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Tuesday, April 22, 2008

Miami: The Microcosm of Housing Lunacy

Of all the areas hit hard by the housing crisis, few are worse than Miami. In Miami, the roots of the crisis are a microcosm of the excesses that the speculative market caused. According to an emailed story from Moneynews, the area is sitting on 24,000 units of condos up for sale. The market only expects to eat up one to two thousand per year. That is a depressed market in the flesh.

What is both fascinating and frustrating is that thousands of these units are priced at one million and above. This is peculiar because Miami is home to the nation's poorest population by income level at just over 24k per year according to the last census.

Developers and realtors tried their own version of gentrification during the housing boom figuring that Miami's beautiful coastline would attract the rich and powerful. In fact, most of these units were advertised in high end magazines. The players figured they could import thousands of wealthy folks and put them into these high priced units using Miami's natural attraction as a selling point. Still, Miami's beauty was the same then as it was years ago. No one asked themselves why it hadn't attracted more rich and powerful before. All of this likely sounded like a good idea when the market is moving, but now it isn't.

Now that the market is not moving, the city is full of condos for the wealthy even though the city is full of poor folks. Trying to important thousands of wealthy people likely seemed like a good idea at the time, but in fact it was dangerous business. Miami is a microcosm of the roots of the speculative market we had in real estate in general. This sort of capitalistic gentrification was bound to blow up, and it was only done because we had a market that everyone thought would continue to rise forever.

No one bothered to ask how they were all going to pull off these million dollar units in an impoverished city because at the time in real estate there were no wrong answers. The kind of questions developers likely should have asked then are the kind of questions they are asking now. Only they are asking them sitting on thousands of million dollar properties in the middle of poverty.

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