South Florida real estate creeping back to normal
By Douglas Hanks
Distressed real estate — brought on by mortgage woes — now accounts for about half of South Florida’s market. That’s far from normal, but a big improvement from recent years.
South Florida’s real estate market is creeping back toward a more normal era. But the trend might not last long.
New figures show bank-owned homes or those facing foreclosure no longer dominate the resale market, and homes for sale under normal circumstances now account for about half of real estate listings. That’s a switch from a year ago, when distressed properties accounted for 70 percent of listings.
“Normal sales are gaining traction,” said David Dabby, a real estate consultant in Coral Gables. “The normal market is separating itself.”
Douglas Elliman, a brokerage based in Miami Beach, issued a report Thursday showing significant price increases in some of the region’s prime real estate markets. The report estimates the median sales price for a single-family home along the coast in Miami-Dade — generally east of I-95 — increased 26 percent to $176,000 between the start of 2011 and the start of 2012. Analysts credited the shift with a decline in distressed properties: 65 percent of the market in 2011 to 48 percent in 2012. That’s still a long way from normal — Dabby said distressed real estate typically accounts for only about 7 percent of South Florida’s market.
The Douglas Elliman report highlights a common refrain from the real estate industry as it climbs back from a historic crash in values, brought on by too much faith in the housing market during the boom. But the figures also capture the dynamics of South Florida real estate, where sales volume has been surging in recent years while prices have been either approaching a plateau or bouncing off the bottom.
Distressed properties tend to go for much less than homes sold under normal circumstances for a number of reason, brokers said. For one, they are often smaller and in less desirable neighborhoods. With a bank involved, buyers often will try to “steal” a distressed home with a low-ball offer — a tactic less likely to work if the owner faces no mortgage woes.
“They know the seller isn’t desperate,” said Vanessa Grout, president of Douglas Elliman Florida. “Every buyer wants a desperate seller. And every seller wants to make it seem that he doesn’t need to sell.”
The new parity between distressed and non-distressed property was largely expected, and the big question is how long it will last. Banks have been holding off foreclosing on properties in the wake of the so-called “robo-signing” scandal, in which major lenders were accused of shoddy paperwork tied to delinquent loans. But with a national settlement reached last year, the foreclosure pipeline should become active again in 2012.
Industry watchers expect such a surge of foreclosed properties that Moody’s predicts a 12 percent drop in South Florida property values this year — on top of the nearly 50 percent drop since the market’s peak in 2006. Condo Vultures, a brokerage that tracks distressed real estate, recently reported a surge in bank repossessions in South Florida: 10,000 in the first three months of 2012.
“This is the first time since 2007 where we have seen at least 10,000 repossessions in the first quarter,” said Peter Zalewski, founder of Condo Vultures. “There is a huge disconnect.”
Zalewski said the repossessions show a wave of distressed properties coming on the market, once banks feel it is a good time to sell. If they can wait, they’re likely to get higher prices. The crush of distressed properties has helped keep values down. The Keyes Co. brokerage cited South Florida figures showing the average distressed home this year is selling for $140,000, versus $265,000 for a non-distressed home.
“It’s a tale of two cities,’’ said Keyes President Mike Pappas.
Back to Blog