Inventories are down, lending has loosened
Just as even the brightest, warmest sun must eventually set, the era of bargain real estate in Florida may be coming to an end, experts say.
Florida, which was among the first U.S. states to be hit by the real estate downturn and recession, is finally emerging from its swamp of foreclosures and depressed house prices. Realtors’ gut instincts, anecdotes and hard evidence all point to a turnaround under way in the state’s home prices — a development that could light a fire under any would-be Canadian snowbirds.
Florida cities took eight spots on the National Association of Realtors’ recent list of “Top 10 turnaround towns.” Miami — where 60% of all buyers are foreigners and the median house price is US$185,000 — was No. 1. Inventory is disappearing: In Fort Lauderdale, the number of homes listed on the market dropped 42% from 2010 to 2011. And a report commissioned by two Florida real estate firms, the Related Group and International Sales Group, predicted that by the end of this year, the developer-owned condo inventory from the last round of construction, in 2005-’06, will have completely evaporated from the Miami area.
Realtors are trying to recruit potential buyers with the message that anyone thinking of buying a home in Florida ought to look now, because the bargains won’t last forever.
“It’s actually the best time they’re going to have. We’ve been telling people for about the last year and a half to basically get down there and start looking. If they want to buy something, they should do so sooner rather than later,” says Brian Ellis, vice-president of Florida Home Finders. A brokerage based in Vaughan, Ont., it specializes in helping Canadians navigate the real estate market in Florida.
“We are expecting a substantial price bounce in Florida,” he says.
Phil Wood, president of John R. Wood Realtors of Naples, Fla., says there have even been multiple offer situations in his Southwest Florida territory, something that was “absolutely not” the case during the worst of the downturn.
Now, with a slow turnaround finally beginning in the U.S. economy, would-be secondhome buyers who had been circling Florida real estate are moving in for the kill.
“The buyers that we’re seeing, they’re for the most part second-home buyers who have been waiting. They’ve wanted to be down here for four or five years but all their plans got delayed because of the recession,” Mr. Wood says.
Other factors are bringing Americans back into the market: The banks are loosening their lending again. And as Mr. Ellis explains, Americans who walked away from their underwater homes (where they owed more than the home was worth) early in the downturn, around 2007, are now re-emerging with good enough credit to secure mortgages.
“It takes anywhere from four to five years [to come back] if you walked away from your home or were foreclosed on. As long as you’ve kept your credit good from that time on, you will be cleared to go back to the mortgage market again,” he says.
Mr. Wood says Canadians still have a competitive edge in the Sunshine State. “The loonie — I think that’s what you call your dollar — has been at or above the [American] dollar for a while now, so a lot of Canadians are looking at that and say-ing, ‘I could get real good value down in the States.’ “
And Canadians are more likely to have a healthy amount of equity available to pull out of our homes. Not surprisingly, we make up 12% to 15% of John R. Wood Realtors’ business.
Florida Home Finders specializes in catering to Canadians, who often lack knowledge of Florida markets. “We find great properties that meet the criteria most Canadians are looking for, and market them here in Canada,” Mr. Ellis says.
“We set expectations as well,” he continues, “because most Canadians have absolutely no clue about what’s really going on in the state of Florida. Setting expectations is one of the biggest things we do.”
While many (if not most) Florida homes are still deadly cheap by Canadian standards, wild tales of a feast of foreclosures are an exaggeration. You’re simply not going to pick up a dream condo on the waterfront for US$20,000, Mr. Ellis cautions.
Depending on the region, however, Canadians may be surprised at what they can get for $100,000 or $150,000.
Where to look? Whereas many part-time Florida residents enjoy the bustle of the Fort Lauderdale-Miami corridor, the relative tranquility of Southwest Florida — with communities including Fort Myers and Naples — has attracted snowbirds by the flock.
“Quite frankly, the Southwest is where the best deals are right now,” Mr. Ellis notes.
Before hunting for those deals, Canadians should be aware that securing a mortgage pre-approval in the United States can take weeks instead of the days Canadians are used to (even through a Florida-based branch of a Canadian bank). So it’s crucial to have one’s borrowing plans figured out before putting in any offers.
Canadians also have to learn about taxation and immigration issues.
House hunters with intentions of renting out their properties for extra income should also be aware that condo boards often restrict that practice — even when the home is a single-storey, villa-style condo of the kind common in Florida.
Finally, as in Canada, buyers must have a lawyer confirm that a condominium association’s finances are in good order. Since the economic downturn, “a lot of them are not in good shape,” Mr. Ellis says. The upshot can be a steep increase in condo fees down the road.
Despite potential pitfalls, Mr. Ellis urges Canadians to take serious steps toward buying a piece of the Florida sunshine, if they’ve ever considered it before. “It’s one of those woulda coulda shoulda times,” he says.