US real estate bubble: Costantini predicts how Miami real estate prices will “hit”

The Ghosts about the housing bubble burst in the US alert to the world. In terms of numbers, the value reached by real estate between 2020 and 2021 is well above the maximum reached in the 2007 bubble.

For example, offices and industries, RetailAnd the several families And hotels, on average 52.8% over 2007 and last year they went up an average of 16.1% over the same period in the previous year. Residential real estate posted a year-over-year increase as of March 2022 of 20.9% in the country overall and 31.4% in Miami, and more specifically in Floridaone of the countries benefiting most from the pandemic: a market in which demand from millionaires looking for quality of life has fallen.

In this way, what is happening in the real estate market mirrors what is happening in other industries as well. In other words, “everything went up,” from properties to cryptocurrencies, raw materials, cars, furniture, bikes, bonds, There is a general bubble. The Fed pumped money, the government pumped spending and deficits 16% (in the US) and inflation 7.8% in dollars. Now you have to pay for the party.

in this context, Fear of a collapse in real estate selling prices haunt the world. Eduardo Costantini, creator of Nordelta, and the man with $2 billion in sales on his two Oceana projects in MIami, a brand high end One of the residential projects that also opened a few weeks ago in Argentina (Puerto Madrio), talk to her Nation on me What is happening in the US real estate market and what are the real possibilities to “pop”.

The first thing to do when analyzing what is happening is to segment the US real estate market. you have the Residence Which is real estate for the middle sectors, on the other hand, high strip Expensive properties end. This is at the same time being bypassed by countries that were recipients and benefited from the pandemic and countries that were somehow disadvantaged,” the businessman begins the analysis.

What is the reason for the rise in real estate prices?

In general, there was already A huge rise in real estate values ​​driven by the strong economic recovery that occurred from 2021 due to the great assistance provided by the US government: Subsidies. In other words, the amount of money distributed was such that it increased the savings of the family, the money they get without working. They were at home and received the checks.

The other factor that affected is Practically very low interest rate of 0.25%. From there, there has been a strong economic recovery coming at the end of last year and so far in 2022. Families, who had become wealthy in quarantine, went out to buy homes whose prices had skyrocketed and they paid very much. Low mortgage payments because of the low interest rate.

What is happening now is that due to the sharp rise in inflation, the US government has come out to raise the interest rate and reduce the amount of money. This situation has had repercussions, and the latest data on the real estate market targeting mid-tier sectors indicates its existence Reduction in the number of operations by about 20%. And it’s a lot At a price level that is 20% higher than last year.

Why did the sales drop?

The decline in operations is first of all a product of price hikes but also due to When the family tries to buy a house, they see that it is 20% more expensive, moreover, the monthly premium they have to pay has increased by 30 or 40% due to the higher rate of interest.. This situation leads to the fact that they cannot pay it or that many of them do not qualify for the credit standards because the fees they have to pay are out of balance with the salaries. It is these variables that affect this entire part called ResidenceWhich has a significant impact on global activity and the faltering US economy. We don’t know what the consequences will be, but it is clear that there is a before and after. Certainly There will be a fall in prices and an accumulation of inventory by the industry.

Are there families at risk of not being able to repay loans and having to auction their homes?

If you get fixed rate credit, the premium won’t go up any more, but if you have a variable rate, yes, but the truth is I don’t see that risk because most mortgages are at fixed rates.

What is happening in the real estate market? high end?

market high end It still does not take note of the uncertainty that occurs in the capital market. From rising rates and the price of energy and food and inflation in general, the stock market has fallen 15% in dollar terms from the 500-company index while the technology sector, which was once the benchmark for market appreciation, has fallen 20% from its cap. There is a lot of uncertainty now as to whether the market will continue to fall and the trend alcohol market Declining market – or if it has already corrected You will behave relatively well. we do not know. What we do know is that investment groups continue to buy land at very high prices and high end Keep pushing as if nothing happened.

How does this new picture affect the US real estate market in Miami?

Miami continues to sell well, especially home sales at record prices. I Feeling It will slow down or it will calm down. My feeling is that. we are in critical transition period You have to wait three to six months to see where the economy, rates, and inflation are going.

But can we talk about a real estate bubble?

more than a bubble There has been a very large increase in production, a very large recovery in the economy, and there is a mismatch between supply and demand. There is more demand than supply but that may change now. This depends on what happens to the macro. The macro economy is doing very poorly in terms of stagnation as well as inflation and there can be a sharp drop in prices. Then, as in the past two years, a bubble could occur.

Do you see any resemblance to the 2008 crisis in the Miami real estate market?

I don’t see anything like the last crisis in 2008-2009 happening, At that time when the market fell, buyers had no way to pay for the properties, so they returned the apartments to the developer or to the banks. Now it has nothing to do with that because you pay more. Second, there are much stronger hands that have entered Miami: businessmen, millionaire owners who have an orchestrated plan to stay in that city. It can be modified but it will be 15% of the values ​​in high end. In other words, a little can be sold but I don’t see the 2008-2009 crisis at all.

Did the investors who bet on the Miami market do business?

The person who invested in high-end real estate did an amazing job And the one who didn’t bet on the market high end Also because this 20% increase also applies to mid-quality apartments, properties that have increased as well as salaries and prices as a result of inflation. You have to look at it in real terms. Homes are up 20% but inflation was 8% so the real rise is 12%. Now the government has to lower the inflation rate, and that’s why it raises the interest rate, the key will be to see how the markets and values ​​are rearranged and whether that rate hike doesn’t mean a mini-recession in the US.

Leave a Comment