Hot Ideas for a Cooling Florida Housing Market: Interview with an Expert

Lew Goodkin knows a thing or two dozen about Florida home loans. And commerical loans. And condo developments. The founder of Miami-based Goodkin Consulting is often referred to when people wonder about the state of the housing market. The Miami Herald recently caught up with him for an interview.

In recent months, the real estate market has shifted and cooled. Home sales have fallen. Goodkin, however, contends South Florida’s future is very bright, but he says the condo market will get much worse before it gets better.

Q: You have seen up and down cycles in the South Florida real estate market during your career, what happened in this latest boom cycle?

A: What happened is that real estate became an investment vehicle as opposed to shelter. There was speculation in some projects where more than 60, 70, 80 percent of the “buyers” were speculators. Many of my clients were shocked by all the speculation. The closings would come and there was a substantial amount of flipping.

The single-family home builders put things in place. They didn’t want to sell to people who will later be competing with them in trying to sell units to an end-user. I remember one developer saying he was giving a good deal to a buyer but that buyer got another unit for less from a flipper. So, many of the home builders wrung it out.

But multifamily builders didn’t do anything. Why would they? It’s sort of like saying, do we want to say no to 60, 70, 80 percent of our buyers? And the speculator has justified their existence with the developers’ need for presales.

Single-family is a different kind of picture. We have a land supply issue for new single-family homes - there is not much new land to build new houses. We are not talking about a tremendous amount of completed, unsold inventory — the kind of things that generate the big pricing drops. If pricing drops, it will be because a lot of speculators and investors bought stuff and will be selling it at lower prices. But this won’t be so much in the single-family.

Q: What will be the result of all this speculation you say has occurred in the condo market?

A: The multifamily [condo] market will have some projects that do well because they are located well. But for the most part, multifamily is in the process of taking a big hit. It will be more than 10 percent in terms of price declines. The reason is that so much of the condo market sales were not based on real users. And if it’s not affordable to user demand, the demand will be so off that it will have to be reflected in significantly lower prices.

Q: What about those who say the South Florida’s real estate market is different from other parts of the country? The fact South Florida draws buyers from Latin America or Europe. That South Florida, particularly Miami, has grown in international prominence. And increasingly the aging baby boomer population in the United States is moving to warmer climates.

A: I believe we have all of those things. But the punch-line is that is not what created this boom. What, did everyone just discover Florida in the last 15 minutes? South Americans buying in South Florida is something new? Florida has always had this appeal. That is why the demand potential remains very good in the future. And that is why I think there will be many people ready taking advantage of lower values when it surfaces, and it will. (FHL note: individuals still must be aware of dangerous Florida home loans in this regard.)