFt Q3 2014 - Miami Beach, FL 33139

Figure 1 – Avg Sales Price Per SqFt Q3 2014 - Miami Beach, FL 33139

The yearly low season in South Florida is normally during the third quarter, which is when prices tend to be driven lower as the number of tourists drops substantially due to the seasonal hot weather, tropical storms and humidity conditions. During this quarter there has been a large increase in inventories in some of the market segments and as a result the prices have been driven a bit lower than during the second quarter.

The past three quarters Q1/2014, Q2/2014 and Q3/2014 showed a Year-Over-Year Avg. Sales Price/SqFt growth of 15.31%, and 13.47% and 10.34% respectively (Table 1). They also have set new all-time high records for Avg Sales Price Per SqFt.

Table 1 – Year Over Year Avg. Sales Price/SqFt Change Q3 2014 – Miami Beach, FL 33139

Table 1 – Year Over Year Avg. Sales Price/SqFt Change Q3 2014 – Miami Beach, FL 33139

 

Miami Beach Condo Market Prices Segmentation Analysis

One might think that prices are very uniform in condo-units that are within the same neighborhood or building. However the reality of it is that, in most cases, it can be found that some condo-units have two to three times (2X to 3X) higher Sales Price/SqFt than other condo-units located in the same building or within the same neighborhood. There are several factors that are responsible for this type of segmentation. Three of the most important ones are, number of bedrooms, location and views. We will now analyze the Avg. Sales Price/SqFt market segmentation for South Beach, based on number of bedrooms.

Figure 2 – Four-BedroomPlus Condominium Avg Sales Price Per SqFt & Trend Q3 2014 – Miami Beach, FL 33139

Figure 2 – Four-BedroomPlus Condominium Avg Sales Price Per SqFt & Trend Q3 2014 – Miami Beach, FL 33139

There were no sales of 4-bedroom+ condos during Q3/2014 in South Beach. This is the first time in several years when this has happened. This may be the result of several factors such as the limited number of condos of this type on the most highly priced buildings, the asking price of the new listings being too high versus what investors are willing to pay; in which case this could be an early signal of a slowing down of this market segment.

Figure 3 – Three-Bedroom Condominium Avg Sales Price Per SqFt & Trend Q3 2014 – Miami Beach, FL 33139

Figure 3 – Three-Bedroom Condominium Avg Sales Price Per SqFt & Trend Q3 2014 – Miami Beach, FL 33139

The 3-bedroom Avg. Sales Price Per SqFt (Figure 3) for Q3/2014 was $888/SqFt versus $1,013 for Q3/2013. This is a Year-Over-Year decrease of 12.34%. This chart has had an upward trend which it has maintained over the year, except for this past quarter. This may be an early signal that the Avg. Sales Price/SqFt for this market segment is beginning to cool off, mostly due to a combination of high listing prices, lower seasonal demand and very low inventory. We will have to wait for the sales numbers of Q4/2014 and Q1/2015 to confirm this.

Figure 4 – Two-Bedroom Condominium Avg Sales Price Per SqFt & Trend Q3 2014 – Miami Beach, FL 33139

Figure 4 – Two-Bedroom Condominium Avg Sales Price Per SqFt & Trend Q3 2014 – Miami, FL 33131

The 2-bedroom Avg. Sales Price Per SqFt (Figure 4) for Q3/2014 was $660, versus $569 for Q3/2013. This is a Year-Over-Year increase of 16%. The Q3 Avg. Sales Price Per SqFt Year-Over-Year for this market segment has been on a steady increase since Q3/2010 and it does not look like it is slowing down. We can expect the price for this market segment to continue to increase in the next year.

The 2-bedroom Avg. Sales Price Per SqFt for Q3 was 25% cheaper than the 3-bedroom one.

Figure 5 – One-Bedroom Condominium Avg Sales Price Per SqFt & Trend Q3 2014 – Miami Beach, FL 33139

Figure 5 – One-Bedroom Condominium Avg Sales Price Per SqFt & Trend Q3 2014 – Miami, FL 33131

The 1-bedroom Avg. Sales Price Per SqFt (Figure 5) for Q3/2014 was $486, versus $445 for Q3/2013. This is a Year-Over-Year increase of 9.21%.The Q3 Avg. Sales Price Per SqFt Year-Over-Year for this market segment has been on a steady increase since Q3/2010 and it also does not look like it is slowing down. We can expect the price for this market segment to continue to increase in the next year.

The 1-bedroom Avg. Sales Price Per SqFt for Q1 was 83% cheaper than the 3-bedroom Avg. Sales Price Per SqFt, and 35% cheaper than the 2-bedroom one.

