‘The Direction Is Clear’ For South Florida Home Prices
The Sun Sentinel has the latest on Floridas’ housing bubble. ” Even the rosiest real estate analysts concede that South Florida’s housing frenzy is fading after five years. Lewis Goodkin, an industry consultant in Miami estimates South Florida’s home sales pace will fall by 20 percent, compared to recent years, while the overbuilt condominium markets in West Palm Beach and Miami will face ‘dramatic’ slowdowns by the summer.”
“He said the housing forecast for South Florida is typical of what’s happening in many growing cities, such as Las Vegas and San Diego.”
” Here are five key indicators: Sales are down. The number of home sales across South Florida has dropped by roughly 40 percent, according to the Florida Association of Realtors. The Orlando-based trade group tracks single-family home sales but not condominiums, townhouses or co-ops. ‘Prices just got to be too high,’ said Marilynn Obrig, a broker-associate in Fort Lauderdale. ‘There comes a point where buyers say, `I can’t do it.’”
“Listings are up. It’s not just your imagination: You are seeing more for-sale signs in front yards. The number of homes and condos on the market more than doubled in Broward County from July through December. Listings rose more than 81 percent in Palm Beach County and more than 64 percent in Miami-Dade.”
“Prices have flattened. As demand wanes, sellers are losing leverage, and some are cutting their asking prices. From July through December, the median increased less than 5 percent to $408,200 in Palm Beach and to $377,700 in Miami-Dade while decreasing 4.3 percent to $369,000 in Broward.”
“Incentives for buyers and real estate agents are increasing. Some builders are offering free upgrades on appliances, countertops and cabinets, as well as offering to pay points and closing costs worth thousands of dollars that the new-home buyer normally would pay. ‘There hasn’t been the necessity to do that before,’ said Jack McCabe, a Deerfield Beach analyst who is betting on a market slowdown and organizing investors to buy properties at reduced rates. ‘The environment is going to get highly competitive this year.’”
“Interest rates are rising and credit requirements tightening. Thirty-year fixed mortgage rates are near 6 percent, and analysts predict they could inch closer to 7 percent in 2006.”
“‘The direction of the market is clear,’ said Manuel Iraola, chief executive of a Miami-based online real estate service. ‘What’s open for debate is the magnitude of the adjustment the market will go through.’”
Thanks to the readers who sent this in.
Florida data
About frigging time. That has been one of the most greed driven markets around. My friend down there refuses to sell until the 2-year period for tax avoidance passes. In the meantime, he’s quickly losing what gain he had and the ability to sell at any profit.
I awoke to this article this morning and it confirms everything weve been seeing and hearing in south fla. The condo conversion discounts are being offered just about everywhere with No closing costs, credits at closing, free upgrades, appliances, no developers fee, 6-12 months no maintenence, we pay mortgage ofr 6 months, even gas cards to come by the sales office. Now for the first time south Stuart/Port St Lucie we are seeing single family home discounts. Olympia in palm beach advertised today 5 homes that are ready to move into with up to $25k in bonuses, priced between $580-879. I expect to see alot more offers in the coming weeks then price reductions period.
I doubt I will ever own a home worth 579 or more in my lifetime and we have a 7 figure net worth. I just refuse to do that.
I fully agree with living below your means and investing for retirement, but I also believe life is short and one needs to “stop and smell the roses”. My father, who never bought a new car in his life, dropped dead less than two years into that wonderful retirement he had saved for.
That said, I kept my last car ten years and just paid cash for my new one. Although I could have spent three times as much without blinking, I think spending on depreciating assets is a waste. We do, however have a 1mm+ house and a beach house as well as all the necessary toys. It is all relative. We could “afford” three times the house. We choose to own 15 properties instead of one mansion. And no, I did not buy anything in the last 3 yrs - in fact, we started our “portfolio” in the early 80’s when we were 23.
I agree. To pay 300-400 thousand for a 800 square foot, one bedroom condo is rediculous and it isn’t even close to the beach. I don’t care how many “luxurious ameneties” there are. We have New York housing prices (maybe not quite as high) in Florida where you are paid much less. I will never spend that kind of money for a closet.
Ditto, Txchic. I too refuse to pay and will not buy a house worth haf-mil. I am a CPA and can afford it, but just because I can afford does not mean it makes economic sense. I will wait until prices tumble 30-40% before I go bargain hunting.
Observer
Same for me. I won’t buy until prices are in line with replacement cost, which will include a reasonable profit for the builder - if it’s a new home. I want the builder to make a profit, but I’m not going to get gouged.
