Experts say South Florida housing market cooling off

[V. Barbarino]

Experts say South Florida housing market cooling off

Surging price increases unsustainable, experts say



By Paul Owers
South Florida Sun-Sentinel

February 11, 2006

Even the rosiest real estate analysts concede that South Florida's housing frenzy is fading after five years. The culprit?

"Its own success," said Lewis Goodkin, an industry consultant in Miami.

Goodkin and other experts say the market was destined to soften because price appreciations of 25 percent or more aren't sustainable. Prices will increase in 2006, but not at the double-digit rate of the past few years, they say.

Goodkin 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.

"We're really coming back to a more normal market," Goodkin said.

Here are five key indicators:

1. Sales are down. Whether you're comparing December to the same period in 2004 or looking at the past six months of 2005, 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.

Certainly, Hurricane Wilma had something to do with the decline in the latter part of 2005, but agents and industry experts say the storm isn't the only reason for the slowdown. Insurance and property-tax increases are driving up monthly mortgage payments, making many people reluctant to buy.

"Prices just got to be too high," said Marilynn Obrig, a broker-associate with Intercoastal Realty Inc. in Fort Lauderdale. "There comes a point where buyers say, `I can't do it. I have to sit back and think about it.' "

2. 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, according to The Keyes Co. and multiple listing services. Listings rose more than 81 percent in Palm Beach County and more than 64 percent in Miami-Dade.

Speculators helped fuel the housing boom, which drove up prices to record levels, but that's changing as many speculators are leaving real estate. With fewer buyers, houses don't sell as quickly and inventory builds up.

There's virtually no sense of urgency, and buyers can take their time considering multiple properties, said Richard Barkett, chief executive of the Realtor Association of Greater Fort Lauderdale.

"Most Realtors want to be listing agents, but you have to be out looking for buyers now," said Boynton Beach agent Bob Melzer. "With 20 homes for sale in the same community, [buyers] say, `What's my rush?' "

3. Prices have flattened. As demand wanes, sellers are losing leverage, and some are cutting their asking prices.

Median prices across South Florida rose by more than 20 percent in December compared to the same period a year ago, according to the Florida Realtors group. But 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.

"A stabilization in prices has occurred," said David Dabby, a Coral Gables real estate analyst. "That doesn't mean that appreciation has stopped in all areas. It hasn't. You're just going to see more modest increases, at best."

4. 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.

Developers also are trying to lure real estate agents. At the Legacy Place condominiums in Palm Beach Gardens, for instance, agents who referred buyers received 4 percent commissions rather than the standard 2 or 3 percent.

"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."

5. 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. While still reasonable, that's enough to keep some people from qualifying for mortgages.

And as interest rates increase, homeowners with adjustable-rate notes will see their monthly payments rise. That'll mean more foreclosures and distressed sales, experts say.

In addition, federal regulators are forcing lenders to become more selective this year. Mortgage applicants will need higher credit scores and more proof of income, while banks are expected to scale back on risky interest-only loans.

"The direction of the market is clear," said Manuel Iraola, chief executive of Homekeys, a Miami-based online real estate service. "What's open for debate is the magnitude of the adjustment the market will go through."

Paul Owers can be reached at powers@sun-sentinel.com or 561-243-6529.

[V. Barbarino]

Persoanlly the Miami condo market is going to tank like the Jets this past season.. Those buildings downtown by the AAA and the clubs are going to loose their ass but not before the Brickell people loose even more...

[Oni]

Thats what i was telling everyone....ive seen this coming for a year or so now. Real estate is the only industry in FL so those of you that are in the business, id suggest you plan for the future now cause i predict that its gonna be a bumpy ride...

[Bling]

im strictly in hard equity our niche is foreclosure bailouts and bankrupcies so it wont affect as much us as per se the regular mortgage lenders

[slamminshaun]

Originally Posted by Bling

im strictly in hard equity our niche is foreclosure bailouts and bankrupcies so it wont affect as much us as per se the regular mortgage lenders

Actually, it will affect you.....for the positive. Foreclosures will be increasing over the next few years. More business for Bling!!

