Retirement Condos Flood South Florida Housing Market; Buyers Pick Up Some Leverage
David Dweck scanned the local multiple listing service last week and found 2,700 condos for sale in Palm Beach County retirement communities alone. According to the Sun-Sentinel, that represents roughly 9 percent of the county’s total listings.
“That’s a staggering number,” said Dweck, founder of the Boca Real Estate Investment Club. “A lot of these buildings took a beating in the hurricane, and a lot of these people are too old and too frail to go through the repairs.”
In the days following Hurricane Wilma last October, many seniors struggled to stay alive after winds tore off roofs and power outages prevented those on upper floors from using elevators. But don’t blame the storms alone for the over-55 condo glut. Some building facades haven’t been updated in years and aren’t appealing to existing residents or buyers.
“That market will continue to correct downward. I don’t expect it to pick up at least for another year,” Dweck said.
While the South Florida real estate market is certainly out of hand, and hanging many lower- and middle-class residents out to dry, there’s a definite silver lining. At least it’s not Naples.
That booming Southwest Florida city across the swamp is the nation’s most overvalued housing market, according to Global Insight and National City, with homes priced 102 percent over where they should be. Salinas, Calif. (79 percent), Port St. Lucie-Fort Pierce (77.4), Merced, Calif., (77) and Bend, Ore. (76) give Naples its stiffest competition.
The Broward County housing market almost looks cheap by comparison, with prices “only” 57 percent overvalued. Prices are comparable in nearby Miami-Dade (64) and Palm Beach (65) counties. Throughout the U.S., Florida and California account for 17 of the 20 most overvalued markets. But while there is the potential for price reductions in these overvalued markets, most of these areas won’t see substantial, widespread declines in home prices.
“In most of these markets, the growth will just slow or flatten until market conditions catch up to prices,” said Jeannine Cataldi, senior economist for Global Insight.
Meanwhile, the Miami-based online real estate service Homekeys has done a little analysis of its own, and determined that 23 percent of properties in Miami-Dade are priced at or below the company’s estimate of market value. In Broward, 37 percent of properties are at or below market value, and in Palm Beach County, it’s a surprising 59 percent.
The bottom line: As Florida home loan costs inch higher and buyers gain some leverage in the market, sellers are getting more realistic.
“The pricing gap is beginning to go away,” said Mario Villena, V.P. of Marketing for Homekeys.
However, don’t expect a break in the rising costs of construction material, said Ken Simonson, chief economist with The Associated General Contractors of America in Washington, D.C. In the past year, builders have been hit hard with steep increases — 87 percent for copper and brass, 48 percent fpr asphalt, 40 percent for diesel fuel, 26 percent for drywall, 18 percent for plastic construction products and 15 percent for cement.
“If you’re trying to get a bid on a home, you’re going to face much higher materials costs,” Simonson said, noting that prospective Florida home loan applicants need to consider the price increases as part of their budgets, while the state’s home builders need to buy materials further in advance.
