ALERT: US Real Estate Crash Imminent as Matthew threatens Miami Luxury Market

globalintelhub's picture

It isn't often such a clear market signal is painted such as the impending real estate market collapse.  It doesn't take sophistocated algorithms or an MBA from Harvard to add up the math and the data and see that we're on the precipice of a historic real estate asset cliff; and that the market is waiting for an 'event' to tip it over.  That event, it can be Hurricane Matthew.  That means this can all unfold THIS WEEK.  For those of us who have been following this trend for a long time (like, more than 10 years) this isn't news, it's just the obvious result of bad planning and decades of building a foundation on the wrong things (this is an educational metaphor - Real Estate Investors built their knowledge on the wrong ideals, the false axioms, and thus - invested in the wrong markets, on markets build on soft, unstable foundations...).

As we explain in Splitting Pennies - Understanding Forex; the entire world's economy, both micro and macro, can be explained through the prism of monetary policy.  Or in other words, if you master FOREX, you can master any market, because all markets are denominated in Forex.  Or in yet other words, markets are only able to function as a derivative of money markets - which Forex is.  

Bubbles have persisted for years, but this last bubble that caused the 2008 crisis was based on real estate.  For a long time, US real estate prices always went up; until they didn't.  So what changed in 2008?  Enter Quantitative Easing, a program designed by the Fed to create 'liquidity' in the market that was otherwise illiquid.  Starting out buying 'toxic' assets no one wanted, now the Fed has a diversified portfolio of many assets, much of which is real estate.  This is not the only thing propping up the real estate market.  Also, the Fed has given banks and hedge funds HUGE access to cheap capital, or free capital, in large quantities.  Let's take the world's largest, as the best example; Blackstone, with $100 Billion + to invest in real estate:

Blackstone, helmed by global head of real estate Jon Gray, is the largest real estate private equity firm in the world. Since raising their first opportunistic real estate fund in 1997, Blackstone has been a dominant player in the industry with their simplified opportunistic philosophy of “buy it, fix it, sell it”. Just this month, Blackstone real estate surpassed a staggering $100 billion in assets under management. As part of a push towards a longer hold, core plus strategy, they recently closed the largest ever PE real estate fund at $15.8 billion. Furthermore, Blackstone recently acquired Chicago’s iconic Willis Tower, which they plan to enhance through value add renovations and a repositioning of the tower’s retail space.

Well, not all $100 Billion is invested in Real Estate, but remember, they are leveraged, so they don't buy for cash, so it's not known what they're real 'real' estate portfolio is.  Between the Fed buying MBS (Mortage Backed Securities), Hedge Funds & Private Equity Funds like Blackstone, and your typical foreign buyers fleeing corruption or a crashing economy in their own market - real estate is highly inflated.  This is of course, exaggerated in niche areas; Los Angeles, San Francisco, Las Vegas, Boston, New York, Miami, Greenwich CT, and many, many others.  Just take a look at what you get in Ohio for $4M and what you get in San Francisco for $4M.  Hmm... Something doesn't add up here.  People in CA shocked at non-CA market values.  Hmm... and there's high state taxes in CA, and pollution, a water drought, and fallout from Fukushima irradiating the crops and population, explosion of cancers.  Where do I sign?  

Years ago, analysts said that in 50 years Florida will be underwater.  Real Estate investors didn't feel that their feet were wet, so they ignored this.  Well, these analysts were wrong - it's happening much, much, much faster.  Miami-Dade County is going to be hit the hardest.  If you don't know about this issue, read this article here "A Rising Tide" :

