A DOZEN years ago, I lived through the hype machine of the energy trading industry in Houston.
Enron and other firms were transforming themselves into investment banks for traders of natural gas and electricity. They sometimes booked profits today on revenues not expected for another decade. Companies showed off their state-of-the-art trading floors. One hired Ray Charles to sing at a dinner for analysts. We all know how that story ended.
There have been other bubbles, of course — particularly in the technology sector — but these days, I’m having flashbacks to my Houston days when I visit Miami and learn more about its high-end real estate market.
Demand for expensive waterfront properties, much of it coming from South Americans and other foreigners looking to park their cash, has the industry punch-drunk with enthusiasm. Miami agents are putting off vacations (lest they miss a big sale), and some are regularly flying to South America on sales missions.
It’s a roller coaster that has a lot of people shaking their heads in disbelief. After all, as recently as two years ago, Miami was the poster child for distressed real estate. “Now it is redefining itself through luxury real estate,” said Jonathan J. Miller, president of Miller Samuel, an appraiser that produces a quarterly report on Miami for Douglas Elliman Florida.
“It is like it got rebranded,” he added.
But is it a bubble? Or, to frame the question more specifically, just how sustainable — and healthy — is this recent boomlet?
The truth is that Miami, more than any big city in the country, has two very different real estate realities somehow coexisting, at least for now.
On the one hand, there are the nondistressed properties along the water, where sales activity is climbing, prices are on the rise, and some record sales this year have captured the industry’s imagination.
A penthouse on South Beach sold to an Italian for $25 million. A single-family home in Indian Creek sold to a Russian for $47 million. And the telecom mogul Peter Loftin listed the former Gianni Versace mansion on Ocean Drive (where Mr. Versace was murdered) for $125 million.
Foreign purchases — which analysts estimate make up a third of all sales in Miami and very likely more than half of sales over $1 million — are driving much of the sales activity. New Yorkers have also played a big role, brokers say. And cash is king: nearly 73 percent of nondistressed condo sales, and 76 percent of distressed condo sales, were all-cash in the third quarter of this year, Miller Samuel said in its most recent Miami report, released in the last week. Continue reading