For too long, people have been buying based on monthly payment using a toxic loan. This is the same reason people load up on car leases, thinking they got a great deal because they can afford the payment. However, for years dealers didn’t have to provide any disclosure of sales price, etc. on the leases and they were really sticking it to people. Do customers really think dealers would be pushing something so hard if it was in the customers’ best interest?
I’m amazed that so few people do any kind of homework when they commit themselves to so much debt. They buy into the “we can afford the payment now” mindset and figure they can sell in a couple of years when their loan resets. Worked for a while, but with prices coming down, these people will be on par with folks that want a new car 2 years into a 5 year lease. They won’t be able to get out of the obligation and will either have to pay the higher payment or give the house back.
Although it’s been awhile since I have posted I still check this site daily. I will ask my wife for permission to donate. I only ask her permission because it’s her Paypal account and I don’t want to bother getting a new one. She knows who her daddy is….
Anywise, I made an offer on a house in our neighborhood. I just can’t hold back my wife any longer. She’s about ready to kill me. I keep telling her to give it just a few more months, but that doesn’t work anymore.
The house we were after was cute but the square footage was small and they wanted more per square feet than any other home in the neighborhood, by far. Our Realtor is completely useless. After this latest off/counteroffer scenario I realized the seller’s Realtor is looking to get the highest price he can for his client. Our Realtor just wants to make a deal to get his commission.
I told him we were getting a VA loan (only because I can) and it must appraise for what we buy it for. This is what he came back with (pasted from his e-mail to me)…
” On appraisals - The buyer has to buy it to prove to the bank the property is worth what the bank is loaning. If the appraisal falls a little short of the purchase price, the Realtors will try to ‘help’ the appraiser by giving him homes they hope will raise the value a little.”
Is this a little illegal, if not very unethical. Here’s my Realtor trying to talk me into buying an overpriced home so he can get his commission and raise everyone’s appraisal value in the neighborhood. I thought he was supposed to be on my side. Needless to say this is part of my response back to him (pasted from my e-mail)…
Thanks for your help, ——-. I looked over the homes you just sent me and calculated the average cost per square foot, which came to $XXX+/-. We gave them an offer based on the comps you gave us two-three weeks ago of $XXX-$XXX per square foot ($XXXk-$XXXk). Looking at the newest comps that you just forwarded me from the seller’s Realtor, the highest anybody paid for a home in that neighborhood was $XXX per square foot back in November. If we pay $XXXk with $Xk in concessions we would be paying $XXX per square foot. I realize they are fond of $XXXk, but based on the square footage it is very overpriced. I am not willing to raise the neighborhood’s appraisal value by paying what they want. Even if we paid $XXX per square foot (highest comp for the neighborhood) the price would be $XXXk+/-. We are in no hurry and will keep looking. Feel free to rescind our offer at this point
What’s funny is I’m the one working the numbers to see if I am getting screwed or not. He sent me back another e-mail after he crunched the numbers and basically said….Yea. I guess you’re right, the homes is overpriced.
I have said alot of bad things about Realtors in the past…..I second everything I have said.
Nayrab:
Good to see you back posting.
Thanks for the anecdote
I totally agree with you and in the same boat. My hubby wants to buy, but I don’t.I had the same experiences with couple of realtors. They don’t care what your interest is, but their own commission. Push you very hard to buy for THEIR own interest. They are sooo greedy.
Now we are trying to buy without taking Buyer’s agent.
The party really must be over…. if not, the Sun Sentinel wouldn’t have ran this article (as a vast portion of the advertising revenue comes from home/condo developers).
Looks like the rest of South Florida either. We would like to move up one day and although my home will drop in price, I still look forward to the day when these $600k homes are more affordable in the $400s.
One of the So FLA news channels last week did a piece on home prices and especially the condo market in Miami. They interveiwed, I believe it was Mr. Perez or something like that, hes called the latin Trump, who had pulled out of that high rise deal in Las Vegas. Supposedly other projects were being cancelled an he didnt seem to enthusiatic on where things were headed. He expressed how dissapointing it was to pull out of projects and that it was the first time in his 20+ year career.
There was mention of the drug cowboys of the 80’s that supposedly financed the Miami building boom of the early 80’s and that they beleived there was more of the same going on now as so much money is laundered from South America in Florida real estate.
Wonderful news.
I have a personal stake in the SFL market. Not that I would ever consider living there, or even invest there.
My situation is that a very good friend is engaged to a man in SFL. None of her friends or family like this guy. She made a mistake, and she knows it. She is trying to wiggle out but finding it difficult. Why?