For all you doom and gloomers out there, don't think a slowdown in the housing market is all that bad. It's always amused me that people think if houses don't go up 30% per year, then the bubble must've burst. The Florida Association of Realtors is expecting less sales in 2006 then 2005 (which technically means a slowdown), but the level of sales in 2006 will EXCEED 2002 and 2003. So what do you make of this information?

I say, if I can have a repeat of 2002 or 2003, I'll take that anyday....while values won't go up 25-30% per year like they had, sales will still be there. The difference is that the inventory on the market is triple what it was in 2003, so many sellers will just have to be realistic about what they expect to make.....I just sold my old house for $20,000 less then what I had it listed for. In the end, cities like mine (Port St. Lucie)won't feel the crunch nearly as much as the Miami condo speculators will.

Another point...people have short memories. Right now, nobody in the Northeast is thinking about those darn hurricanes in Florida. I expect the phone to start ringing with New Yorkers who are fed up with the snow....

[drlogic]

Originally Posted by Slammin'

[quote author=Bling link=board=6;threadid=24900;start=0#msg293053 date=1139847241]
im strictly in hard equity our niche is foreclosure bailouts and bankrupcies so it wont affect as much us as per se the regular mortgage lenders

Actually, it will affect you.....for the positive. Foreclosures will be increasing over the next few years. More business for Bling!!

For all you doom and gloomers out there, don't think a slowdown in the housing market is all that bad. It's always amused me that people think if houses don't go up 30% per year, then the bubble must've burst. The Florida Association of Realtors is expecting less sales in 2006 then 2005 (which technically means a slowdown), but the level of sales in 2006 will EXCEED 2002 and 2003. So what do you make of this information?

I say, if I can have a repeat of 2002 or 2003, I'll take that anyday....while values won't go up 25-30% per year like they had, sales will still be there. The difference is that the inventory on the market is triple what it was in 2003, so many sellers will just have to be realistic about what they expect to make.....I just sold my old house for $20,000 less then what I had it listed for. In the end, cities like mine (Port St. Lucie)won't feel the crunch nearly as much as the Miami condo speculators will.

Another point...people have short memories. Right now, nobody in the Northeast is thinking about those darn hurricanes in Florida. I expect the phone to start ringing with New Yorkers who are fed up with the snow....
[/quote]

Well put!

So your investment doesn't go up 30%/year? How bout half that? Or half of half? It's still more than any savings acct.

20 yrs. ago, Mtg rates averaged @ 10,11%(more or less). The rates got so friggi'n low, people don't realize that a 6 or 7 is still pretty fohk'n good (historically speaking, of course). I know, I know,,,,this doesn't jive for THE SKY IS FALLING crowd. Everything is doom n gloom for them. LOL

[LeVeL]

This is great news...

And I hope the House Market Prices keep getting lower too, Real Estate Agents have had enough time to make money. This will ultimately make Houses more affordable in the long run for people like me who are in the market for one.

Because some of the prices before Hurricane Season last year were just too ridiculous, something had to give and I am happy its not me.

[Chica]

this is good news..... buying a house now days is almost impossible the prices too high and the salaries too low :

[slamminshaun]

Sorry to burst the bubble of those that think they will be able to afford a home in the future in Miami, but first time homebuyers in San Francisco have been waiting for house prices to become affordable for 50 years....basically, unless you have a large down payment, inheritance, or a large income, home ownership will always be out of reach in Miami. Home prices would literally have to cut in half for the home to be affordable to those earning the median income in Miami. Mark my words, prices will drop....but not by 50%. You'll be lucky to see them drop 10% at best before levelling off.

Keep in mind, house prices are only one component of housing expense. If you ask me, its not the house prices that are ridiculous, its the homeowner's insurance rates and property tax rates that are out of control.

[Seb]

I live @ the Grand flamingo on the Beach and the building will be going condo shortly. I want to buy our apartment but I'm afraid that prices will go down in the near term which will leave me negative equity. I'm curious how do you guys think this will effect the condo market on the beach? Would this still be a worthy investment?