The Real Deal Miami

Realtors battle lure of cheap foreclosures

By P. Douglas Filaroski | September 16, 2009 02:16PM

Home sales continue to improve, but times remain tough for new home builders and sellers competing against distressed properties listing at deeper and deeper discounts.

“This business that the market has bottomed out is absolutely ridiculous,” said Lewis Goodkin, an independent real estate analyst in Miami. “We’ll know we’ve hit the bottom when not only are sales going up, but prices have stopped dropping.”

The Florida Association of Realtors reported existing home sales rose statewide and in South Florida in July for the 11th consecutive month. A total of 20,917 homes sold in Florida in July compared to 14,991 in July 2008, providing further hope for the industry.

But figures also showed a decrease statewide in median sales price of 24 percent for single-family homes and of 36 percent for condos during that time.

Goodkin, CEO of Goodkin Consulting Corp., said the numbers represent a house-half-empty scenario — especially as a second wave of distressed properties hits the market from adjustable rate mortgages and continued high unemployment. “So you can say, yeah, there are people buying homes at low prices,” he said. “But there are still more homes being added at deeply discounted prices.”

Real estate agents said properties involved in foreclosure, short sale or auction are dominating business these days. Goodkin said the association reported distressed properties account for half of the area’s home listings. He guessed the figure is even higher.

Pat Fitzgerald, broker/owner of Coastal Properties in Jupiter, said low prices are tempting many of her buyers. “It’s understandable,” she said. “In a lot of instances, you could not build the property for what they’re getting it for. [A lot of builders] are selling them at cost.”

But Fitzgerald, who is also vice president of the FAR, tells clients that new homes and non-distressed properties tend to close faster and have fewer problems, like missing appliances or damage.

In a new home, “You may pay a little more, but you have the benefit of a warranty,” she said.

Brad Hunter, chief economist with Metrostudy in West Palm Beach, said housing starts may begin to creep back up soon after a near standstill. After reporting more than 10,000 starts annually between 2000 and 2005, Broward County is projected to have 311 starts and Palm Beach County 758 starts this year.

But builders will be taking a different approach in light of new competition for sales from banks.

“Many of them will value-engineer houses to save a few thousand dollars on cost and price,” Hunter said. “I don’t think we’ll see a lot of the five- and six-bedrooms. They’ll probably figure people can get by with four or even three bedrooms.”