Well, after working in the restaurant/bar industry for years, he talked her into becoming a Realtor(tm) because he was dabbling in property development down there. He took on too much, and has himself leveraged to the hilt. She can’t move what he has because it is priced too high and the seasonal bounce just isn’t happening. I feel sorry for her, but not for him. Let the blood of the greedy flow.
What is his back-up income? Selling luxury boats. Something tells me that those HELOC luxury item sales will tighten up soon. Double-f@cked.
I know this sounds like an incredible case of schaedenfreude, but all of us friends are pulling on her to get out of a very bad situation. Hopefully the strain of all of this will justify dumping the chump and finally send her packing. She has a great deal of potential, and she is wasting it on trying to be a bottom-feeder Realtor(tm).
All the while, I have to listen to her spew the NAR “all is well” lines to me, and it takes a whole lot of restraint not to dash her hopes.
My friend in Miami bought his home in the low $400k in 2003, now it is worth mid $800k. He really hits a jackpot.
It may well be. If he can sell it at that price. With the amount of supply entering the market, he shouldn’t count on it. Do him a favor and tell him to sell NOW.
I was looking at this Centex development, they started selling units in September and it’s still not sold out. In fact they just incresed the incentives from 10k to 40k.
What really makes me laugh is that you can get this brand new 3bed/2ba townhouse for 285k and then deduct the incentives, but there are 10 year old 3bed/2ba townhouses across the street that are going for 300-320k!
Who would buy them when you can get a brand new one for 285k - incentives.
I took a snapshot of Miami/Dade-Broward-Palm Beach inventory between 100k and 1mil and it went up from 42k to 53k in just over a month.
So much for running out of land and houses. Apparently the immigrants stopped buying 500k houses!
The scenario you describe above will happen all over as builders offer larger incentives and lower prices. The recent buyers who need to sell have to compete with the builder, only the builder has much more flexibility in pricing. I remember lots of people stuck in their houses in the early 90’s in SoCal because they couldn’t compete with what the builder was selling.
Does anybody know what’s happening in the Tampa Bay area? I keep seeing more and more huge highrise condo projects supposedly going up (at least the grounds are being cleared), and nobody seems aware that the real estate bubble is popping. I keep thinking that there’s some kind of ghastly glamour that has been cast over the entire world, but that some of us have been spared.
The projects going up in Tampa are being built in absolutely horrible, contaminated and highly polluted areas, but according to the developers, people are buying everything sight unseen at prices unheard of in Tampa even two years ago.
If anybody has evidence to the contrary, I’d been very happy to see it. My brother is a realtor, and says the lemmings (he calls them idiots) have not slowed down. He claims most are Northerners who think a water view, even if it’s a polluted-water view, is heavenly, and that a million dollar 2,000 square foot condo is a bargain.
Don’t know about Tampa, but here’s a Fort Myers article concerning the slowing of the condo market there:
http://tinyurl.com/dbc6d
The title of the story is:
Luxury condos’ allure wanes
Visits to WCI’s sales centers show sharp drops
Here is a 968 sq ft trailer for sale for $1 million in Everglades City, Fl….
Public Detail Display
Status: A Single Family/RE1
List Price: $1,000,000 MLS #: 251476 List Off: 371
Comm: EV SubArea: OI Is Loc: OT
Num/Alpha Unit: 0/ Num/Alpha Block: 2/ Lot: 0
Bed: 2 Baths: 1 H Baths: 0
Furn: P Furn Type:
Priv. Pool: N
Rear Exp: E Water Ac/View: ACCESS PRIV DOCK VIEW CANAL SEE REMARKS
Water Frnt: CANAL GULF ACCESS RIP RAP
Garage Sp: 0 Carport Sp: 0
A/C Area: 986 Tot Area: 1100 Yr Built: 1968
Sp Asmt: 0 Bld Prod: N Year 2:
Tax Amt: 556 Tax Yr: 2004 Tax: COUNTY ONLY
Property Description
Prop ID: 01202960002 Subdivision: Subd. Name:
Dev. Name: Plantation Island Add. Legal: 13 53 29 PARCEL DESC IN OR 162-666+667 AKA TRACTS 33+34 PLANTATION ISLAND 4.07
TN: 53 RG: 29 SC: 13 County: COLLIER Zoning:
OR Book: 1479 OR Page: 2331 Waterfront Foot: 100
Lot Size: 4.07 Road Front: Lot Loc: SEE REMARKS
Spa/Hot Tub: Y Stories: 1 Gar/Prk Desc: PRK CIRCLE DRIVE
Construction: MANUFACTURED Style: SEE REMARKS
Floor: CARPET VINYL Roof: METAL
Dining: BREAKFAST BAR Rooms: FLORIDA ROOM SCREENED LANAI
Remarks
4+ acres Plantation Island on Halfway Creek which gives you Gulf access and backwater fishing! Land has a manufactured home and dock included! Beautiful!
