Hurricane season may be under way in Florida, but brokers say that won’t stop the South Florida real estate market from doing business as usual.
The National Hurricane Center in mid-May released its hurricane season prediction for 16 named storms — with nine possible hurricanes — through Nov. 30, less than last year’s record-setting hurricane season. In 2005, there were 28 named storms, of which 15 became hurricanes, with seven of them at Category 3 or higher. Last year, hurricane damage to Florida and Gulf Coast states reached $150 billion, according to the Weather Channel.
In a testament to human optimism — or perhaps foolishness — Florida still drew huge numbers of new arrivals.
“What’s interesting is that 400,000 people still moved to Florida even though there were four hurricanes that hit Florida in a period of 13 months,” said Michael Dooley, president of the Florida Association of Realtors.
At the start of the 2005 hurricane season in June, the median sales price in Miami had reached $363,100, with 1,317 sales for the month. In West Palm Beach, the median sales price was $406,800 with 1,551 sales. But during the hurricane season, which ends in November, sales in Miami had dropped 53 percent as the median sales price increased to $381,600. Records by the Florida Association of Realtors also show sales in West Palm Beach fell 61.3 percent over the season while the median sales price rose.
According to Dooley, it’s a cooling of prices, not weather, that will be needed to reverse the decrease in sales. “Prices have outpaced the ability of most purchasers to buy,” he said. “A retraction of prices will occur.”
Rather than the rapid price increase of 2005, Dooley expects a 5 to 6 percent appreciation over the next few years. In addition to the increase in interest rates affecting the market nationwide, Dooley said an increase in real estate taxes for non-homesteaded properties, the speculative group of purchasers that came into the market, and a spike in home insurance rates, has a dampening effect on real estate.
Rosalind Clarke, a Corcoran Palm Beach agent, said the storm damage in the past couple of years is responsible for the higher insurance rates.
There is talk that soon home insurance companies will only insure up to $1 million, but many buyers in Palm Beach are already self-insuring their homes, said Clarke.
Since the $26 billion damage caused by Hurricane Andrew in 1992, strict building requirements have reduced liable damage. Hurricane-resistant windows and shutters have become necessities for most residential homes.
Nevertheless, high-end housing sales in the Palm Beach area are steady, said Clarke. Corcoran’s market report for 2005 showed an average home sales price of $4.394 million in the area.
“We are talking about people who can afford to protect their houses appropriately,” Clarke said. “There is a certain amount of people who seem to be driven to overlook these factors and still pay top dollar. If there is a place to be when a hurricane hits, Palm Beach is as good as anywhere.”
With sales price appreciations slowing down and a calmer hurricane season, the South Florida market forecast may lighten up.
“I think that if we can get through this year without a storm, we’ll see a whole different mindset,” Clarke said. “But there is no question that this is something on the top of everyone’s mind.”