Gaining Ground

Eight years after Florida’s housing market collapsed, presaging a global financial meltdown, where do we stand?

On more solid ground, thank you. Confidence and prices in South Florida are on the rebound, and interest rates are still at consumer-friendly levels. Foreclosures are generally down, median home sale prices are higher, and residences in some areas are almost back to pre-crash valuations.

Have we turned the corner? Or should we keep an eye out for another dark cloud?

Some important lessons have been learned.

“What we’re seeing is like 2004, ’05 and ’06, before the crash, but there are different dynamics,” says real estate attorney Mark F. Grant, a partner at Greenspoon Marder Law in Fort Lauderdale. Lenders are more cautious, he says, and are weeding out speculators. They’re also requiring higher deposits from house and condo buyers. 

Many lenders and developers are requiring what’s called a “50 percent deposit” of the purchase price, in which buyers put 10 percent down, then make a progression of payments during construction, explains Mindy A. Mora, a partner in the business finance and restructuring group at Bilzin Sumberg Baena Price & Axelrod in Miami.

Then, assuming the bank finances about 30 percent, developers have as little as 20 percent invested in a project, Mora notes. 

The new paradigm doesn’t seem to have slowed things down. “We’re not seeing the money affect closings,” says real estate attorney Gary A. Saul, a shareholder at Greenberg Traurig’s Miami office. “The increased deposits ease the amounts required by buyers to close and, in fact, make it easier for buyers to finance their purchases, since they have significant invested equity.”

However, much of the money is coming from international buyers—from places like Latin America, Russia, Europe and Canada. Nearly one-third of real estate transactions in Miami-Dade and Broward counties in 2014 were by foreign purchasers, according to a Miami Herald report.

For those who can afford it, the hot place to live, work and shop is downtown Miami.

“It’s never been like that before,” says Jay Steinman of Carlton Fields Jorden Burt. From his office on Southeast Second Street, he can see 15 construction cranes, 10 of which are working on condos.

“It’s insane,” says Steinman, who focuses on commercial real estate. “Miami is a very sexy place to live now. Internationally, it’s considered very chic.” 

Saul says the trend in multifamily construction is to strategically develop in neighborhoods—“rather than what we saw in the last cycle, where buildings were built on any available piece of land”—and to connect with existing areas, such as parks and shops.

“We’re filling in the natural gaps,” he says. “The development is a more controlled, more thought-out process.”

Miami’s new urbanites want the ability to “live-work-play in one location,” he says. Brickell City Centre, a $1.05 billion mixed-use project in downtown Miami, will include 5.4 million square feet of residential, office, hotel and entertainment space. Condos will start around $595,000. Miami Worldcenter, one of the largest private master-planned projects in the nation, is located on 10 downtown blocks and will include residential towers, with condos starting at $690,000; as well as retail and hospitality space.

The story is not the same everywhere in Florida, says Manuel Farach, a real estate attorney and of counsel at Richman Greer in West Palm Beach. “This is not across-the-board growth,” he says. “Miami-Dade is going gangbusters.” 

Metro areas are faring better than rural regions, and upscale neighborhoods are outpacing less affluent localities. Even in Miami, the bounce-back varies widely. In Liberty City, the median price of a single-family home plummeted 72 percent during the crash, and is still 24 percent below the 2003 value, according to a Miami Herald report. However, the story noted, the median price of a condo in the 33137 zip code along Biscayne Boulevard by 2013 was within about $5,000 of its highest value in 2006. 

Of course, real estate is always cyclical, especially in Florida. In the next 18 to 24 months, Floridians can expect to see “some correction ahead,” but another severe crash is unlikely, says Steinman.

And Florida always has a trump card when it comes to property values: the weather. 

“They’ve had a couple of harsh winters up north,” Grant says, “which bodes well for U.S. buyers from New York, New England or the upper parts of the Midwest.”