House Description
LR: 0 DR: Combo: y KT: 27×12 FR: 12×40 MB: 11×12 2BR: 8×9
3BR: 4BR: Off/Den: SP/L: 12×12 UR: GA:
Bedroom Descrip.:
Master Bath: COMBINATION BATH/SHOWER
Interior/Exterior: PANTRY SMOKE DETECTOR
Eqpmnt/Appliances: DRYER MICROWAVE RANGE REFRIGERATOR WALL OVEN WASHER
Window: SINGLE HUNG
Guest House: GH SqFT:
Utility Information
Heat/Cool: HEAT-CENTRAL ELECTRIC COOL-CEILING FAN COOL-CENTRAL ELECTRIC Water/Sewer: WATER CENTRAL SEWER SEPTIC
Sprinkler: SEE REMARKS Cable Avail: Y Ceiling Fans: 7
Virtual Tour Information
Virtual Tour: N Virtual Tour ID: -
Listing Agent: CAROL FOSS
Listing Firm: Everglades Island Properties Agency Phone: (239) 695-2277
P.O. Box 5008 Everglades City, FL 34139
FEB-11-2006 * Information Deemed Reliable But Not Guaranteed * © 2005 Marco Multi/List, Inc.
Funny, I was just driving around everglades city at Christmas time. Thought there might be some affordable waterfront - NOT. Huge difference from 5 or 6 years ago price wise. Still a complete dump.
“Prices will increase in 2006, but not at the double-digit rate of the past few years, they say.”
sales can be off 4% or 40%, and somehow the housing “expert” spins this into a single digit rate of appreciation in ‘06. it’s like a magic funnel.
liars
It’s about darn time. You have houses that look like people sell crack in them asking over $300,000. The market IMHO needs at least 25-30% to get back down to earth. It is going to be very ugly.
It is about time. Prices have doubled in 5 years. The local market needs at least a 30% frop to get back down to normal levels.
It is about time. Prices have doubled in 5 years. The local market needs at least a 30% frop to get back down to normal levels.
http://southfloridarealestatebubble.blogspot.com/
I wonder whether the actual increase in inventory here in South Florida is being under-estimated by the analysts. Driving around Jupiter, about 1 in 3 of the for-sale signs are “By-Owner”. I don’t remember FSBO to be all that common in the past, but it seems to be a trend in this market.
Home values is still a very common topic of conversation around here. Most I talk to seem to be completely naive about any impending crash in home values. A colleague of mine at work is shopping for a home in Jupiter right now, even though there is a 50% chance that he will have to relocate within 3 years. The opinion that housing prices will deflate would not be popular with my colleagues who have recently purchased homes or are shopping now. I just keep quiet about it to avoid engendering anger.
I wonder if all those “by-owners” are because people are close to (or actually) underwater such that they cannot afford they RE commission.
Speaking of Jupiter, you’re right, I too see lots of FSBO signs around town. But let’s just look at the “official” inventory available through real estate agents. I’ve been tracking it using Realtor.com since June 15,2005. That day, when I searched for how many “at least 2 bed, 2 bath homes were for sale from $100,000 to $500,000 in my zip code, 33458″ I got 150 hits. Today: 439. Using my trusty calculator, that comes out to a 192.7% increase in just under eight months. This week was a blow out, with inventory going up by a few units virtually every day.
So as you can see, this is pure proof we’re seeing nothing more than a nice, soft landing in South FL.
Incidentally, someone else posted a link to WCI and their buyer traffic. In Q4, their earnings report (just out this past week) showed — if memory serves … it’s in the archives here — a 69% year-over-year drop in new tower and home orders. 69%. Sure, some of that was probably due to good old Wilma back in late October. But they had all of November and all of December … the heart of the tourist season down here … to make up for it. And it doesn’t look to me like sales bounced back much. I can’t wait to see the January stats for the market as a whole. But lots of things tell me we’re falling off a cliff here fast.
Just changed my name to clarify - I hope I am not Vain. Clearly, if you saw me ,in my sweats and t-shirt, Vain would be the last thing that came to mind.