 

Miami Beach Condo Market Top 10 Selling Buildings

Table 2 – Top 10 Condo Selling Buildings Q3 2014 – Miami Beach, FL 33139

Table 2 – Top 10 Condo Selling Buildings Q3 2014 – Miami Beach, FL 33139

Figure 6 – Top 10 Condo Selling Buildings Chart Q3 2014 – Miami Beach, FL 33139

Figure 6 – Top 10 Condo Selling Buildings Chart Q3 2014 – Miami Beach, FL 33139

The Avg. Sales Price Per SqFt is set by those buildings that have the most sales activity. The top 10 buildings that have set the highest sales volume year-to-date are shown in Table 2 and Figure 6.

During Q3 of 2014, the Continuum South Tower had the highest Sales Volume ($62,225,000). The Setai had the second highest Sales Volume ($53,225,000) as well as the highest Avg. Sales Price Per SqFt ($2,786). The Floridian and the Icon South Beach had the largest number of sales (22 and 20 sales respectively), with the Murano Grande having the smallest Avg. Days On the Market (117 days). The highest Avg. Sales Price to Listing Ratio was set by the Floridian Condo with 96.4%.

This information can be extremely useful for investors and brokers in order to know where most of the sales are coming from, which are setting the market trends. It can signal investors which buildings to invest in or stay away from based on the various metrics values. Brokers can better allocate resources and marketing dollars based on the top selling and listing buildings (which will be analyzed in a section later on).

 

Miami Beach Condo Market Inventory Analysis

Table 3 – Year Over Year Inventory & Absorption Rate Change Q3 2014 – Miami Beach, FL 33139

Table 3 – Year Over Year Inventory & Absorption Rate Change Q3 2014 – Miami Beach, FL 33139

Figure 7 – Number of Sales & Trend Q3 2014 – Miami Beach, FL 33139

Figure 7 – Number of Sales & Trend Q3 2014 – Miami Beach, FL 33139

Figure 8 – Number of Listings & Trend Q3 2014 – Miami Beach, FL 33139

Figure 8 – Number of Listings & Trend Q3 2014 – Miami Beach, FL 33139

As I mentioned before, the Avg. Sales Price Per SqFt across the one and two bedroom market segments set new record highs during Q3 of 2014. However the inventory absorption numbers shown in Table 3, reflect that there has been a substantial accumulation of inventory in the past three quarters. In Q3 2014 there were 273 sold condos versus 552 new listings (Figures 7 and 8). This is an absorption rate of 49.5%, with an net increase in inventory of 279 condo-units. When compared to the previous four quarters we can see that the Year-Over-Year absorption rate change were -15.9% for Q4 of 2013, -18.3% for Q1 of 2013, -24.6% for Q2 of 2014 and -54.1% for Q3 of 2014 (negative absorption rates indicate accumulation of inventory). The net effect of this is that there has been an acceleration in the quarterly inventory accumulation of condo-units from -3 in Q4 of 2013, 103 in Q1 of 2014, 162 in Q2 of 2014 and 441 in Q3 of 2014 (Table 3).

This indicates that the market is slowing down and it has been consistent in the past four quarters. There is also the fact that the new listings have increased 52.07% Year-Over-Year, from 363 in Q3 2013 to 552 in Q3 of 2014. The net effect of this is that we are having an accumulation of listings that will compete for the number of buyers for each quarter. This will further increase the competition with the new listings coming up in the next quarters, and unless more buyers come into the market, then we will see an increase on the amount of time that it takes to sell a condo – Days On The Market (DOM) and a decrease of prices in some of the market segments.

As always, everything is based on supply, demand and easy access to capital and lending. Right now due to the mixed levels of inventory, this is a seller’s market in some of the market segments and a buyer market in some of the others. However with potential further increases in interest rates, we can expect to see certain market segments sales to slow down. The luxury market is not normally limited by loans as most of the sales are cash transactions. So I expect, based on the luxury market trends and limited inventories, that we will continue to see higher sales price per SqFt during the year 2014 and the first half of 2015.

 

Miami Beach Condo Market Days On The Market (DOM) Analysis

Figure 9 – Avg. Days On The Market & Trend Q3 2014 – Miami Beach, FL 33139

Figure 9 – Avg. Days On The Market & Trend Q3 2014 – Miami Beach, FL 33139

The Days On The Market is a key metric that can show the effect of imbalances in supply & demand and listing and selling prices. When it is higher than 180 days or it is increasing, it shows a potential oversupply of inventory and/or unrealistic listing prices; it signals a buyer’s market and it may lead to decreasing selling prices. When it is lower than 180 days or it is decreasing, it shows a potential limited inventory and/or increasing sales prices; it signals a seller’s market. As each building and neighborhood has its own ecosystem of pricing and inventory behavior, none can really characterize what the typical number of Days On The Market (DOM) is for them. This is why it is key to be able to obtain the actual Days On The Market chart for each building (and each market segment within the building if possible).

