The start of the new year may be the point when the upper end of the Miami Beach market found its hardwood floor. After luxury property sales in Miami Beach slowed in 2008, lower prices caused a rebound in the second half of 2009 — and inventory is shrinking in 2010.
Miami Beach luxury waterfront home prices for all of 2009 fell 25 percent year-over-year, according to data from Esslinger-Wooten-Maxwell. Kevin Tomlinson, a realtor with the brokerage, said that data surprised him.
“Sellers are starting to see the light. They are hearing what the market is saying — and they are lowering prices,” Tomlinson said. “Homes on the market for an average of about 200 days were causing a backlog in inventory in the first half of the year, but sales velocity picked up toward the end of 2009 for homes with lower prices.”
In 2008, there were 49 sales and the average price of a Miami Beach waterfront home was $934 per square foot. Prices fell to $702 per square foot by the end of 2009. That means a seller who owns a 7,000-square-foot waterfront home that was worth $6.53 million in 2008 saw his home drop in value to $4.91 million in 2009. Tomlinson expects the luxury home market to find its bottom this year as some sellers seek to avoid foreclosure.
What’s driving the prices down? It’s a combination of things, said Bryan Halda, a senior vice president at Gray & Associates Properties in Miami Beach. Halda made the first luxury property sale of 2010 in Miami Beach — the Meruelo mansion at 5745 Pinetree Drive, listed for $5.6 million in 2005 and selling for $4.6 million the first week in January.
“Some people bit off more than they could chew. They are faced with increased property taxes on multiple properties. Some built new homes on spec expecting to flip them for a large profit and couldn’t,” Hyda said. “So they are willing to lower the price to get out from under some of the monthly overhead.”
Nelson Gonzalez, last year’s top producer at Esslinger-Wooten-Maxwell, thinks the Miami Beach waterfront market may have already hit bottom and believes cash buyers are circling. In the past few months, he said he has sold an $8.5 million condo on Miami Beach, a $9.75 million home on North Bay Road, a $9 million home on Indian Creek, and a $6.6 million house on Golden Beach — all to cash buyers.
“The number of cash buyers blew me away — and 99 percent of the buyers were end users, which is very good for the market. That also tells me we may have hit bottom,” Gonzalez said. “The speculators won’t put their feet back in the water until somebody declares that prices are on their way back up.”
Esther Percal, a senior vice president at Esslinger-Wooten-Maxwell, said sellers were more motivated in the second half of 2009.
“There are a lot of locals that have been hovering around this market for five or six years and now they are finally laying their eggs,” Percal said. “Some foreigners are doing the same — looking, looking and looking and now finally bidding.”
Inventories of luxury homes on Miami Beach, are down 30 percent, according to Esslinger-Wooten-Maxwell. Percal said deals are getting done faster.
“The moment one person focuses on a property, two more come out of the woodwork with an offer and all hell breaks loose,” Percal said.
But he said there’s a cautious side to even the most ambitious buyers trying hardest to drive prices down. “The difference now is when you start bidding wars with too many people in the $3 [million] to $5 million price range they more often back off,” he said. “They aren’t so emotional anymore. I think the [asking] prices go upward from here.”
Hyda said he’s running out of listings because he’s selling Miami Beach luxury homes so fast, albeit below the listing prices.
“If January is any indicator of how 2010 is going to be, luxury brokers in Miami Beach are going to have a very successful year,” Hyda said. “I have never been as busy as I am right now.”