South Florida Real Estate: Is It Finally Time to Buy?
From 2000 to 2005, South Florida housing unit sales were going up by double digits annually, as was appreciation. "During the overheated market, there was too much flipping going on," Peltier told HousingWatch. "Consumers were buying [homes] as an investment, so demand became far in excess of supply. As a consequence, developers ratcheted up the activity way beyond their levels to meet the insatiable demand."
This happened in Miami, especially, where condos were being built en masse to meet an artificial demand. Then the market started to crack, the financial market tightened and it suddenly became necessary to be employed and credit-worthy, and the house of cards (in this case house of "condos") started to crumble. At this point, appreciation halted altogether and people who bought at the inflated values -- and whose only purpose for buying was to sell at a higher price -- were immediately underwater for thousands of dollars.
"It was clearly a case where speculators could not dump properties fast enough. Actually, the demand was just normalizing. An overly aggressive demand was largely due to speculation, not because we had a lot more primary users entering the marketplace," Peltier says.
condos, which was very aggressive in the early part of the decade. Some prices have been corrected in Miami and also in West Palm Beach as much as 50 percent. Unfortunately, though, the prices are still at 2002 levels, so those who bought from 2002 to 2005 are probably underwater.
One area of South Florida where things have corrected is west of Highway 41 on the West Coast, in places such as Naples -- largely due to the area's proximity to the water. Unit sales in this area have been growing in the last two years and home values have largely stabilized. They are still off their peak by 25 percent, but Naples has the most overheated market in the country. Prices went up 180 percent; some home values are greatly ahead of their normal growth.
And it's definitely a buyer's market right now, with interest rates on 30-year fixed-rate loans at about 4.5 percent, a level that Peltier says we are never likely to see again in our lifetime. That's what puts buyers in the driver's seat, a reversal from the usual, when sellers are in control. Sellers, though, are competing with both distressed real estate and a significant supply of inventory.
"We've got to get rid of all this foreclosed real estate in order to correct the market," Peltier says. "The ideal situation is to have a balanced inventory where supply and demand are pretty much equal. Our current glut and need to absorb all this inventory is not a process that's done in six months to a year."
The forecast is that significant improvement will occur in a year to a year and a half. For South Florida, though, the forecast is what works in the area's favor. It's still a place where folks want to move and migrate to, thanks to the weather -- perhaps a winter retreat for six to eight months or a second home. Once folks are more confident in their economic situation, they likely will begin migrating to the Sunshine State again.
These AOL Real Estateguides can help, no matter what housing market you're in:
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