A sign of the times?
I’ve been watching the Florida real estate market VERY carefully for the past two years. I’m fortunate to have a couple of good friends in the real estate business who have shared some insight. I’d like to pass it along…
I won’t use any names here, but one of them builds several hundred homes a year in Florida, ranging from tear-downs on the water that become mansions to Planned Unit Developments of 100 houses or so. If you live in Florida, you know this name. He also owns a lot of prime Florida property. A few months ago, he began renting his teardowns, as opposed to rebuilding them because the market for 1.5 million to 2.5 million dollar homes dropped-off dramatically. According to him, we’ve reached a point of saturation, where those that could afford homes in this price range have already purchased them. He has stopped acquiring land for development at this point.
Another close friend is a very active Realtor and has shared information with me that most of us consumers CAN’T get our hands on. Realtors have their own multiple listing service. It’s not open to the public. In Palm Beach County, this system is called RMLSFL. This program gives you stats and details on homes you could only dream about. It covers all of Palm Beach, Martin & St. Lucie Counties, with a little bit of Broward too. It gives real, relevant numbers with some amazing statistics. BELIEVE ME… Realtors don’t want you to see these stats!!! The health of this market is NOT what they are representing.
Last year, RMLSFL had 18,000 active in August. As of this month, RMLSFL is at 43,000 active. The number of homes for sale, in just these 3 counties, has more than doubled and has been rising sharply each week over the past 4 months. Matter of fact, there were only 32,000 active 4 months ago. 20% of these "actives" are price changes. A few dreamers are actually going up, but the majority of them are going down. Time on the market has gone from just a few days last year - to several months this year. The majority of listings over 500k expire in 90 to 180 days without being sold.
Adding to this, there are some 15,000 rentals listed in RMLSFL. On any given day, over 14,990 of them are still available. Believe it or not, these figures are relatively ACCURATE. This does NOT include private rentals, usually found in the newspaper or managed apt complexes. To give you another example… I was looking at a townhouse that was DIRECTLY on the intracoastal. It was a large, very new 2/2 with a garage and a dock for only $1600 a month. It sat vacant for 6 months! You can hardly rent a decent apt 10 miles inland, with a view of a bush for $1200-$1400 in South Florida. Many investors are having to carry the mortgage payments on these properties because they can't rent them.
Homes under $350k still move along briskly, as many first time home buyers rush to beat rising interest rates and are afraid the market will go higher. BTW… if it’s under 300k, it’s so bad you wouldn’t wish it on your ex-wife. Often, these people can’t even afford $300k homes and are taking interest only or adjustable rate loans. Pretty dangerous when you can’t afford a conventional 30 year, fixed rate mortgage that only costs a few more dollars a month! On this subject… did you know that 30% of all new homes mortgages throughout the US are interest only? In California, over 70% of new homes loans are interest only! These stats were shown on a CNBC town forum with the president of the National Board of Realtors, the Pres. of Lending Tree.com and an economic professor at an Ivy League university.
If you’re thinking about South Florida real estate, caveat emptor… a good number of properties in Florida are held on speculation. I don't remember the exact number, but it was very high. For condos, it's downright shocking. They are often investor owned, or owner occupied by “flippers”. Apparently, a lot of these people had been vested in the stock market, but pulled out when the market went south and started… the great Florida land rush. Would you like to know where a lot of this money is going when they sell their properties in Florida? Take a look at lake front properties in Georgia, Tennessee, and the Carolinas. The run-up in prices over the past few months has been rapid!!! A good site for monitoring this is www.LakeHouse.com
For many investors who own property in Florida, they are trying to make 100k-500k and even 1,000,000 on properties they have bought in Florida. There are 1000’s of people who have bought waterfront property over the past 1-2 years. For the most part, an average home on a canal was around $500k just 12-18 months ago. Now… these people are trying to realize 1 million to 1.5 million for these same homes. (and condos!!!)
Here’s some info…
1. The two largest Private Mortgage Insurance companies in the nation pulled out a few months ago due to the number of loans in default. The reason is because the default rate for homes with less than 20% down is exponentially higher than homes purchased with larger down payments. This means, if you put down less than 20%, PMI is getting hard to find and it’s expensive.
2. Referencing the post above, Citizens is Florida’s largest insurer. For most homeowners on (or near) the water… they are the ONLY insurance company, because the big names have pulled out. If you are purchasing a home on the water, or even near the water…good luck finding an insurance company that will cover you.
Here’s a link to a story on this… http://220.127.116.11/search?q=cache...+florida&hl=en
A related link to Citizens in trouble… http://www.sptimes.com/2005/10/03/Op...for_Citi.shtml
And here’s a sign of the times…
Several Realtors have snubbed me in the past because I wasn’t looking for a 1 million dollar home. Now, they are calling me… and they all want to be my best friend. Caveat Emptor.