[freedomtowernight_edited.jpg] 26th Parallel: South Florida Real Estate Market

Friday, May 26, 2006

South Florida Real Estate Market

Much has been said (and predicted) about the real estate market these days. Some people think we're due for a big crash, while others think we're headed back to the days of more reasonable property appreciation (10% a year as opposed to 100%).

Today's articles in the Herald and Sun-Sentinel address the cooling real estate market. The Sentinel article does a better job of explaining the current situation and offers some good examples.

In my own neighborhood, there are several homes which have had For Sale signs up for several months now. This is a big change from last year when those homes would have been scooped up in days, not months. I think this is a good thing (of course, my house isn't on the market so this is easy for me to say), as an out-of-control housing market is bad in the long term. Gone are the days when sellers could come up with whatever price they felt like, and get away with it. Buyers are more selective and are beginning to drive prices down to reality.

When I say reality, I don't mean a crash. I mean back to the days of modest but steady appreciation. The condo market, that might be another story, especially downtown and on the Beach, but for regular single-family homes, no crash is in sight.

I just drove by a house about 2 blocks from mine which recently went on the market. It's a nice home in a safe, shady suburban neighborhood in Kendall. Four bedrooms/2 baths, garage, pool, big backyard, updated kitchen and floors. Very similar to the others in our neighborhood. Exactly one year ago, the house sold for $320,000, which at the time was very close to the median home price in Miami-Dade County.

It's now selling for $550,000, which is about $175,000 higher than the current median price.

This is the dilemma the market is currently in. Sellers who are still stuck on previous years' markets, and buyers who have caught on and are much more selective. I think the buyers will win, but it will take some time for sellers to get their heads out of the clouds.

I really feel bad for new homeowners these days when they have to deal with these kind of prices. The home described here is by all means a nice home, one that you could raise a family in. But does the seller (and the real estate agent) really think that the home has appreciated 80% percent in a year? Even with improvements and updated to the home, it's way too much.

If you think this is just a South Florida phenomenon, think again. I have talked to many of my work colleagues from other places, and the same thing is occurring in practically every medium and big-sized city in the US, especially in the South. We couldn't afford our own homes if we had to buy them now. This doesn't even factor in taxes and insurance, which is another story.

To all you sellers and buyers out there, good luck.

11 Comments:

Blogger Henry "Conductor" Gomez said...

Robert,

As you allude to, the chilling effect that property taxes are having on the market is quite considerable. When you pay an inflated price on a new house the property will be assessed again in year 2 (year one you pay under the previous assessment). The result is an unpleasant surprise. My tax bill doubled. And the homestead exemption hasn't increased in forever. I bought 3 years ago and my most recent appraisal shows an appreciation of $140,000. I could pocket that money but where would I move to? That's why I'm happy I bought plenty of LAND with my house. 15,000 sq feet of land for my little 1700 sq ft house. Plenty of room to expand.

1:57 PM, May 26, 2006  
Blogger Robert said...

Henry,

You are correct. There was a drive to increase the Homestead Exemption a few months back but it met a lot of opposition and was dropped.

Yes, the extra exemption would cut into tax revenue, but with property values rising at an incredible rate you would think that lost revenue would eventually be recovered, and then some.

I am also glad I bought a comfortable sized home when I did.

2:51 PM, May 26, 2006  
Blogger Tere said...

"Reality" is an apt term. Because what's going on right now is not in the least bit realistic. As a person who can't afford to buy a house anywhere (and, with one child and plans for a second one underway, condos are not an option), I am pissed as hell at sellers in general, because it seems that for 2 years now (at least), people are buying single families home for the sole purpose of flipping them.

I follow home sales closely, and it's common for houses to be purchased at one price, then resold in about 6 months for at least $100K more. As a person who works hard, makes good money and still can't afford crap, I feel insulted by this tactic.

The only realistic solution for us is to leave South FL. We've long hoped for a crash that would leave a ton of houses in foreclosure or with sellers desperate to sell - but how much longer can we wait? We need and want a home, and the money we've sacrificed to save will be better spent somewhere else, where prices are more realistic, taxes fairer and quality of life better.

Sorry to sound so bitter, but this real estate market has taken people who could normally buy homes and make neighborhoods friendly, safe and beautiful, by the throat and pinned them up against a wall. Nothing says "we don't give a fuck about you" like making homes completely unaffordable. And unlike every other pretentious fool in Miami, I refuse plunk down $450K to live in raging debt and put up appearances, and at the end of the day end up living in a 3/2 that in a realistic market would barely be worth $200K.

11:45 AM, May 30, 2006  
Blogger Robert said...

Tere,

I feel for your situation, I really do. If I was in your shoes I would be frustrated as well.

However, I do have to say a few things in response to your comment.

