South Florida’s housing crisis was on display this winter tourism season as visitors flocked to town to enjoy the warm weather, experience the diverse culture, and eyeball what many are calling the epicenter of the U.S. housing crash.
Weekend after weekend dating back to late November, domestic and foreign buyers alike have come to town to shop for real estate during the day, and socialize in the tropical air at night.
With Easter already celebrated and Passover just getting under way, South Florida is symbolically transitioning from the busy winter tourism season that features perfect weather and large crowds to the more idyllic summer season that entails South American visitors and humid temperatures.
As South Floridians prepares for the steamy temperatures and what historically is a slower pace, the rising interest level of real estate buyers – especially those with rich foreign currencies - has the potential to make this a fast-paced summer.
Sentiment is growing among individual buyers that certain submarkets that did not experience the overbuilding such as in downtown Miami, Sunny Isles Beach, and West Palm Beach, may be finally stabilizing.
After all, some say, it has been 29 months since Florida real estate reached a pricing and sales peak in November 2005, only to start a tumble in December 2005 that hasn’t stopped, according to data from the Florida Realtors Association.
“We are not at the bottom but certain submarkets are doing better than many people would probably expect,” said Peter Zalewski, a principal in the Bal Harbour, Fla.-based consultancy Condo Vultures®. “For example, individual sales of waterfront properties in mature South Florida markets are and have been closing at a steady pace throughout the winter season. We expect that to intensify this summer as fear grows among buyers with foreign currencies that the U.S. dollar may be in its lowest trading band.”
Another purchasing segment that appears to be becoming more active is the bulk buyers.
Several funds are ratcheting up their efforts to purchase large chunks of units in some of these condominium towers that have been recently delivered or are close to completion.
Offers on bulk deals have been coming in at a steady pace for several months now, only to be rejected many times because a buyer’s offer is too low and a seller’s minimum release price is too high.
Optimism is building that the difference between buyers and sellers could soon be overcome due in part to creative structuring and external factors such as regulators.
Consider that one domestic private equity manager who was in South Florida the week of April 14 described his fund’s “anxiousness” to get started so as to have time to build relationships and not lose out to competitors.
Another domestic private equity fund that has been visiting since last summer just leased office space and corporate housing in Miami in anticipation of a busy spring.
Representatives from a third group based in Europe were recently back in South Florida for two weeks sizing up bulk opportunities in Miami-Dade and Broward counties that the fund managers hope to acquire in the near future.
Representatives from a fourth fund, also based in Europe, are scheduled to return to South Florida this upcoming week to reassess three opportunities that were originally viewed at the beginning of April.
Many industry watchers insist that it is still not the time to buy in South Florida because of the amount of inventory available and the amount still yet to come.
Besides, the experts say, Florida’s unemployment rate just hit a 4-year high of 4.9 percent in March as 56,600 jobs were eliminated in the state last month. More job cuts are expected in the future as industries related to real estate and construction are struggling to survive.
On top of that, the experts point out U.S. foreclosure actions, as reported by RealtyTrac , spiked 57 percent to 234,685 filings in March.
Locally, properties repossessed in Miami-Dade, Broward, and Palm Beach counties by lenders jumped by 255 percent in the first quarter of 2008, compared to the same period in 2007. This year alone, lenders have taken title through the court to nearly 5,000 properties for an average of 52 per day including weekends, according to a recent report from Condo Vultures®.
All of these problem loans are having an impact on South Florida’s 61 locally based institutions.
South Florida banks experienced a surge in problem loans in 2007, with 33 local institutions reporting that their nonperforming loans surpassed the industry norm of 1 percent. In 2006, only 15 South Florida banks had more than 1 percent of their loans categorized as nonperforming.
In addition, a new poll by the Associated Press–AOL Money & Finance finds that 60 percent of the 1,002 adults asked said they “definitely won’t buy a home” in the next 24 months. That’s up 7 percent points from the last time the poll was conducted in September 2006, when only 53 percent said they wouldn’t be buying in the next two years.
Making matters worse, the Vultures Database™ Report for April (which is scheduled to be released next week) is expected to show that the average coastal property in South Florida being tracked by Condo Vultures® is down by 27 percent off of the historical high asking price. The combined discount of the more than 4,300 properties in the database is about $974 million.
Peter Zalewski is a principal with the consulting company Condo Vultures®LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com . Don't forget to sign up for our weekly Market Intelligence Report.
Copyright © 2008, Condo Vultures® LLC
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