Even as headlines focus on the potential positive indications of the end of a market slowdown, the recovery of the retiree homebuying market will take years, some experts say.
The number of retirees buying property in South Florida has decreased dramatically, and economist Don Grimes projects a five-year lag in its recovery, though some realtors say things are already looking up.
Grimes, an economic forecaster at the University of Michigan, says this market, vital to the area’s economy, started a downward slide after the fierce hurricane seasons of 2004 and 2005. Buyers scared off by storms then saw retirement savings battered by the collapse of the stock market. He says it could take five years before retirees come back to Florida in the droves they did in the first half of the decade.
Many retirees or those planning to retire can’t sell their homes up north and are looking at shrunken retirement portfolios. States with lower property costs such as North Carolina and South Carolina are beating out Florida, Grimes says.
“I think it will be very hard to recover to that level of growth South Florida had three years ago,” Grimes says. “I think it is going to be a slow recovery.”
Recent Census Bureau data shows that more northerners are staying put, Grimes points out. The New York area has shown a drastic drop in transplants to Florida, and the state is the biggest source of retirees who move to the region. In 2005, about 100,000 New Yorkers moved to Florida and 25,000 Floridians moved to New York. Two years later, those numbers dropped to fewer than 60,000 New Yorkers moving to Florida and 32,000 Floridians moving to New York. And that was before the economic breakdown on Wall Street.
Longtime realtor Sheldon Jaffee — who specializes in high-end properties selling for $1 million-plus and goes by the nickname of “Boca Expert” on his Web page — says Grimes’ five-year estimate for a recovery of the retiree market is “overblown.”
“The cost of living in Florida might be a little more than South Carolina or North Carolina, but what about weather and easy lifestyle, and the fact that we don’t have an income tax?” asked Jaffee, an estate agent with Lang Realty in Boca Raton. “Anyone looking for warm weather beaches and a quality lifestyle, there is nowhere else that offers anything close.”
Jaffee says many baby boomers have seen their stock portfolios and 401(k) plans lose 40 percent to 50 percent. There are still plenty of high-end buyers willing to invest in property in Boca Raton, Delray Beach and Highland Beach, he says. These buyers are ready to pay cash or can get credit for homes in the seven-figure range, even if those high prices still represent discounts.
Jaffee says one retired doctor is looking at a Boca Raton home for $3 million — $1 million less than the seller was asking previously — and another retiree looking at a home in Delray’s exclusive Stone Creek Ranch for $4 million — a 40 percent price reduction.
“The market has already started toward recovery over the last month,” Jaffee said, attributing the pickup to positive news in the national media about the stock market and lenders more willing to finance mortgages and lower interest rates. The biggest factor drawing down northerners, Jaffee says, is the low prices.
Grimes acknowledges that Florida does have a lot to offer retirees, but high insurance rates and property taxes — added to shrunken retirement portfolios — makes it hard for many northerners to make the move to Florida.
“If they can psychologically make the leap, they would realize there are a lot of bargains to be had,” Grimes said. “They might sell their home up north for 20 percent less than they would have a year ago, but they can buy a home in Florida for sometimes 35 percent less than they could have.”