British Buyers Halt Florida Home Mortgage Rush for Vacation Properties
Great Britain is America’s good friend across the Atlantic. Nowhere is this more the case, however, than in the Sunshine State, especially if the issue at stake is a Florida home mortgage.
Of the state’s 76 million visitors last year, England represented the largest single overseas nationality - approximately 4.3 million - with more than 150,000 of these blokes on the lookout for a holiday or vacation home.
Now, however, the second home market for Americans and Brits alike is dissipating. After five years of record Florida home mortgage growth - between March 2001-2006, the statewide median house price rose 104% - and double-digit annual capital gains, our state had been one of America’s fastest-moving property markets. But today, the bottom has fallen out of holiday home rentals and, despite a weak dollar and a glut of available properties, British buyers are turning their backs on Florida.
Second Florida home mortgage sales down
The Florida Association of Realtors said last month that local sales of existing single-family homes and condominiums have been in a double-digit freefall for six months. One British-based agent, who insists on anonymity, admits that he hasn’t sold any Florida properties for months.
“The market is completely flat,” he says. “It is undergoing correction. Houses were built so quickly and prices went up so quickly that it is only natural that they would calm down a bit. It is certainly a buyers’ market at the moment.”
So, what has gone wrong? It’s a combination of bad weather, America’s worsening reputation abroad, rising Florida home mortgage costs, and sheer greed. For the rising number of international buyers who now want to get out, it’s a mix that is creating headaches now the euphoria of owning what appeared to be their dream home has worn off.
Escalating fuel surcharges on airline tickets have added to the uncertainty, raising the prospect of future rises in fares. It hasn’t helped that British Airways is at the centre of an investigation by the Office of Fair Trading and the US Department of Justice, amid allegations of a fare-fixing cartel.
The rising costs of owning in Florida
Statewide, utility and home insurance bills have been driven sky-high by hurricane after hurricane: 16 swept through the Caribbean and Gulf last year and the first storm of the 2006 season hit in June. Their trails caused massive hikes as the insurance and power companies attempt to recoup the losses sustained during particularly bad seasons.
Florida mortgage rate hikes aren’t helping, either. The 17 Federal Reserve rises since June 2004 mean the rate of interest on a typical 30-year fixed rate mortgage is now 6.76%, up from just over 4% when the round of rises began.
Meanwhile, investors who had hoped to make swift profits find their money tied up in property they can’t sell without slashing the price; British buyers, lured in by claims of big holiday-rental profits, find there are too many properties chasing too few leads. The market is awash with holiday-home bargains. Those bubble sitters that are waiting for prices to fall in order to swoop in with a Florida home mortgage loan may have the right idea.
“We are still going through a stare-down between buyers and sellers,” says Jack McCabe, chief executive of McCabe Research and Consulting, a property consultancy based in Deerfield Beach. He warns the situation will worsen. “It’s the tip of the iceberg for both the Orlando market and the south Florida market.”
“The Florida market has had its day for the time being,” says Bill Blevins, managing director of Blevins Franks International, an independent firm providing tax and investment advice. “Prices are not just levelling off, but in many cases developers are jittery to the point of making deals that would not have been available a year ago, and with the US dollar at current levels, this may be an opportunity to buy for anyone who wants to hold the asset for the longer term.”
Blevins echoes the sentiment that a buyer hoping to turn a profit after a couple years shouldn’t consider a Florida home mortgage right now. It’s too risky to be in the short-term.
Therefore, depending on your point of view, it’s not all bad news. For opportunistic investors with the time, money and patience to buy in for the long haul, there are bargains to be had, while the real bottom-feeders are still waiting for further price drops.
“I have just been contacted by five of the largest hedge funds in America, and they are all interested in the opportunity to buy distressed properties,” says McCabe.
The jackals — or should that be alligators — are closing in.
