August 24, 2012
Excess Condos Drying Up in Florida
The Miami Herald recently reported that 45 new condo towers are in various stages of development for the Southeast Florida area, including about 1200 new units in the beachtown of Sunny Isles Beach, just north of Miami Beach.
Even more amazing, according to another report from Miami Condo Investments, three Miami projects that launched earlier this year are already 97 percent sold out. Two of the three projects have not even broken grounded yet.
In 2006, Florida condo prices hit record highs and people waited in line to buy pre-construction opportunities that were being sold out of aluminum trailers. By 2010, many of those same buyers had walked away from their dreams losing thousands of dollars, and on one else was waiting in line.
After the boom, prices plummeted about 50% by 2011. New buildings that were completed in 2007 and 2008 sat empty and buyers were nowhere to be seen. Developers filed bankruptcy all over the state and slashed prices to try to sell the excess inventory. Experts said it would take years to liquidate the condo-bust nightmare.
Real estate in some parts of Florida is actually flourishing again. The Gold Coast area from Palm Beach to South Beach has seen a big increase in sales since early 2011. Many of these condos are being sold to Canadian buyers.
Most U.S housing experts agree that Florida is in the early stages of a huge rebound. Almost 95% of the 49,000 new condos that were constructed in South Florida’s seven biggest coastal markets during the boom are now sold and the inventory of new beachfront condos priced under $1 million is down to a handful. According to the Miami Herald, the housing market in much of South Florida is almost back to the peak boom years of 2005 and 2006.
Many believe that Florida home prices are probably going to jump over the next decade since there has been very little construction in the state since the bust and nothing substantial will be coming to the market for at least a few years, when most of the baby boomers will be in their retirement phase.
Some real estate people believe prices in the most popular coastal areas could be twice as much as today’s market. According to a recent report from Fiserv, most metro areas in Florida should see annualized appreciation of 8% to 10% in home prices over the next five years.
Second Home Statistics
The National Association of Realtors (NAR) recently stated that international buyers purchased US$82.5 billion worth of property in the U.S. for the year ending March 31, 2012, compared to US$66 billion a year earlier. The latest numbers from the NAR show that foreign buyers are having an impact in the United States. Increasingly the buyers are Canadian and represent about a quarter of all buyers.
Based on the tales of real estate professionals and financial planners, multiple home ownership is becoming more common as the wealthy spread out beyond just owning a cottage to having a U.S. address.
Many real estate experts believe that if you are only using something 10% or 20% of the time it doesn’t make financial sense to own a second (or third) home unless the owner is renting out the property.
Southwest Florida’s Economy Outpacing State’s
According to The Econocast index Southwest Florida’s economy outpaced the state in the first quarter.
The data calculated an array of economic statistics, from housing starts to unemployment claims. The report showed that Charlotte County’s economy growing at triple the statewide rate and the Sarasota-Bradenton economy doubling the state pace.
Still, the state economy and those of the 20 metropolitan areas that are tracked in the index created by Orlando-based Fishkind & Associates Inc. are far below where they were at the height of the building boom. Despite the improvements, the index stands now at roughly where it was 11 years ago.
Statewide, the index was up 1.51 percent in the first quarter and 4.8 percent from where it stood at the end of the first quarter of 2011.
The statewide improvements were tied to an accelerating decline in new unemployment claims, a 38 percent jump in housing starts, a mild increase in median housing prices and a jump in new construction, tied mainly to the building of apartments, Fishkind Associates reported.
The only component of the index to fall was the number of single-family homes sold in the quarter, which was down roughly 1 percent from the end of 2011.
While Charlotte County’s economy showed the biggest improvement in the quarter, the community had the farthest to climb. With the first quarter improvement, Charlotte lost its place at the bottom of the index’s list, replaced by Daytona Beach.
After Charlotte, the Palm Coast-Flagler County metro area had the strongest quarter, with a 3.91 percent improvement. The Naples-Marco Island metro area was next at 3.31 percent, with Sarasota Bradenton fourth with 3.10 percent.
Posted by Scott R. Lodde
August 13, 2012
Home Price Index Rises 2.5% – Fourth Consecutive Year-Over-Year Increase
The recent CoreLogic Home Price Index (HPI) showed that home prices nationwide, including distressed sales, increased on a year-over-year basis by 2.5 percent in June 2012 compared to June 2011.
On a month-over-month basis, including distressed sales, home prices increased by 1.3 percent in June 2012 compared to May 2012. The June 2012 figures mark the fourth consecutive increase in home prices nationally on both a year-over-year and month-over-month basis.
Excluding distressed sales, home prices nationwide increased on a year-over-year basis by 3.2 percent in June 2012 compared to June 2011. On a month-over-month basis excluding distressed sales, home prices increased 2.0 percent in June 2012 compared to May 2012, the fifth consecutive month-over-month increase. Distressed sales include short sales and real estate owned (REO) transactions.
According to the firm, home prices are responding positively to reductions in both visible and shadow inventory over the past year. Mark Fleming, chief economist for CoreLogic believes this trend is a bright spot because the decline in shadow inventory translates to fewer distressed sales, which helps sustain price appreciation.
Highlights as of June 2012
- Including distressed sales, the five states with the highest appreciation were: Arizona (+13.8 percent), Idaho (10.4 percent), South Dakota (+10.1 percent), Utah (+8.3 percent) and Wyoming (+7.7 percent).
- Including distressed sales, the five states with the greatest depreciation were: Alabama (-4.8 percent), Connecticut (-4.0 percent), Illinois (-3.4 percent), Georgia (-2.9 percent) and Delaware (-2.8 percent).
- Excluding distressed sales, the five states with the highest appreciation were: South Dakota (+10.2 percent), Utah (+9.1 percent), Montana (+8.7 percent), Arizona (+8.7 percent) and Wyoming (+6.9 percent).
