Lessons Learned from the Florida Housing Market Crash

What to keep in mind, now that property values are looking up

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

On more solid ground, thank you. How do we know this?

  • Prices in South Florida are on the rebound
  • Interest rates are still consumer-friendly
  • Foreclosures are generally down
  • Median home sale prices are higher
  • Houses in some areas are almost back to pre-crash values

New Rules

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 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 buyers to put 10 percent down, then make a progression of payments during construction, says Mindy A. Mora, a partner in the business finance and restructuring group at Bilzin Sumberg  in Miami.

This doesn’t seem to have slowed things down. “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,” says real estate attorney Gary Saul, a partner at Greenberg Traurig’s Miami office.

Who’s Buying Now?

Nearly a third of real estate transactions in Miami-Dade and Broward counties in 2014 was by foreign purchasers, according to a Miami Herald report. Here’s where much of it is coming from:

  • Latin America
  • Russia
  • Europe
  • Canada

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 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 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 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 McGlinchey Stafford in Fort Lauderdale. “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. In Miami’s Liberty City neighborhood, 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. It also 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,” says Steinman, but not likely another severe crash.

And Florida always has a trump card: the sunshine.

Florida

What we’re seeing is like 2004, ’05 and ’06, before the crash, but there are different dynamics.

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