“This whole beautiful landscape’s going to change,” he said. Miami Beach consists of a long, low barrier island accompanied by a scattering of manmade islets. It’s one of the lowest-lying municipalities in the country, and its residents are leading the way into the world’s wetter future. Along the island’s low western side bordering Biscayne Bay, people have come to dread full-moon high tides, when salt water seeps into storm-drain outlets and the porous limestone that provides the island’s foundation, forcing water up and out into the streets and sidewalks and threatening buildings and infrastructure. And Miami Beach is just one small part of a region that’s in big trouble. If sea levels rise as projected, no major U.S. metropolitan area stands to rack up bigger losses than Miami-Dade County. Almost 60 percent of the county is less than six feet above sea level. Even before swelling of the seas is factored in, Miami has the greatest total value of assets exposed to flooding of any city in the world: more than $400 billion. Once you account for future sea-level rise and continued economic growth, Miami’s exposed property will far outstrip that of any other urban area, reaching almost $3.5 trillion by the 2070s. The sea level around the South Florida coast has already risen nine inches over the past century. Among experts, the optimists expect it to edge up another three to seven inches in the next 15 years and nine inches to two feet in the next 45 years. More pessimistic (some say increasingly realistic) predictions say the rise will be much faster. Even the very gradual rise of recent decades will make extensive infrastructure reengineering necessary—Mowry’s job. However, according to a report published by the Florida Department of Transportation, it will become difficult, expensive, and maybe impossible for these efforts to keep up with the accelerated sea-level rise that is actually expected. 

Miami is spending $500 Million building walls and drainage to address this problem.  Read the 2012 Presentation in PDF here.  But will it be enough?  And what about Hurricanes?  A Category 5 hurricane can have a storm surge of 20 - 30 feet, such as Camille in 1969.  Storm Surge is when the water rises, completely - that means the ocean will rise 24 feet (Read about it here).  Matthew, if it struck Florida, would really be Biblical.  Billions of Dollars in damage would occur, just from the storm.  And this information is not 'priced in' to this already 'frothy' market, just see spring articles about Miami's real estate crash here, here, and here.

This article being the most dramatic: "Luxury Urban Housing, Built on a Myth, Is About to Take a Big Hit".

The other info that you need to know, since the early 90's, the US Government manipulates the weather.  If you're not up to date on this topic, you can read about it here in this groundbreaking book Chemtrails, HAARP, and the Full Spectrum Dominance of Planet Earth.  Or for a simple primer on Geo-engineering, checkout No Natural Weather: Geoengineering 101.  Then, why would they allow a hurricane to smash into South Florida?  Who knows, but if you want to look at the strange correlation between military events and Hurricanes, take a deeper look at 911 and Hurrican Erin - This book Black 911 is a great start.

Matthew is now heading toward Jamaica, at which point it may settle down; Jamaica has mountains which Hurricanes don't like.  But Florida is being warned.  

Traders, tomorrow's trade is easy; put in your buy limits above the MAs on HD, LOW, and get ready to short homebuilders, and other South Florida real estate companies.  This week is going to be a wild ride for real estate, regardless if Matthew hits FL or not.

The market now is quiet, sales are down 80% in some areas (i.e. Greenwich, CT "Billionaire Capital"), but the panic selling hasn't started yet.  An event such as a Hurricane in FL, or a big Earthquake in CA, can be the tipping point that starts it.

This will hit the rent market too - as values collapse, rents will too.  Not only that, but a bad economy will put pressure on renters and their ability to pay.  This recent bubble, in both housing values, rent prices, and other assets - is just that.  A bubble.  It will pop.  And as we saw in 2008, each time the bubble bursts, the drawdown is a little deeper.  But real estate in particular recovered with the help of the Fed and numerous Fed players, as this was a political victory as well as an economic one.  It was seen as helping Main St. as well as Wall St.

There's other investments, other ways to make money than real estate, such as Forex algorithms.  But it seems that as usual, investors will need to have a huge loss before learning this lesson.  

Pain - is the only real teacher!

To learn more about the financial markets, checkout Splitting Pennies - Understanding Forex - your pocket guide to make you a Forex genius!  Or visit Fortress Capital Forex, and broaden your horizons.

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Ned Zeppelin's picture

The writer of this article may be sort of right, but he is a looney tune.

RadioFlyer's picture

Time to 'flush' out the palmetto bugs.

Rikeska's picture

South Florida hurricane panic how original.

I live here and the only thing me'n Spider and Dirty Mike and the boyz are worried about is picking the right board for the killer surf that's coming.

My trailer's gonna be fine I don't think any fancy condos are at risk.

 

 

bardot63's picture

Oregon and Washington state poisoned by Fukushima radiation --Earthquakes splitting and sliding California into the Pacific--Miami underwater from a Cat 5----I still don't see the problem.

DavidC's picture

Shame it's not Washington D.C. though...

