Prices for Miami real estate have dropped as much as 43 percent from the 2006 peakFor some Manhattan renters, buying a second home is coming before buying a first.
While New York real estate has seen severe discounts (Manhattan prices are down roughly 20 percent from their peak), some New Yorkers are going to real estate markets like Miami or the Hamptons that have been burned by even deeper discounts.
In the Hamptons, prices have dropped as much as 30 percent since 2006, said Barbara Weber, managing director of Nest Seekers International in the Hamptons. In Miami they have dropped as much as 43 percent, compared to the city’s historic high in 2006, according to Peter Zalewski, a broker with the Bal Harbour-based Condo Vultures Realty.
“You can literally buy five condos in Miami for the price of one in New York,” said Ron Shuffield, president of EWM Realtors in Miami.
New Yorkers are also taking advantage of foreclosures and short sales in the Miami-Dade area, said Alfredo Vizcarrondo, president of the AV Group in Doral, a real estate company. “In the last quarter of the year, there [was] increased interest from New Yorkers,” said Vizcarrondo. He said he recently closed on properties in Miami’s Brickell area and in Aventura for prices as low as $160,000.
“On any given day, we’re getting about 1,500 unique visitors to our Web site, and a solid 15 percent are New Yorkers,” said Zalewski, who is also a principal with the consulting firm Condo Vultures.
Closer to home, the Hamptons have also captured the attention of New York renters as a place where they can buy before purchasing in the city. “Since the recession, I’ve seen this [phenomenon] a bit more as a first-time investment,” said Weber. “Some people still feel they can’t afford to buy in New York, but they can rent out that home in the Hamptons, and in the summer, might capture 75 percent of the money they’re outlaying a year for the house.”
Holly Rubenstein of Town and Country Real Estate said that activity has picked up significantly on the East End since October and “there are lots of young married couples looking to buy.” And, she said, many can claim these properties as a primary residence even if they still live in the city.
Aside from falling prices, Weber said there has also been a surge in the number of year-round rentals in the Hamptons — a possible avenue for owners who rent in the city. And she cited low taxes in the Hamptons as a reason for its appeal to New York City buyers.
“When you buy a co-op or condo in the city, you’re starting out with a minimum of $1,000 a month maintenance,” Weber said. “If you bought a house here at $700,000, the taxes might only be $3,000 per year.”
One New York renter, who asked to remain anonymous, was originally looking to purchase an apartment in Brooklyn, but his broker advised against it. After Lehman Brothers collapsed, he turned his search toward the Hamptons.
“The relative value of homes out there versus what they were before the crash — they just haven’t [held] the way they have, say, for two-bedroom apartments in Manhattan,” he said. His price range is around $2 million, which might get him a four-bedroom house on a quarter-acre of land, possibly with a pool, in Water Mill or Amagansett.
And because he goes out to the Hamptons frequently, he might even be able to claim the home as a primary residence. If that’s the case, he said, a bank would be likely to lend up to 70 percent, as opposed to 50 percent for a secondary residence.
Weber, who rents in New York, bought a house in the Hamptons in 2002 for many of the same reasons New Yorkers are looking there today.
But taking advantage of fire-sale deals in severely hurting markets can have its perils.
It’s not a good idea to simply buy a Miami condo because, for example, it’s available at a third of the 2005 cost, said professor Frank Schnidman, director of the Center for Urban Redevelopment Education at Florida Atlantic University in Fort Lauderdale. Maintenance, he said, will likely go up, and windstorm and homeowners’ insurance policies are expensive.
And if other condo owners fail to pay their fees, that could mean higher costs for everyone else. “The best deals are on troubled condos, but that’s why they’re the best deals,” Schnidman said.