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Continued Growth Is On The Horizon For The South Florida Real Estate Market
By Debra Banerjee, The Boca Raton Observer
Homebuyers are still heeding the siren call of the Gold Coast, enticed by the leisurely lifestyle, beautiful beaches and tropical climate.
Despite warnings of rising sea levels for coastal communities, hurricane activity in 2017 and the prospect of more severe weather, the South Florida real estate market is expected to remain strong going into next year, with a new influx of residents.
It's not only wintry weather up north causing an exodus to the Sunshine State. Residents of the Northeast with high property taxes are feeling the cold from federal tax reform that limits deductions on state and local taxes to $10,000 and restrictions on the deduction of mortgage interest. Millennials are also part of the migration southward, attracted by jobs, start-up opportunities and the lower cost of living.
Indeed, the recession of 2008 is behind us, and we're experiencing a more robust economy nationwide. An estimated 180,000 new jobs will be created in Florida this year, according to a Florida Chamber of Commerce report.
Zillow, the real estate and rental marketplace, reports that home values in the tri-county area, Palm Beach, Broward and Miami-Dade, have gone up during the past year and will continue to rise for the next year.
Here, we speak with area real estate professionals for their insights into the present and future of the South Florida real estate market.
Nationally, home prices have risen for the past 23 months, according to Forbes, attributable to the expanding economy, low unemployment and low interest rates. Home prices are expected to continue rising this year, although at a slower rate due to government policies that may impact housing. The Federal Reserve Bank raised the fed funds rate in June and may hike it a couple more times this year to hold inflation at around 2 percent, which signals banks to raise mortgage rates.
Florida consumer confidence was slightly down in June over anxiety about the potential impact of U.S. tariffs and trade wars, according to FloridaRealtors.org.
Plus, the National Association of Home Builders reports that, due to tariffs on Canadian lumber and steep lumber prices, the cost of a new single-family home has risen $9,000 since January 2017. However, tariffs on aluminum and steel will affect condominium prices more than single-family homes, which are constructed mostly of wood. That cost may be passed on to buyers and renters, according to MarketWatch.com.
"The market continues to pick up," says Matthew Maschler, a Boca Raton Realtor with Signature Paradise Florida Properties LLC who holds a Certified Residential Specialist designation. "It's a great time to make a move, for a buyer to buy and a seller to sell. The economy is getting better. We're seeing an influx of first-time home buyers. Interest rates are still good; banks are lending. People are getting back to the idea of home ownership."
He believes a rise in mortgage rates won't be reflected in housing prices any time soon.
"I don't think house prices fluctuate that quickly," he says. "They are based on comps and previous purchases in the last six months, so, while the news affects the stock market in real time, I don't believe housing gets affected in real time."
Hurricanes will not stop people from moving to the area, he believes: "There are bad hurricanes in New York, up and down the coast. The cold weather, snow, high taxes in New York and New Jersey are driving the growth to Florida."
All the new construction in South Florida shows that there's demand, Maschler says.
"When the economy slows, [construction stops]. When you see buildings going up, it tells you there's a demand. I'm a big believer in the U.S. economy. Ten years from now will be an even better economy, a better real estate market. At any point in the U.S. economy, high or low, it's always better 10 years later. Nothing stops the USA."
Maschler, who met with Warren Buffett recently through an Israel Bonds delegation, says the billionaire and philanthropist agrees with that sentiment.
Maschler notes that the housing inventory is stable: "I wouldn't wait to see if anything better comes on the market. If you are buying, make a selection. If you are a seller, what are you waiting for?"
He remarks that first-time buyers today want clean, modern units: "They don't want to do work. Sellers will get a premium for updated units."
Country clubs are becoming popular again, he says, such as the luxury community The Oaks at Boca Raton.
"It's a lifestyle choice," he says. "[People want] privacy, activities, amenities, a resort lifestyle, living where other people vacation."
Selling A Lifestyle
Claire Sheres - a Global Luxury Certified Agent, the top producing Coldwell Banker agent in Southeast Florida for eight consecutive years and Woodfield Country Club's No. 1 and most referred Realtor - specializes in country clubs and luxury waterfront properties in the Boca/Delray area.
The 26-year resident of Boca Raton says that, even as snowbirds are staying longer each season, she sees a "definite increase" of people moving permanently from the Northeast, California and South America, "especially as people are so mobile in their businesses."
She sees "much younger people" moving to this area, she says: "People are looking for lifestyle more than just a home. We're selling a lifestyle."
Younger families are moving to country clubs, she says, like Woodfield in Boca Raton, a "community for all ages" but with a family-friendly vibe and a children's clubhouse.
"They enjoy the ability to meet other people, to play tennis and golf and feel comfortable in a new setting without joining all separate facilities," she says.