DvidC

Canoe in the Desert's picture

More pig fart. Who cares?

 

mary mary's picture

It would affect insurance rates.  Everybody's insurance rates.

JailBanksters's picture

Who cares about real estate and people

ARE THE DRUGS SAFE !!

 

richsob's picture

Don't buy a house in a flood plain, a mile from the San Andreas fault or next to a mosque.  How fuckin' hard is it to make good decisions?

mary mary's picture

Miami New Yorkers and Miami Cubans don't have to make responsible decisions.  They are God's chosen People.  Miami is the fraud capital of the USA.  Responsibility is for the little people.

Erek's picture

If we lose Miami it will be a change for the better.

Dg4884's picture

Football sucks down there anyway.

j0nx's picture

RE is never going to crash again. I know this because I have been renting for over 3 years with cash in hand waiting for it and the prices keep going up by 15% every year. I am at the point now where I don't have much choice but to buy after the election come crash or not.

canisdirus's picture

The fact people like us can't reasonably afford RE is the exact reason RE will crash. Trust me, if the people that are your prime customers can't afford your product, you won't be selling it at those prices for very long.

Singelguy's picture

You always have a choice. Hang in there. Your patience will be rewarded. Real Estate Crash 2.0 is coming soon.

I am Jobe's picture

True. I live outside Austin, TX renting a room and cash to buy but the property taxes and price keeps going up. Not sure where and how to buy a home at this rate. 

mary mary's picture

That's one reason They are pushing Immigration so hard: They have bought up lots of rental properties and now need to keep them full (which, pleasantly for Them, will  also keep your rent high).  Law of Supply and Demand.

i2choose's picture

Doom porn for sea rise again! The link is a recent article on the south-east Florida area. The sea has been rising since the little ice age, sometimes faster, sometimes slower and sometimes due to the land sinking. The avarage over time is less than 3mm per year. It can be more if the land is sinking and less if it is rising. We have coped OK with this for the last few hundred years!

https://wattsupwiththat.com/2016/05/11/9-mmyear-of-sea-level-rise-in-sou...

Wildchemist's picture

The boy author is crying wolf and devoted too many words toward a sea level rise that's not happening except in the minds of climate change alarmists. The rate of sea level rise is half what the bleating alarmists are saying: http://realclimatescience.com/2016/02/todays-sea-level-fraud-from-the-un.... If anything Miami is sinking: http://dailycaller.com/2016/07/10/miami-is-sinking-but-that-doesnt-mean-...

Squid Viscous's picture

not going anywhere near miami, but with a little luck it will barrell into the Hampsteins like the 1938 "Long Island express"

Consuelo's picture

 

 

"...but with a little luck it will barrell into the Hampsteins"

 

Gawd that is fuckin' great...!!   

NuYawkFrankie's picture

re Miami sinking into the sea..

While the rest of the country, with the NeoCON-MEN running the show, is sinking into The Abyss

BabaLooey's picture

The idiots that bought real estate in Miami are fools.

Andrew taught these idiots nothing.

The fear up here in Central Florida is a mass migration of these fuckers up here.

Stay down there and take it - and get swept into the sea.

Fools.

Latitude25's picture

Doom porn.  Matthew will miss Florida entirely.  Check the national hurricane center.

Erek's picture

Why the hell would anyone build and invest in a dangerous hurricane zone?

And why the hell would any insurance company offer protection on something that will eventually wash into the ocean?

TheRideNeverEnds's picture

Yea but cmon! Hurricanes in Florida! Who could have possibly seen that coming?

Nunya Bidness Gogl's picture

You think insurance companies "protect" anything?! Ha! That's a laugh! They are in business to take in premiums, and never pay out anything if they can get away with it through any possible loophole. They collect premiums for years and years (decades even) throughout Florida, and then if there ever really is a storm that does some damage, they just fold up! Great "business model!"

CheapBastard's picture

When Sam Zell sold off his RE in Chicago saying it's overpriced, I smelled the reality of the RE crash finally showing its nose. he even said as much when he sold.

Stuck on Zero's picture

Everybody invests in Miami because that's where the illuminati hang out.

Chris Dakota's picture

Manufactured like the Sandy Storm that saved Odinga's ass.