Housing investors in control as prices fall, interest low
By Marilyn Bowden
Depressed pricing, low interest rates, a strong rental market and favorable exchange rates for foreign currency are pumping up the housing market as domestic and international buyers snap up both single-family homes and condos as investments.
"Investors make up the strongest segment of the market," said Mike Pappas, president & CEO of The Keyes Co. "Demand for rental is rising, prices have dropped and interest rates are low. It's a perfect storm.
"People fear inflation, and want to get into a tangible asset that they can control."
So far, Mr. Pappas said, bank-owned properties, or REOs, that have come on the market have sold quickly.
"We're able to absorb them due to that investor base," he said. "Either they flip them or they are renting them and holding for a longer-term play."
Historically, he said, about 68% of South Floridians owned their homes, but the foreclosure crisis has changed that. He estimated more than half are now renting.
"I'm amazed at the inflow of cash into the real estate market today," Mr. Pappas said. "I believe people are taking their money out of savings or IRAs, where they aren't getting a good return, and putting it in real estate, where they can get returns of 7%, 8% or 9%. This is an unbelievable time for South Florida real estate."
Savvy small investors starting seeing the possibilities as early as 2009, said Melanie Hyer, a broker at Keller Williams Miami Beach.
"They could buy foreclosures for $60,000-$80,000, put $20,000-$30,000 into fixing them up and then resell them to first-time homebuyers eligible for the FHA credit," she said. "It was an amazing market."
In 2010 and '11, she said, "more investors started figuring this out." The frenzy for cheap investment properties got so bad, Ms. Hyer said, that those who were not offering cash didn't stand a chance.
"Lenders started implementing some rules so that first-time buyers could get these properties," she said, "as the lenders and the government wanted" — things like not accepting any offer for 14 days, and giving preference to owner-occupants over investors.
"At the same time, there was a strong investor market in top-dollar resales," Ms. Hyer said.
The price differential between these two market extremes averaged about $100,000, she said, "but in 2011the gap started shrinking. Foreclosures started selling for more, top-dollar properties for less.
"People who were willing to take a risk and were buying in 2009-'10 will be rewarded the most," Ms. Hyer said. "Now the market is stabilizing and with only seven months of inventory, it's no longer a buyers' market. But there are still a lot of good deals.
"The market that is still going on is buying properties for cash flow. It's gone from fix-and-flip to buy-and-hold."
Investors are coming from Europe, South America and Canada as well as New York, she said, but some of them are local as well.
"The entire US right now is still down about 8% in property sales," said Perci Pietro, president of Own Realty, "but Miami is up 54% — and the reason for that is international buyers."
Own Realty, which works with many international clients, is fielding interest in investment and second-home properties from all over, he said.
"For Mexicans and Venezuelans, it's security issues," he said. "For Canadians and the English, it's the exchange rate; for Russians and Germans, the strength of their economies. So there's a lot of action."
It makes sense, Mr. Pietro said, for international buyers to invest in real estate right now, "not just to make money but for the safety of their money, and buying condos or home in this area is a way to do that.
"Right now, even the euro is having problems. People are saying China is cooling down, and China and Brazil are so closely connected that Brazil could be affected.
"And there are so many reasons to invest in this city, starting with the beautiful weather."
JoAnn Roberts, who works out of Coldwell Banker's Pinecrest office, said most of the investors she sees are foreign.
"The international luxury market is hot," she said. She defined that market as properties selling for $1 million and up.
Ms. Roberts said statistics show that 81% of investors in the luxury residential market nationwide are foreign — and 31% of them buy in South Florida.
"What differentiates us is the weather and all the amenities South Florida offers," she said. "Many buy to rent and sell in the future. It's a great time for buyers who have been sitting in the background."
Europeans, Asians and Brazilians are here with cash and ready to buy, Ms. Roberts said, "but there is very little luxury inventory, so some are frustrated."
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