MIAMI – May 12, 2014 – When people ask Miami Realtor Javier Gonzalez how South Florida’s housing market is doing, it often makes him laugh.
“It’s a real complex question. Every market is a micro market,” said Gonzalez, an agent with RE/MAX Advance Realty. “A lot of people don’t understand.”
South Florida’s sprawling and diverse market includes homes ranging from a new two-story penthouse in Sunny Isles Beach with a $50 million asking price to a decrepit, 354-square-foot foreclosed apartment for $9,900 in the Freddie Mac HomeSteps program. And thousands of options in between.
Each neighborhood, each price range and each type of residence – townhouse, condo or single-family home – has its own dynamics. In some price categories and neighborhoods, the choices are plentiful; in others, they’re still hard to find.
Ask first-time homebuyers Russell and Katherine Dodson. They scouted neighborhoods from Sunny Isles to the Design District to South Beach for more than a year before finally signing a contract in April for a house in the Little Gables.
“We found it incredibly competitive and difficult to land a place,” said Russell Dodson, who, like his wife, works in advertising.
The Dodsons were close to making offers more than once, only to be outflanked by another buyer. “A lot of what we looked at, we thought was overpriced for what you’re getting,” he said.
For more than two years, home prices in Miami-Dade and Broward counties have spiraled sharply higher off their recession lows. But now, with the spring and summer house-hunting season in full swing, sellers and buyers are confronting a shifting market in South Florida.
The frenzied buying scene of last year has settled down.
On the heels of the roaring gains, housing prices are leveling and the volume of sales is moderating, as if the market is catching its breath.
Some like to say South Florida’s housing market is returning to “normal.” But after more than a decade of roller-coaster prices and radical swings in sales, it’s hard to define “normal.”
Besides, nothing is normal about a market in which 48 percent of single-family home sales and 72 percent of condo sales are cash deals – as was the case in Miami-Dade in the first quarter. Cash was still king in Broward, too, accounting for 45 percent of the single-family home sales and 77 percent of condo sales in the same period.
Investors are still a major force in the market, although they have been pulling back as the bargain prices have disappeared.
“It’s a strange market,” said Doug Mayer, a first-time homebuyer who has been shopping since late last year. He made offers on several properties that didn’t pan out before signing a contract recently for a 3-bedroom, 2 1/2-bath townhome in Miramar.
South Florida home sales and prices, so far, have been outperforming most of the nation, where many indicators point to a slow start in 2014.
In Congressional testimony last week, Federal Reserve chairman Janet Yellen sounded a cautionary note on housing. “Readings on housing activity – a sector that has been recovering since 2011 – have remained disappointing so far this year and will bear watching,” Yellen said.
Like many Realtors, Lisa Dority of RE/MAX Advance Realty has noticed a slowing from last year’s hectic pace of sales. Still, she said homes priced right in desirable areas continue to move fast. A renovated 1950s-vintage house at 6290 SW 50th Street in a popular unincorporated neighborhood drew three offers the day after an open house in April and is currently under contract, Dority said.
In South Florida as elsewhere, shoppers are finding that one popular source of discounts – short sales, in which lenders agree to accept less than the mortgage amount – are getting more scarce.
That is primarily because a federal tax exemption on forgiven mortgage debt expired at the end of 2014. That means any sum a bank agrees to forgo in a short sale or loan modification becomes taxable income to the mortgage holder. (A bill pending in Congress could change this if passed.)
For the first quarter of 2014, short sales in Miami-Dade and Broward fell 43 percent from a year earlier, according to the Miami Association of Realtors.
After a long stretch with limited inventory available in both counties, a growing number of for-sale signs are sprouting for homes and condos in various price ranges.
The balance of power in negotiating home sales – which has been squarely with the sellers for two years – is shifting toward the buyers. But it’s not yet a buyer’s market in most cases.
In recent months, buyers are asserting themselves more, says Jaime V. Rodriguez, principal loan originator at MVP Mortgage Company in Miami.
“People were willing to overpay. I have seen homebuyers negotiating more,” Rodriguez said. “I see it converting more to a balanced market. I wouldn’t say it’s a buyer’s market, but people are negotiating more.”
Buyers and sellers often have divergent views of the market.
Shoppers in the hunt for a great deal are stunned how much prices have rebounded from the dark days of 2010 and by the keen competition, including from cash-wielding investors. Sellers, meanwhile, often use the bubbly peaks as their benchmark.
“The gap between what buyers are willing to pay and what sellers expect is getting harder to bridge,” says Riley Smith, who heads The Riley Smith Group boutique brokerage at EWM Realty International, focusing on Coconut Grove, Coral Gables and the Brickell area. “That will slow sales.”
With home prices up sharply from two years ago, many buyers are stretching. Household incomes haven’t kept pace, so a growing number of people are getting sidelined.
“There is sticker shock going on,” EWM’s Smith said. “We deal with 20 different buyers at any different time; most are reaching the upper levels of what they are comfortable paying.”
While the overall inventory for sale in South Florida remains tight by historic standards, some areas are tipping toward a buyer’s market.
For example, an analysis of housing inventory by municipality conducted by EWM Realty International shows that the pickings are slim in cities such as Hialeah and Miramar. Similarly, homes priced under $1 million in Coconut Grove remain in tight supply.
