Miami’s real estate sector has been in a slump for nearly two years. According to a July report by data provider RealtyTrac, the Miami area ranks 10th in the country in percentage of foreclosures. About one house in 62 is in foreclosure.
Currently, because of continuing oversupply of units, tightened lending standards and would-be buyers waiting for further price declines, the overall picture has become even more muddied. So what do experts on the spot think it will take for the market to rebound?
Opinions vary widely: Some of South Florida’s best-known analysts say the worst is already over and that the market is showing signs of recovery right now. Others think the recovery won’t happen until 2015.
“It seems that people are starting to get some confidence,” said Peter Zalewski, founder of Condo Vultures, a market analysis firm in Bal Harbour. “There are more buyers in the market, and these buyers are going after the quality stuff.”
A report released by Zalewski in June noted that the volume of condo resales in South Florida rose in May, the fourth consecutive month of sales increases. In May, South Florida (Miami-Dade, Broward and Palm Beach counties) had 1,714 closed resales of condos, up from 1,576 closings in April.
Those numbers were up from 1,536 resale condo closings in March, 1,132 in February and 1,012 closings in January, according to data from the Florida Association of Realtors.
While sales figures are still below those set in 2007, Zalewski feels the month-over-month upswing is significant.
“In 2007, there was still some credit available,” he said. “Today, there’s no credit.”
As elsewhere in the country, the lack of credit is acting as a drag on sales.
“Credit in South Florida has gotten much more stringent,” said Lee Eisenberg, president of Leading Edge Mortgage Corp. in Boca Raton.
Eisenberg noted that the South Florida market has been labeled a “declining market” by Fannie Mae, which reduces some of the maximum acceptable loan-to-value ratios. In addition, he said that private mortgage insurance has become harder to obtain in South Florida.
Michael Cannon, executive director of Integra Realty Resources in Miami, considers himself an optimist, but still thinks a recovery is 12 to 18 months away.
According to Cannon, Miami’s problems aren’t limited to a vast oversupply of units — presently 25,000 resale units are listed in the MLS and another 25,000 new units are slated for completion by the end of 2009 — and the credit crunch. The city’s real estate market is also marred by affordability issues resulting from property taxes and homeowners-insurance rates that have skyrocketed. There is also an ever-rising number of exotic loans under foreclosure.
Still, Cannon did note that he’s seen an increase in contracts as well as closings since December. “If that continues, we may be seeing the beginning of the bottom,” he said.
Mark Zilbert, a real estate broker in Miami Beach, thinks a South Florida-wide recovery may be several years away, but believes that some neighborhoods will begin to rebound much sooner than others.
“Popular markets, like the beachfront communities of South Beach, Bal Harbour, Sunny Isles and Fort Lauderdale, will take 12 to 24 months to recover because buyers will happily embrace well-priced oceanfront properties,” he said.
“Downtown Miami and other communities around Miami-Dade and Broward Counties will take four to six years to recover, due mainly to an oversupply.”
Zilbert said buyers are also concerned about community stability and tend to seek out projects or neighborhoods with minimal foreclosures, like the South of Fifth (SoFi) area of Miami. Downtown Miami, on the other hand, has been hit hard by foreclosures and buyer defaults, so buyers are wary, he said.
Perhaps the most pessimistic local analyst is Jack McCabe, chief executive officer of McCabe Research and Consulting. Back in 2004, McCabe was one of the first industry analysts to predict an imminent bust. These days he thinks the single-family market in Miami will recover more quickly than the condo market — by the end of 2009, after prices drop another 20 percent or so.
As of May, there were 17,065 single-family homes for sale in Miami-Dade County, McCabe said, compared to 25,555 multifamily units. “There is more demand for single-family homes,” he said. “And there is limited supply because Miami-Dade County … is mostly built out.”
On the other hand, McCabe said there is a 57-month supply of condos based on the number of units presently being closed each month.
Before any rebound in the condo market, McCabe said there has to be real demand by buyers, not speculators.
And for that to occur, housing has to be affordable — meaning that prices, taxes and insurance need to drop, so more buyers will enter the market — and the glut of excess inventory needs to dwindle.
“Reduced prices equate to greater buyer demand, and greater buyer demand equates to a shrinking supply and more balanced ratio,” he said. “That’s how the market corrects itself.”