The weather may be frosty, but South Florida’s commercial real estate leaders will spend this evening talking about where rays of sunshine may penetrate the gloom.
Robert Cruz, Miami-Dade County’s chief economist, said that many elements of stability need to be in place before there’s a sustainable market recovery, and that may take more of 2010 than optimists would like.
“The financial sector remains weak and many things need to happen before we will see more robust growth,” Cruz said. “But compared to where we have been, I see positive signs internationally — and that means there will be more demand for U.S. products as we move into the future. Housing and construction will be the last segment to recover.”
Cruz will join Tere Blanca, former Miami branch manager of Cushman & Wakefield of Florida and principal of Blanca Commercial Real Estate, and national real estate analyst Michael Cannon, managing director of Integra Realty Resources in Miami, at a Condo Vultures panel discussion tonight.
Peter Zalewski, principal of Condo Vultures, will serve as moderator of the event, which will examine real estate, finance and economic trends in South Florida in 2010, including talk of the state of bulk condo deals, note sales and commercial real estate.
Cruz said 2010 will be a year of economic recovery for South Florida, but growth will be stymied by an overall weak U.S. economy, lack of credit, and a mass of unsold housing units. With sales of existing homes — both single-family houses and condos — rising, and prices showing signs of stabilizing, the residential market may well be starting to turn the corner.
But risk factors remain.
“We haven’t solved the foreclosure problem,” Cruz said. “We still have a lot of residential units out there that are worth less than their mortgages and we also have to find a solution to that. If that problem isn’t solved, we may have another wave of foreclosures and that will hurt the housing and construction markets.”
Cannon of Integra Realty Resources said one of his biggest concerns is pervasive fraud. According to the TowerGroup, losses from mortgage fraud were about $2.5 billion in 2008, and the firm expects comparable losses to continue for the next few years.
“It seems everyone has a little bit of larceny,” Cannon said. “I think very few, unless they’re hypocrites, don’t. Larceny turns into greed. Greed turns into fraud. And, if it’s widespread, fraud turns into what we’re faced with today.”
Cannon said the market is going through a deleveraging period. Everything was over-financed based on the expectations that prices and values would continue rising. It was an unrealistic expectation, he said. Throw in poor underwriting, poor oversight regulations, and an abundance of greed and it was a perfect formula for a housing meltdown, he said.
Cannon also said one of the biggest obstacles to recovery is the sheer number of “upside down” mortgages. Home values have rolled back to 2004 levels in many markets, and even lower in some sub-markets, leaving a majority of people who bought homes in the last seven years owing more than their properties are worth. Still, Cannon said, South Florida is beginning to emerge from the down real estate cycle.