MIAMI (ad)VICE

TO GUILLOTEMI AND MINIMAN (JASON)

(I'm writing this from a Shanghai Airport hotel room, where I'm overnighting before my early morning flight to Miami via Detroit).

It seems like we're all on the same page, going by gut feel as opposed to following the herd.

I'm not sure if you know, but the Holy Grail of housing statistics just came out: the Case-Shiller Index (always comes out on the last Tuesday of every month).

At first it sounds depressing (or at least that's how the journalists spin the story).  In a nut-shell, there is as yet NO SIGN OF A HEARTBEAT in the US housing market.  It's still declining, although at a very slow rate.  One could say that it's "bouncing along the bottom".  The big question is, for how much longer will it bounce for?

One can read this as a bad sign (ie. it may not improve for ages, or may drop much further) or as a good sign (now we all have more time to get our finances in order and build up bigger portfolios before it starts rising). 

But these are my own thoughts entirely, so check out the stats for yourself after reading the article:
http://www.bloomberg.com/news/2010-10-26/home-prices-in-20-u-s-cities-rose-less-than-forecast-case-shiller-says.html

S&P/Case-Shiller Table

============================================================
               1-months 3-months  1-year  2-years  3-years
               earlier  earlier  earlier  earlier  earlier
============================================================
US Composite-20  -0.21%    1.45%    1.70%   -9.75%  -24.72%

I've underlined Miami, showing that it has dropped the third most (after Las Vegas and Phoenix), a whopping 42% in the last 3 years.  Note that the whole crash took place between 3 years ago and 1 year ago, and in the last year it's just gone sideways.

Looks like the bottom to me.

Hi from Miami

I arrived very early yesterday morning (my flight was delayed in New York).

Some things I learnt on the trip: if you come from a country that has a visa waiver with the US, you must go online before coming, and apply for permission.  My travel agent didn't tell me this, so I spent an extra hour in immigration in New York filling in forms.

To rent a cheap car in Miami, use Kayak to compare all car companies.  When you get off the airplane, you catch a free Car Rental Bus to the car rental centre about 5 minutes from the airport.  It's an enormous 4 story building, the same size as the airport.  All the expensive car rental companies have their offices inside this building.  The cheaper companies are in the streets surrounding the building.  So if you've booked a car on Kayak, call them when you arrive at the building, and they'll come and fetch you.

Beware, because the cheap rental companies will then try to talk you out of your cheap deal that you booked on Kayak.  I booked a Kia for $675 (through Advantage), but then they wanted to deduct $1500 from my credit card.  I only noticed this when given a form to sign.  What they'd done is thrown in an extra $25 per day for extra insurance.  I told them I was fine with the minimum insurance required, and they eventually agreed to give me the car for the original price of $675 for the month.

I then drove from Miami airport to Wallmart (near the airport) and had an amazing McDonalds breakfast for $3 (amazing to me because I live on an island in China where there isn't McD's) and bought a cell phone for $15 without any airtime, and then bought 310 minutes of airtime for $20.  Not a bad deal, I reckon.  Cheaper even than China. 

From Wallmart I drove back past the airport, through downtown Miami, and onto the causeway going to the island where South Beach is.  My impressions: Miami city downtown (from the highway) looks rich, beautiful, and modern.  Lovely glass skyscrapers make for an impressive skyline.  The causeway gives you a view of lots of multi-million dollar playboy waterside mansions with yachts parked outside.  The cars on the road are often soft-top Ferraris, Mercedes etc.

I have rented a one-bedroom apartment for a month, one block from South Beach.  This beach is stunning: the color of the sand, the cleanliness of the water, the infrastructure, all give off a taste of international elegance.  The streets are teeming with rich tourists, international models, body builders etc.  Amazing (but expensive) restaurants are everywhere.  In a nutshell, I like it here, though I reckon property near this beach must be very expensive.

Yesterday afternoon I opened a Bank of America account.  It was easy, and immediate. I opened a Preferred Customer Savings account, plus a checking account, since there are no fees for most of the kinds of transactions I shall be doing.  The advantage of renting an apartment for a month is that you have a US address.  The reason you need an address is because they need to send you your check book and debit card after 10 days, unlike in China where they'd issue it in person on the spot.

I immediately sent my account number to my accountant so that she can start wiring money, which will take a week to arrive.

That was yesterday.  This morning I had an amazing 2km swim before daybreak (it was so nice in the water, surrounded by fish, with seagulls and pelicans overhead, that I swam much futher than I usually do).  Now it's time to start thinking about getting financing, seeing property etc.

Hi Spritecat

It's my 4th day in Miami, and I'm loving it.  It is a hundred times nicer than I'd expected.  I'm staying on South Beach, which is a very mellow paradise, teeming with beautiful people in their beautiful cars, but there's also a hippy/traveller/hobo element just to add a bit of variation.

This place is somewhere I'm going to be very happy to own a home or condo in, whether it appreciates in price or not, and whether I get a good rental return or not.

Sadly, it's the weekend, and people in Miami take their leisure seriously, so I haven't been able to visit lenders or even see properties these past 2 days.  But I'm spending my time driving around, and the more I see the happier I am.

I really like this whole stretch of island from South Beach up to Surfside/Bal Harbour.  It's all rich, touristy, with bridges spanning beautiful stretches of water, and parks along the uninterrupted beach. 

I should add 2 interesting observations about this "island" that sits east of Miami downtown:

1. seems to be crime-free, probably due to it being a tourist mecca, but also because criminals would be wary of coming here as they wouldn't be able to escape easily since there are only 3 bridges back to the mainland

2. the spoken language is Spanish more than English.  I often make the mistake of trying to communicate with people (even blonde haired blue-eyed ones like myself) to be politely told that they can't speak English.  This doesn't worry me from an investing point of view, since these are all wealthy South Americans of European descent, and I feel that it adds an exotic element to the place.

I'm now really divided between buying a single-family home (I like the idea of the privacy, plus no HOA fees) or a condo, since condo prices have been beaten down for 2 important reasons:

A. there was too much overbuilding in the boom years, and many condos only came on the market after the crash, which has meant they've struggled to find buyers, which in turn sometimes led to bankruptcy of the builder, giving the whole condo market a bad name

B. because of the aforementioned bad name given to condos since the crash, banks won't lend to buyers of condos.  That's why you always hear: Cash Is King!.  Because buyers must pay cash, and since most US citizens have no money, there just aren't many buyers, so the prices have crashed.

Having said that, there are still banks who'll lend on condos, but they want 30% down (for foreigners) and they are picky on which condos they'll lend on.  So most foreign buyers are just paying cash, thereby getting a better bargain, and then trying to get a mortgage afterwards.

The condo prices I've seen advertised on Trulia are very cheap compared to China (about 25% of Sanya on Hainan Island).  It now remains to be seen whether the prices advertised on Trulia are for real, or whether these estate agent sharks just write fantasy numbers to attract your attention.

cheers
Steven