Experts Foresee Rising Miamidade Housing Prices

By Patricia Hoyos
Residential real estate experts foresee a boost in property values due to international buyers growing increasingly interested in South Florida.

Still, with a lack of inventory, financing hurdles and more foreclosures on the horizon, the real estate industry is far from its 2005 market peak.

The state of the residential market was discussed at the fourth annual Residential Real Estate Outlook Luncheon on Friday at the Westin Colonnade in Coral Gables.

The luncheon and panel discussion were hosted by the Coral Gables Chamber of Commerce in partnership with the Miami Association of Realtors and Miami Today. Michael Lewis, Miami Today’s publisher, served as moderator.

"You can see that our monthly closings and sales are inching up," said Patrick O’Connell, senior vice president of new business development for EWM and a panelist. "All the numbers are going in the right direction now, and that’s what we want to see."

According to a market report by the Miami Association of Realtors, as of August, condominium sales are up 53% from one year ago and single-family home sales are up 49%. Also showing a favorable number is the residential inventory, which is down to 15,405 from last year’s 25,679 units on sale. The industry generally considers a six-month supply of residences on the market to be optimal; larger numbers tend to drive down prices.

In Florida, 31% of sales are to international buyers. In South Florida, 60% of buyers are foreign nationals, said Jack Levine, chairman of the board of the Miami Association of Realtors and a panelist. Nearly one in three international transactions in the US is in Florida, and nearly one in three international transactions in Florida is in the Miami and Fort Lauderdale area.

"The buyers are coming in here and they want to buy, and the pricing is great," Mr. Levine said "The main problems I see are in the financing side of it."

However, financing doesn’t seem to be a big problem for many international buyers, who tend to pay mostly with cash. Mr. Levine said foreign buyers also tend to buy residences at the higher end of the market.

Panelists agreed that the number of buyers from Brazil is increasing significantly. On average, Brazilian buyers pay about 85% in cash and only need financing for the remaining 15%, with a median purchase of $215,000, according to the market report.

Many of these international buyers are purchasing foreclosed properties as investments to rent them to others, Mr. Levine said.

"The rental market is on fire," he said.

Around 53% of international buyers are from South American countries, including Venezuela, Brazil, Argentina and Colombia. Residents of Canada, France and Italy also represent a large number of international buyers.

Lorenzo Perez Jr., chief executive officer of Premier International Properties Inc., emphasized the need for realtors to reach international buyers through social media. With the majority of social media users not being from the US, he said, the web can be an effective way of reaching potential buyers.

Because of these international buyers, panelists predict that next year property values will rise.

"We do foresee an increase in values in properties," said Mayelin Carbajales, vice president of Mercantil Commercebank’s residential lending sales department. "It all depends on the market. Currently, in Dade and Broward and Palm Beach, we are seeing an increase in value because of the foreign national buyers that are buying there."

A major problem currently facing the residential real estate market is having limited inventory.

Mr. Perez said there is a demand for properties, but there hasn’t been much inventory placed out there. High numbers of bank-owned real estate properties continues to be a problem that could continue to hurt South Florida’s real estate in the upcoming year.

"From a banking perspective, we are going to see an increase in foreclosures," Ms. Carbajales said. "We are also seeing distressed borrowers."

According to Mr. O’Connell, the universal message from his contacts in the banking industry is that a lot of bank real estate owned properties are in the pipeline. He said real estate owned inventory in the market is currently down 50% to 60% from the peak.

In the luxury homes market, he cited a 30% decrease in inventory.

Mr. Levine said he expects the real estate owned inventory to be "gobbled up as soon as it comes back up in the market." The question remains when these properties will be listed again on the market.

Also hurting the real estate industry are banks being more hesitant to lend than in the past.

In coming months, banks are going to require higher down payments and increase credit score requirements, Ms. Carbajales said. Overall, she predicted, standards across the country for borrowers will be raised.

With the number of foreclosures still high, banks are continuing to be concerned about the risks associated with lending, she added.

The panelists said they don’t expect foreclosures to slow down in 2012. But on the bright side, they anticipate that interest from international buyers will remain strong, increasing the value of properties.

"We aren’t able to predict with crystal balls," Mr. Levine said. "We try to pick up trends, but it’s really, really hard, especially because there are so many moving variables."To read the entire issue of Miami Today online, subscribe to e -Miami Today, an exact digital replica of the printed edition.