For the South Beach area, we can see that the Q3/2014 Avg. Days On The Market was 159 days versus 136 days in Q3/2013, a 17% increase Year-Over-Year change (Figure 9). Even though there was a very steep downtrend on the Days On The Market from Q1/2011 to Q4/2013. The Avg. DOM chart shows that there was a bottom in Q4/2013, with the DOM increasing to 140 days in Q1/2014, with a pause during Q2/2014, and then increasing to 159 days in Q3 2014. This DOM increase, combined with the increase in inventory, and the decrease in absorption rate, sets a clear signal that some of the market segments are slowing down. We will continue to track this metric for Q4/2014 and Q1/2015 to look for further confirmation.

 

Miami Beach Condo Market Sales-To-Listing Price Ratio Analysis

Figure 10 – Avg. Sales To Listing Price Ratio & Trend Q3 2014 – Miami Beach, FL 33139

Figure 10 – Avg. Sales To Listing Price Ratio & Trend Q3 2014 – Miami Beach, FL 33139

The Avg. Sales to Listing Price Ratio (SP/LP Ratio) is another key metric that when combined with inventories and Days On The Market, can show the effect of imbalances in supply & demand and listing and selling prices. When the Avg. Sales to Listing Price Ratio is higher than 94% or is increasing, it shows a potential limited inventory and/or increasing sales prices; it signals a seller’s market. When it is lower than 93% or it is decreasing, it shows a potential oversupply of inventory and/or unrealistic listing prices; it signals a buyer’s market and it may lead to decreasing selling prices.

For the South Beach neighborhood, we can see that the Q3 of 2014 Avg. Sales to Listing Price Ratio was 95% versus 96% in Q3 of 2013, a Year-Over-Year decrease of 1% (Figure 10). From the chart we can also see that the Avg. Sales to Listing Price Ratio hit a bottom in Q2 of 2009 with 90% and it took over one year to recover to levels over 94% in Q3 of 2010. It has since, been on a range between 94% and 96%, clearly a seller’s market. I will also continue to monitor this metric in Q4 of 2014 to see if it moves lower than 93% as it will start flirting with a Buyer’s market and will start increasing further the Avg. Days On the Market.

 

Miami Beach Condo Market Listing Price Analysis

Figure 11 – Avg. Listing Price/SqFt & Trend Q3 2014 – Miami Beach, FL 33139

Figure 11 – Avg. Listing Price/SqFt & Trend Q3 2014 – Miami Beach, FL 33139

South Beach Avg. Listing Price/SqFt has been increasing at a very steep trend since it hit bottom in Q3 of 2010 (Figure 11). From the chart we can see that Q3 of 2014 set yet another all-time high Avg. Listing Price of $802/SqFt versus $592/SqFt in Q3 of 2013, a 35.47% increase Year-Over-Year. Also the gap between the Avg. Listing Price/SqFt and the Avg. Sales Price/SqFt has increased to 39.24% in Q3 of 2014 versus 13.41% in Q2 of 2013. This may partially explain why the market has slowed down in the number of sales, as the prices are getting to a point where buyers get more selective, nervous or prefer to wait and see.

For the remainder of the year 2014 and the early part of 2015, we can expect to see further deterioration of the world economy and political environment, due to the Ukrainian crisis, which is currently affecting the European Union and Russian investors liquidity. This might hit the luxury market in South Florida more than the sub-$1,000,000 condo-units sales.

 

Miami Beach Condo Market Top 10 Condo Listing Buildings

Table 4 – Top 10 Condo Listing Buildings Q3 2014 – Miami Beach, FL 33139

Table 4 – Top 10 Condo Listing Buildings Q3 2014 – Miami Beach, FL 33139

Figure 12 – Top 10 Condo Listing Buildings Chart Q3 2014 – Miami Beach, FL 33139

Figure 12 – Top 10 Condo Listing Buildings Chart Q3 2014 – Miami Beach, FL 33139

The Avg. Listing Price Per SqFt is set by those buildings that have the most listings activity. The top 10 buildings that have set the highest listings volume year-to-date are shown in Table 4 and Figure 12. The three top buildings with the highest listings volume Year-To-Date were the Setai ($149,504,000), Continuum South Tower ($129,065,000), and The W South Beach ($114,592,,000) and. The Continuum South Tower had the highest sales volume year-to-date (of listings listed Year-To-Date) of $45,125,000 with 11 sales and an Avg. of 89 Days On The Martket. The Setai took the first place setting the highest Avg. Listing Price Per SqFt with $3,243/SqFt at the expense of only having sold three of the condo-units that were listed Year-To-Date. The W South Beach and The Portofino Tower had the highest Avg. Days On The Market with 115 and 125 days respectively.

As I mentioned before, investors can use this information to better understand which buildings are setting the listing activity and price trends in order to make their decisions on where to invest. Brokers can better allocate resources and marketing dollars based on the buildings where condo-unit owners are more likely to list their units and the type of prices that are being set for new listings and sales.