I am sorry to break the news to you – you might not want to read on.
You see the sad thing is, you have already missed the tipping point in Miami’s property market, unless you were one of the very lucky few to get in early.
Unfortunately, tipping points by their nature are difficult to spot, if we miss subtle clues. Us human beings often don’t see them until they have been and gone. Sometimes they are staring us right in the face – we still don’t see them.
So how do you spot that turn in the market before it’s too late, is there anything that tells us when it is near?
It might surprise you to hear this, but the tipping point can only occur when something hits rock bottom – when the pain is at its worst.
It’s like going to the park and sitting on a seesaw, you don’t expect to be raised upwards until you are touching the floor.
As body builders often say, if there is no pain then there is no gain. It is when all seems lost and people start throwing the towel in, hold their hands up and saying, “That’s it – this just isn’t going to happen. I am just going to make it easy on myself and give up on this house.”
Yet in property investing as in life, it is when things seem at their darkest that the light is just around the corner.
This point was reached in Miami in 2008. This was the time when Miami property prices had fallen by nearly 17.5% in twelve months. The city had made it through the worst years between 2006 and 2008 when prices went into reverse across the USA, yet the city wasn’t immune.
Cranes stood motionless and developers began making huge losses.
In August of 2008, Miami housing stock levels stood at 46,000 enough to satisfy demand for several months. Few people would have bet on a recovery back then.
As demand had fallen, so too had demand for construction workers. Who needs them when there is already plenty of homes to go around?
The longer the slump went on, the more construction workers started looking for alternative career paths in the US.
The market went quiet but the tipping point was coming…
Instead of phoning up a plumber and being sent to an answer machine, you would now have them picking up the phone in seconds, work was drying up.
The remaining housing stock satisfied demand for a time, but the clock was already ticking
Since 2000 the population of Miami has risen 93% and they are young, 55% of them are between the ages of 24 and 44 according to a survey from 2011.
A rising population meant that more housing stock was absorbed and as the cranes left the skylines and builders were finishing off their degrees in subjects like computing, fewer properties were built.
The tipping point arrived some time in 2011. It was foreign investors mainly from South America who saw it coming first.
As of March 2013, the housing stock level in Miami stands at 11, 920, enough to last just 5.3 months. To put this in perspective, there are 75% less properties on the market than in 2008.
Miami is not alone. The US is facing a struggle even now – remember all those construction workers who had to get jobs doing something else?
There is still a national shortage of construction workers according to this month’s FT.
The number of home building jobs in the US fell 43 per cent from 3.45m to 1.984m between 2006 and 2011, according to the Bureau of Labor Statistics. So good builders are hard to come by at just the time when they are needed to help satisfy demand.
The good news is, that the value of Miami property continues to rise by 20% a year according to figures released this month. There is no sign of a peak on the horizon as strong demand and limited stock levels are continuing to drive the market.
How long it will last is a tough one to call, my advice is if you still want to catch the capital growth potential in Miami property, you will need to act sooner rather than later.
Where do you think the next big property turnaround will be? It would be great to hear your thoughts.