“Inventory is very low, and there’s pent-up demand,” said Ivory Cooks, a Coldwell Banker agent who sells a lot in the Grove. In a recent 30-day period, he said, three of his listings there sold, and “all had multiple offers.”
On the flip side, Sunny Isles, for example, has a large supply of high-end condos on the market relative to the pace of sales.
And the western suburb of Doral – which has been a center of new home construction – has seen a rising supply of both single-family homes and condos recently, according to EWM’s analysis. “The increase in supply that stands out in the analysis is the Doral area,” said Ron Shuffield, president of EWM.
With the housing market in flux, real estate agents are facing tougher challenges in educating buyers and sellers about the realities.
“People ask: “Can you find me a bargain?’ I say: “You’re two years too late,'” said Carlos Ruiz de Quevedo, an agent with EWM in Coral Gables. “I say, ‘I can find you a good home that still has some upward potential.'”
Out-of-town buyers often have the biggest learning curve. “Local buyers realize the days when you could buy here under $200,000 are gone,” Ruiz de Quevedo said.
On his first few tries at buying, Mayer, a 41-year-old commercial pilot, figured that if an appraisal came back lower than the contract, it would open the door to whittling down the price.
“I thought it would be a negotiating tool if the appraisal didn’t come in at [the contract price],” Mayer said. His agent, Denise A. Madan, set him straight.
“He told me, ‘I’m not paying one dollar over appraised value,'” said Madan, who works at RE/MAX Advance Realty in South Miami. “I said, ‘Doug, if you don’t wrap your head around what kind of market we’re in, you’re never going to buy a home.'”
After missing a few deals, Mayer relented and agreed to pay, if necessary, up to $10,000 over appraisal, she said.
Mayer said he wishes he bought a year ago, but he’s convinced that even with the run-up in prices, his timing is still good. “It’s a great time to lock in a nice interest rate,” he said.
Buyers’ expectation that a home appraise at the contract price sounds fair enough. But many sellers – emboldened by the strength of the market – are demanding that buyers waive the condition.
The sellers’ rationale is that appraisals, which are based on comparable sales in an area, tend to trail the market. In a fast-changing market, they can be particularly dated.
More to the point: If the sellers have a property that is in strong demand, they know that another buyer – probably with cash – is waiting in the wings.
Realtors say sellers’ expectations, by the same token, have also become unrealistic. With a battalion of cash-wielding investors and foreign buyers ramping up demand, many sellers have swagger. In the wake of two years of sharp price gains and a tight supply that spawned the return of bidding wars, homeowners sometimes figure they can set prices where they want.
That was probably a bit truer a year ago than it is now.
“Sellers think they can get what they want,” said Francisco Angulo, who manages Coldwell Banker’s Coconut Grove office. “It’s not what you want – it’s what the market will bear.”
“They’re probably over-confident at the moment. Each new seller wants to reach a new high for their neighborhood. Sellers are getting a little too greedy,” EWM’s Smith said.
If a Realtor can’t persuade a seller to be realistic about pricing, it isn’t uncommon to agree to list a property at a lofty price – with the proviso that if it doesn’t sell or at least draw lookers after a reasonable period, a price cut is in order.
“It takes a very strong agent to say, “Hey, you’re nuts,'” said Gonzalez, the RE/MAX agent.
With more choices coming on the market, buyers are freer to say “no thanks” and move on. Several things are fueling the rise in inventory that will eventually tip the scales from seller toward buyer.
In some cases, homeowners who have been stuck in homes that were financially underwater during the downturn now have the flexibility to consider selling without the specter of ponying up cash at the closing table to satisfy a mortgage obligation.
Real-estate investors, big and small, who bought during the downturn and have been renting the properties are seeing an opportunity to cash out at a substantial profit.
Many condo owners in the Brickell downtown area are looking to sell into the strong price gains of the past two years, rather than risk a correction. A huge pipeline of pre-construction units is starting to be delivered to owners this year, with much more coming in 2015 and 2016.
Since most buyers are foreign nationals, they are widely expected to either put the new apartments for lease or to list them for sale at a profit to their pre-construction contract prices.
Despite the rising inventory of residences on the market, it can be tough to find homes in a certain price range.
When Tessa and John Hernandez were looking to move up to a house, their West Kendall townhome sold so fast – within a month of listing – that they ended up moving in with his parents.
They found a lot of competition for homes in their price range of $300,000 to $325,000 before finally signing a contract this month on a 4-bedroom house in the same area.
“It’s a very popular price range,” said Tessa Hernandez, a 35-year-old hospice worker.
Tessa Hernandez, whose husband is a police officer, said the variety of homes in their price range was wide enough, but the competition was keen.
“They go from one extreme to the next. Either the whole house needed to be fixed up or it was really nice,” she said. “We’re getting ‘Ew!’ and “Oh!'”
They made an offer on one house, but it went to another buyer, and in a second instance, they found a problem with the roof that the seller wasn’t willing to accommodate. Finally, last week, the couple, who have an 8-year-old son, landed a contract on a 2,100-square-foot home built in the late 1990s.
“It was not easy to show the house. It took two days to be able to show it, and the gentleman told me we were offer No. 4,” said Florence Saade, a Coldwell Banker agent who has been helping the Hernandez family to find a home. All the buyers were offering 20 percent down with 80 percent financing. Saade added: “It was just a question of price.”
Copyright © 2014 The Miami Herald, Martha Brannigan. Distributed by MCT Information Services.
