Despite Shifting Market, Don’t Expect Falling Prices in the South Florida Housing Market

The South Florida real estate boom is over, housing sales are down, and worries over the future of the housing market abound.

But don’t look for prices to drop much, if at all, says the chief economist of the National Association of Realtors.

The reason? Of any U.S. state, Florida real estate has the highest share of international buyers, at 15 percent on average. Miami-Dade and Broward counties rely even more heavily on foreign buyers, with 30 percent of all sales, according to a Realtors study in the 12 months ending May 2005. So strong is the demand for local housing that some banks are now offering Florida home loan options in foreign currencies.

Lured by the U.S. importing-exporting explosion, the high value of the euro compared with the dollar, and the safety of U.S. investments amid turmoil in Latin America, foreign buyers will keep propping up the Florida housing market, economist David Lereah and others said at the 2006 International Real Estate Congress and Expo.

With foreigners still buying, baby boomers starting to retire, and the constant allure of warm weather, Florida will remain America’s No. 1 spot for the next 10 years at least, experts say. The weight of international buyers was clear Tuesday at the Expo, where exhibitors offered sales materials in Spanish and other languages.

Developers of the luxury W Fort Lauderdale Hotel and Residences also sought out brokers catering to European and Latin American buyers. Foreign buyers will likely make up 20 percent of the resort’s 171 residences, each priced from about $1 million to $2 million, said Maura Launders, sales director for Fort Lauderdale’s Colonial Realty.

Still, risks remain for investing in Sunshine State homes and land, especially due to the onset of hurricane season and the never-ending Florida insurance crisis.

But so far, only a tiny share of buyers, less than 1 percent, are forgoing Florida because of such woes. Lereah warns that the share of those electing to eschew Florida could rise, however, unless the government makes strides in restructuring subsidies for disaster insurance.

The borrowing costs of Florida home loans matter, too.

The U.S. real estate boom ended last August, when a mix of rising interest rates and soaring home prices led many speculators to realize that flipping houses for quick profits was no longer feasible. Investors stopped buying, demand and prices cooled in many markets, and here we are today.

The U.S. locales that posted soaring prices for years, including Miami, Fort Lauderdale and West Palm Beach, now are seeing rising inventory levels and homes staying on the market longer. Sales are down as much as 30 percent in some areas, such as Miami’s overbuilt condo market.

Over the next six months, experts predict, U.S. prices will either fall or rise slowly until sales picks up again likely next year.