- Excluding distressed sales, the five states with the greatest depreciation were: Delaware (-3.6 percent), Alabama (-3.1 percent), Connecticut (-2.1 percent), New Jersey (-0.9 percent) and Kentucky (-0.4 percent).
States with the Most Underwater Homeowners
Another CoreLogic report in July stated that fewer homeowners nationwide are “underwater” on their mortgages, owing more on their loan than their home is currently worth. The report noted that the number of underwater mortgages fell from 12.1 million – or 25.2 percent – at the end of 2011 to 11.4 million – or 23.7 percent – by the end of the first quarter of this year.
Still, the number remains high in some states. Those with the highest negative equity also tend to have some of the highest percentage of homeowners falling behind on mortgage payments and facing possible foreclosure.
24/7 Wall St. recently identified the following states as having the highest percentage of homes with underwater mortgages.
- Nevada: 61.2%
- Florida: 45.1%
- Arizona: 43.4%
- Georgia: 37.2%
- Michigan: 35.6%
- California: 30.5%
- Illinois: 28%
Canada Poised To Step Up Transaction Activity In South Florida Condo Market
According to a new report from CondoVultures.com, foreign real estate investors from Canada are poised to increase their transaction activity in the tricounty South Florida region of Miami-Dade, Broward, and Palm Beach in the upcoming winter tourism season.
A series of factors for this expected increase include; 1) a strong Canadian Dollar being fueled by that nation’s economic prowess and natural resources; 2) several years of real estate appreciation in Canada’s residential market; and 3) a growing concern in press reports about the possible overheating of the Canadian condo market -are expected to prompt an increasing number of buyers from Canada to look at diversifying into the slowly recovering U.S. housing market where rental rates are surging and resale prices remain discounted.
The potential increase in the number of investors from Canada in South Florida’s foreign-buyer-dependent condo market comes at a time when international purchasers are increasingly challenged by economic and currency volatility in their native countries of Argentina, Brazil, Mexico, and Western Europe.
Despite a weakening in recent months, the Canadian Dollar against the U.S. Dollar is up more than five percent as of Aug. 7, 2012 compared to the same time in 2007 when the U.S. housing market first began to implode.
This compares this to the worsening currency exchange rates of countries active in the South Florida real estate market such as Argentina (down 31.5 percent); Brazil (down 6.1 percent); Mexico (down 16.1 percent); the Euro (down 10.3 percent); and the British Pound (down 23.4 percent) since August 2007.
International buyers have played a major role in acquiring the excess South Florida condo inventory that flooded the market beginning in 2007 at the start of real estate crash.
Of Florida’s estimated $12.8 billion of international sales annually, investors from Canada account for 39 percent of “total international purchases” in the state with a preference for condos (57 percent) compared to single-family houses (32 percent), townhouses (six percent), and other residential product (five percent), according to a report by the National Association of Realtors.
By comparison, Latin America accounts for 26 percent and Western Europe for 23 percent of “total international purchases” in Florida.
Posted by Scott R. Lodde
August 3, 2012
Florida’s Home Appreciation Statistics Between 1998 and 2006
I recently read an article from local mortgage broker, John Calabria (BANCMORTGAGE CORP) in which he provided some interesting statistics regarding home appreciation in Florida during the boom times.
Between 1998 and 2006 real estate investors were just anticipating a boom in housing due to the coming maturity of the baby boomers. This is what happened in Florida:
- 1998 – the median price of a home was $86,100
- January 2002 – the median price was $118,800
- 2006 – the median price was $257,500
- Price appreciation between 1998 and 2002 was 38.0%
- Price appreciation between 2002 and 2006 was 116.8%
- Total appreciation between the years of 1998 and 2006 was 199.1%
Finally some good news from Standard & Poor.
Home prices rose sharply in May, cutting the year-over-year drop in prices to 0.7 percent from 1.4 percent in April, reported in the Case-Shiller Home Price Index.
Prices in the 20 cities surveyed rose 2.2 percent month-over-month, the strongest monthly gain since the 20-city index began in January 2000.
Miami, Minneapolis, Phoenix Emerge as New Target Markets for Foreign Investors
According to information collected by Jones Lang LaSalle Capital Markets Research in London, the U.S. is benefitting from ‘Being a Safe Haven’.
Global investor commercial real estate purchasing activity picked up in the second quarter with total market volumes increasing 24% from the first quarter to $108 billion, according to data collected from more than 60 countries.
This level of investment reverses the slight dip in activity recorded in the first quarter when volumes reached $87 billion.
REITs and unlisted funds were the second quarter’s biggest net buyers of property.
London remains the world’s most sought-after location, according to the report, with the United States moving back towards the $40 billion transactions mark in the second quarter, with 35% of deals involving cross-border parties.
While New York, San Francisco and Washington DC have long topped the target list for foreign investors, a number of second-tier U.S. cities have entered the Top 10 list for cross-border purchases into the United States, including Miami, Minneapolis and Phoenix.
According to the report, the U.S. is also benefitting from a safe haven strategy, as other global markets appear on shakier ground, particularly given the ongoing Eurozone crisis.
Although U.S. economic growth appears relatively weak, compared with most other fully mature economies, U.S. growth is much stronger, and investment into real, tangible assets in the country is attractive as a defensive strategy in volatile, challenging economic and market conditions in developed and emerging countries.
Cross-border Purchases, Q2 2012
- New York – $1,014 m
- San Francisco – $685 m
- Washington DC – $643 m
- Miami – $554 m
- Chicago – $529 m
- Dallas – $514 m
- Seattle – $431 m
- Minneapolis – $384 m
- Boston – $318 m
- Phoenix- $317 m
Posted by Scott R. Lodde