"A Tale of Three Cities"-Miami, FL
Wednesday, March 21, 2007SUSIE GHARIB: Florida was one of the nation's hottest real estate markets until last year. Existing home sales plummeted 30 percent in 2006 and home prices dropped dramatically, especially in markets like Miami. As we continue our series, "A Tale of Three Cities," Jeff Yastine looks at the state of Miami area real estate.
JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you didn't read the newspapers, you'd think the condo boom was still in full swing in much of coastal Florida, where frantic construction activity is still very much in evidence on the skylines of major downtowns and in quieter suburbs. These condominiums on the western edge of Boca Raton are one of hundreds of condo and condo-conversion projects that saw pre-construction demand and prices soar, only to drop sharply over the past year and a half. Some speculators, like Marie Guillaume, a Haitian immigrant, saw the value of their units drop 20 percent or more even before construction was finished. So Guillaume, and some other buyers here decided to walk away from their purchase contracts and forfeit their deposits. Now in another time, it wouldn't have been a big deal. The developer could have turned around and sold those units to someone else. But buyers are so scarce these days, the developer instead chose to sue Guillaume and force her in court to close on her condo purchase. Marvin Moss is Marie Guillaume's attorney.
MARVIN MOSS, ATTORNEY: It is very unusual. As a matter of fact, if you talk to most lawyers they have never come across these cases at all before. The only lawsuits for specific performance as previously stated are the ones that are filed by the buyer against the seller in order to get title to the property.
YASTINE: Litigation between buyers and developers over condo-related disputes fills the newspapers in much of Florida. Real estate analysts like Jack McCabe say it's a sign of the post-boom times.
JACK MCCABE, CEO, MCCABE RESEARCH & CONSULTING: Speculators is what's really has driving this market over the past five years and why prices have gotten so high. All those speculators have left the market now and we're left with truly the end user buyer pool in normal conditions, which is only 50 percent or less of what the market has been in 2001 through 2005.
YASTUNE: New statistics show the pain. Median home prices in some areas, like Orlando, remain steady. But prices have fallen sharply in areas that were hottest during the boom -- Miami, Fort Myers, Sarasota, and Melbourne. So what's next? McCabe has a dark outlook for the next several years.
MCCABE: We haven't seen the effect that we're going to see later this year and into 2008, the mass foreclosures that we're expecting. And also where lenders are going to be taking back projects from developers and in many cases hedge funds and investment asset groups are going to step in to buy those assets at highly discounted prices.
YASTINE: But other analysts, like Jack Winston of Goodkin Consulting, say legislative action on property insurance and tax rates and continued economic growth will bring individual buyers back.
JACK WINSTON, SR. CONSULTANT, GOODKIN CONSULTING: We're still growing by almost 2 percent a year. Jobs still continue to grow at a very good rate and mortgage rates are still in the 6 percent range, which is the lowest rate we have had in years. So the fundamentals for a strong housing market are still there, they haven't changed. The only thing that has changed is an overbuilding and excess inventory.
YASTINE: Winston sees the Florida market bottoming out this year, with a return to modest growth in 2008. Jeff Yastine, NIGHTLY BUSINESS REPORT, Miami.
