The real estate market in South Florida, one of the hardest hit regions of the country, affects thousands and thousands or baby boomers who are considering retirement communities there. Your Topretirements editor has been in the Sunshine State for the past several weeks – this report summarizes his microcosmic view of the Florida real estate market.
2005’s Unsustainable Price Increases
The recent history of home prices in this market is very instructive. (Note: all pricing figures are from the National Association of Realtors website). In 2004 the median selling price of a home in 5 of Floridaâ€™s major metros (Miami, Fort Myers, Tampa/St.Pete, Sarasota, and Orlando) averaged $212,000. A year later (2005), when speculators were waiting in line to buy condos sight unseen, the selling price for homes in those markets had jumped 35%, to $287,000. In 2006 prices were mixed; prices continued to increase in some markets and declined in others. By the 3rd quarter of 2007 the average selling price had declined to $271,000, still a significant 23% above the group’s 2004 median selling price.
Our conclusion is that – even without the sub-prime financial mess, speculation, or over-building – the price increases experienced in 2005 were unsustainable. When these other factors are added in, it is no surprise that real estate markets are hurting through much of Florida (although prices in Orlando have actually held up quite well).
Observations from a Secret Shopper
While in Florida we have had the opportunity to read about real estate, talk with realtors, and visit many properties for sale. Here are some general observations and tips that we offer for any baby boomer considering retirement here.
– The condo market is moribund. We visited a number of condos projects, both existing and new, with very few signs of life. In some new buildings not a single unit had been sold, even though the project has been on the market for more than a year. It would be very scary to be the first person to buy â€“ but some one has to eventually! In existing buildings the problem is too many units for sale, at 2005 prices. If you are tempted to buy an unusually nice property, you should demand a sizable discount.
– Far too many homes for sale. In Key West, considered to be one of the more stable markets because of its steady tourist business, there are generally at least 2 homes for sale on every block. Many have been on the market a long time, and getting attention from buyers or brokers must be very difficult.
– There seem to be 2 groups of sellers (and this observation seems to be true just about anywhere in the country). The first group is stuck in the mind set of 2005 prices. They put their properties on the market at high prices, and no one is interested. The second group, sellers who know that if they want to sell their property they have to be realistic about their asking price, is in the ascendancy. Their properties are being looked at by buyers, who are making offers.
– In any market this uncertain there have to be some bargains somewhere. Some buyers have to sell. Others want to sell and know they have to be realistic. Anecdotal evidence from agents tells us that offers at 85% to 90% of the asking price have a good chance of success.
– Get a good broker. A poor broker will waste endless amounts of your time showing you only their listings, whether or not they are the best properties for your needs. A good realtor will ask you about your needs and pricing range, and then only show you properties that fit. The broker you want will only show properties that are fairly priced, and that are quality listings. If you feel your broker is wasting your time get another one, there are plenty to choose from.
– Foreclosures and forced sales. If the bank is taking over a property it might be prepared to make a good deal to qualified buyers. If you can pay cash, you are the kind of buyer they want. Ask your realtor to show you (quality) foreclosed properties, or at least explain to you what is involved in buying one
– Coping with the fear issue. If you decide to buy a home in Florida (or most any other state) you have be apprehensive with what you are reading in the news. But there are 3 positive factors to consider: 1) If you buy now you wonâ€™t be buying at the top, because prices have definitely fallen back. 2) Experts usually advise buying when fear is at its highest (and fear seems pretty high now!). 3) Many high quality properties are available now, so you are in a rare position to be very selective.