Firstly, the buyers are as much "to blame" for the rapid increase in prices. If buyers don't buy, sellers don't sell. It's really that simple. That's what's BEGINNING to happen now. I think it will continue this way for a while until prices stabilize a bit.

Prices will never crash here. The condo market, maybe, but not single family home. The demand will always exceed supply here.

People have to either lower their initial expectations and gradually build equity in a smaller home until they can afford a bigger one, or as you said, move away. I have talked to quite a few people from outside of Miami and the situation isn't much better, at least in the major cities. You can still get good deals in rural or far suburban areas.

Honestly, I don't think it's pretentious for someone who can afford a $450,000 home to buy one, even if its overpriced. The key of course, is afford. I guess I don't feel the same contempt for my fellow Miamians. Most people who are scooping up those homes (not condos) are either re-investing a previous sale or are moving from more expensive areas such as the Northeast and Europe.

I sincerely wish you the best of luck.

12:48 PM, May 31, 2006  
Anonymous Green Man said...

Robert,

Val knows a good real estate on South Beach his wife told him about a few months ago.

Ask Val to give you the guy's numbers.

6:37 PM, May 31, 2006  
Anonymous Anonymous said...

We've long hoped for a crash that would leave a ton of houses in foreclosure or with sellers desperate to sell - Tere

So lemme get this str8: Teresita is hoping that hard-working people that have saved for their own slice of the American Dream will have their homes foreclosed so she can get into a house cheaper than what she is willing to pay.

Now I am beginning to appreciate why so many people in Cuba are willing to live with privations instead going back to the "nostialgic" days.

In other words, let's hope that the city stays lost.

Leeches

6:41 PM, May 31, 2006  
Blogger Tere said...

I agree that buyers are as much to blame for driving home prices up. And while I wish no one any ill will, I won't feel pity for those whose homes end up in foreclosure because their greed and lack of financial planning put them in that predicament.

I'm too bitter about this topic to have any sympathy left in me. And anonymous, it's not that I'm waiting for a house at a price I'm "willing" to pay - I'm waiting for a house I can AFFORD to pay. One where the mortgage is reasonable for what I'm getting and taxes are not three, four or five times what the previous owner paid.

And Robert, I don't think it's pretentious to buy a house that's worth $450K if you can afford it, but that's my point: not many people can afford it! A person who makes $50K, or a family who makes $70K (and I'm being way more generous than what real average salaries are here) can NOT afford a $450K house (including insurance, taxes, utilities). When I said pretentious, I said it in reference to all the fools I personally know who have over-extended themselves and purchased home they can't afford (buyers who are as guilty as sellers) simply because "everyone" was doing it, or they felt it was their right to move on up even though their salaries haven't kept up. To have a house that eats up 80% of your monthly income is foolish, NOT an investment, and, in cases of many people who care only about appearances, pretentious and pitiful. For these people, no, I won't care if they end up in foreclosure.

Like I said, I wish no one any such misfortune, but everyone has to face the consequences of their actions. For some people - those who are in hock over the houses they bought at hyper-inflated prices using "innovative" and "flexible" financing, those who have been motivated by greed to buy houses and then flip them (or attempt to flip them) within months for tens of thousands more than they paid - there will be a consequence as the market continues to change. And if that consequence turns out to be foreclosure, they will have no one to blame but themselves. And if that enables me to buy a house at a fair price, then so be it.

8:31 PM, May 31, 2006  
Blogger ShepherdFlorida said...

"Firstly, the buyers are as much "to blame" for the rapid increase in prices. If buyers don't buy, sellers don't sell. It's really that simple. That's what's BEGINNING to happen now."

Robert my friend, you couldn't be more right. I live in Tampa and for what historically would be a busy summer season for real estate, has been quite slow. I have my ear to the ground and this is the story all over Florida.

It really is quite interesting to watch what is unfolding here. Most sellers are asking for prices that would have worked when the market peaked in late 2005. Other sellers seem to think we are appreciating 30% per year and have priced their listings that much higher which shows how clueless they are. The fact is that buyers have for the most part just simply and wisely stopped buying at these prices. Sellers are putting their houses on the markets in record numbers, inventory is at an all time high, and the houses are not selling. The party is over.

Most sellers are holding out through the summer, expecting to be able to dump their real estate at top dollar. But if they have not already sold, they have missed the boat. And as we move past August 31st and into the Fall, sellers will begin to realize this. But this market turned so fast, that sellers who have been used to this housing boom party over the last 5 years cannot quite grasp what is happening yet.

Scroll through the MLS real estate listings, and never have I seen so many signs of a falling market with comments like "seller motivated", "urgent must sell", "present all offers", etc. I see real estate buyer's agents being offered full 3%, 4%, and even 5%! But these tactics are not bringing the buyers as they are on the sideline waiting for a much needed price correction.

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