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September 2, 2010 |
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| November 16, 2007 |
By: Polyana da Costa |
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outh Florida home sellers are starting to accept the reality of falling prices.
Listing prices have been dropping over the last three months, in some cases as much as 40 percent.
Not even the luxury market is immune to the worst housing slump in 16 years.
Unsold condominium units that are on the market priced at more than $1 million in Palm Beach County could take more than 10 years to be digested — if sales trends continue at the current pace.
The timeframe is based on a calculation of unsold units and sales rates in the third quarter, according to data compiled from the Multiple Listing Service.
The supply and demand imbalance of condos listed for more than $1 million in Miami-Dade and Broward counties is slightly better than in Palm Beach County.
The Broward inventory would take nine years to clear, and Miami-Dade would take six years.
The prospects appear to be slightly better for selling single-family homes priced at more than $1 million. Palm Beach County has an inventory likely to last 55 months — almost five years — if sales stay at the current pace. The supply would last 45 months in Miami and 44 months in Broward.
The oversupply is pushing down prices.
In a heathly market, there should be no more than a two-year supply of million-dollar-plus properties, said Ron Shuffield, president of Coral Gables-based Esslinger Wooten Maxwell, one of the largest South Florida-based residential real estate firms.
Despite the oversupply, Palm Beach County homeowners are resisting the price drop, especially on the luxury end.
“There are a lot of people in Palm Beach County that are not willing to cut,” said Peter Zalewski, president of Bal Harbour-based brokerage Condo Vultures. “In the condo market you’re starting to see some desperation. West Palm is catching up and is going to spike when all the new product comes online.”
Zalewski’s company tracks residential properties east of I-95 that have been on the market for more than 100 days or has seen list price cuts of at least 10 percent or $100,000.
Prices have headed down in West Palm Beach and the town of Palm Beach. In contrast, Boca Raton showed “very little movement.”
Two Palm Beach homes are among 56 Palm Beach County properties that meet Zalewski’s criteria for unsold property with prices cuts. The list price on one property was cut 29 percent after it was initially listed for $2.4 million late last year and was reduced to $1.7 million.
Cristina Condon, a real estate agent with Sotheby’s International Realty in Palm Beach, said she has not seen price drops on the ritzy island.
“Prices have been steady,” she said. “There are few houses in Palm Beach in the $2 million or less range. There were a few of those that had a 10 percent drop, but that is normal. And most are older houses that will be torn down. Houses over $6 million have not been affected, and prices have not dropped.”
The number of Palm Beach County homes sold for more than $1 million has dropped more than a third to 29 last month from 47 a year before, according to MLS data. Only four condos in that price range sold in September and October compared with 25 in April. MLS data show South Florida condo sales tend to peak from March to July.
Properties priced at more than $1 million are without a doubt being affected by the housing slump, said Chappy Adams, president of Palm Beach Gardens-based Illustrated Properties.
“You are starting to see a gradual reduction,” he said. “They will come down, but not at the same rate as the lower value properties. The people who own a $3 million condo can typically sit and wait. They don’t have the pressure to sell right away.”
Condo Vultures found 10 Palm Beach condos that fit its criteria priced from $200,000 to $2 million that have been on the market for an average of 304 days, and prices have been reduced by an average of 24 percent, or about $156,000.
In West Palm Beach it found 44 condos, townhouses and single-family homes that have been on the market for an average of 223 days. Asking prices on those units dropped an average of more than $100,000 each.
Oakland Park is on top of Zalewski’s reduced-price list for South Florida with an average price cut of 31 percent on 15 properties that have been on the market for an average of 16 months.
Zalewski attributes the crunch in the Broward community to the condo conversion boom, which suddenly faltered.
Affluent Pinecrest in south Miami-Dade, with only two condos on the market, had the second largest price reduction of 29 percent. The units have been for sale for about three years.
Wilton Manors ranked third with 30 properties and an average 26 percent price reduction.
“Wilton Manors was overspeculated,” Zalewski said.
Many investors acquired older homes in Wilton Manors with plans to renovate and flip them but ran out of cash or decided not to invest more in the properties as the market soured.
Condo, townhouses and single-family prices for long-term listings in the three counties are down about 21 percent, according to Zalewski’s report.
Miami-Dade has the largest number of properties with reduced prices. More than 2,000 homes and condos were on the market for an average of more than 400 days in Miami and Miami Beach with price reductions averaging 18 percent.
Hallandale Beach, Sunny Isles Beach, Hollywood and Fort Lauderdale have about 200 long-term condo listings each with significantly reduced prices, according to the report. Many of the units were first listed in 2005.
The price reductions cut across geography and property types with what would appear to be plenty of bargains to go around.
A Bal Harbour condo listed for $3.4 million in March 2006 was reduced to $1.4 million this year. A house in Miami’s Coconut Grove went from $9.5 million to $5.23 million.
That doesn’t necessarily mean the seller is losing money. Shuffield said some people put their houses on the market for 20 percent more than they are worth, expecting to reap boom-time profits.
“It hurts the market,” he said. “If those people had listed their property for what it is actually worth, you wouldn’t be seeing such large reductions.”
Miami-Dade’s luxury market is much stronger than the lower-end market, Shuffield said.
But there is some good news at the high end. In the past year, 25 condos valued at more than $5 million were sold in the county compared with five in the previous year, according to Shuffield.
“There is a lot of wealth coming into Miami,” he said.
Lower-priced properties have a bigger problem.
“While inventory of single-family homes over $1 million increased by 12 percent over the last year, inventory of homes under $300,000 increased by 110 percent,” Shuffield said.
At the same time that supply boomed, the number of single-family home sales dropped. In October the number of homes sold in Miami-Dade decreased by about 49 percent compared to the same month last year.
People who bought during the boom and need to sell now will likely lose money, Shuffield said.
And as desperation rises so will the pressure on prices.
Some anxious sellers are trying everything to get out. Many properties are listed for sale and rent, whichever comes first, Adams said
“If owners are able to rent some of those properties, it will definitely take some of the pressure off the market,” he said.
The growing number of foreclosures and tighter lending standards have magnified the problems in the housing market, further pushing down prices.
The foreclosure of one single-family home affects property values within an eighth of a mile by an average of 0.9 of a percent in general and 1.4 percent in low- to moderate-income communities, according to research by the New Orleans-based Association for Community Organizations for Reform Now.
In a neighborhood with 10 foreclosures where house prices average $150,000, the other owners face a loss in value of about $21,000, the study found.
“It’s a tough market,” said Shuffield, who has been a broker in South Florida for more than 30 years. “But it will recover eventually.”
Polyana da Costa can be reached at pdacosta@alm.com or at (561) 820-2065.
Ron Shuffield photo by Jill Kahn
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