Another bonus for families is that the school systems have gotten much better, Sheres says: "People were concerned about that in the past."
Northeasterners may start out by renting, cautious about buying before getting a feel for the area and lifestyle, but buying a property makes sense, Sheres says.
"We don't know where mortgage rates are going to go."
Buyers are no longer investing in super-huge homes, choosing to diversify their investments, she says: "They might be able to afford $3 million, but they might buy a $1 million home."
A property in the Boca/Delray area provides the best qualities of both urban and suburban living, she says.
"It's close to good restaurants, theater and the beach," Sheres says. "There aren't concrete commercial buildings everywhere, like Fort Lauderdale. It's quieter, but you have the lifestyle."
Repurposing existing infrastructure for mixed use in urban areas is a big trend right now.
The Park at Broken Sound, on the site of the former Arvida Park of Commerce, built in 1978, is a 700-acre planned mobility commercial and residential district in the northwest sector of Boca Raton. Earlier this year, the City of Boca Raton Office of Economic Development and The Park at Broken Sound marked a milestone in the park's rebranding efforts with new signage.
The development, which takes its name from the nearby golf course, aspires to be the "perfect address" as a community hub of blended work-life arrangements where people don't depend on their cars to commute to work and benefit from the leisure, dining and shopping contained within and nearby.
The Park at Broken Sound - home to companies that include corporate headquarters, entrepreneurial start-ups, manufacturers and warehouses - features 5.2 million square feet of office space. StateTrust Group recently paid $13 million for a headquarters there. Orangetheory Fitness moved its headquarters there from Fort Lauderdale in 2016.
The park - with 28 acres of open green space, 29 acres of lakes and waterways, and 1,160 trees as well as 618,000 square feet of commercial/retail space - is also home to restaurants, hotels, a day care center and a veterinary clinic. A free shuttle goes to and from the Tri-Rail Station.
According to MidtownBoca.com, "Ninety percent of the 90,000 jobs in Boca are held by nonresidents who commute into the city, the majority by car."
To help address that problem, The Park at Broken Sound has six residential projects with 1,620 multifamily units.
Two landowners associations comprising 80 property owners own The Park at Broken Sound, which is managed by Haag Management Inc.
Downtown Fort Lauderdale
The Las Olas corridor in Fort Lauderdale is undergoing a renaissance. The city's planning initiative to concentrate high-density, high-rise development in the downtown core to maximize sustainability has resulted in a flurry of redevelopment. More than 8,000 residential units have opened in downtown Fort Lauderdale in recent years, and another 7,000 residential units and 1,000 hotel rooms are planned, according to the Sun Sentinel.
The unsuccessful Las Olas Riverfront will be redeveloped into 1,200 apartments marketed to millennials and 40,000 square feet of retail and restaurants. A Brightline train stop is a short distance from Las Olas, expanding transportation options for residents to West Palm Beach and Miami.
"I think we'll see more and more investment in Fort Lauderdale in 2018, driven by a growing recognition of the unique lifestyle that's available here," real estate investor Steven Hudson, president of Hudson Capital Group, told BizNow.com. "For the first time in a long time, Fort Lauderdale is being talked about in the same sentence as cities like Austin and Seattle, not only in terms of attracting developers, but millennials and the creative class as well."
Among the towers going up is Fort Lauderdale's tallest (for now) residence, Kolter Group's 100 Las Olas Boulevard. Measuring 499 feet high, the mixed-use building by SB Architects will feature 46 levels comprising 113 luxury residences, a 238-room Hyatt Centric hotel and 8,500 square feet of retail space.
Miami Luxury Market
Although international buyers are still coming to South Florida, the numbers were down for Miami-Dade in 2017 but up for Broward and Palm Beach counties.
Miami-Fort Lauderdale-West Palm Beach remains the most-searched U.S. market by international consumers, according to Realtor.com. The top three countries investing in South Florida are Argentina, Venezuela and Canada. Top investors in Miami-Dade are from Venezuela, Argentina, Brazil and Colombia; in Broward, it's Canada, Argentina and Brazil; and in Palm Beach, it's Canada and Brazil.
The best performing segment of the Miami-Dade market was luxury homes (over $1 million), rising 24.1 percent year-over-year in May, according to a June report by the Miami Association of Realtors.
"Miami real estate luxury sales continue trending upward," says George C. Jalil, Miami Realtors chairman of the board. "Several key factors are strong pent-up demand for $1-million-and-above Miami properties; sellers becoming more reasonable with their prices; and the federal tax reform leading more home buyers from high-taxed northern states to purchase in Florida, which has no state income tax."
If the euro and other major currencies get stronger against the U.S. dollar this year, as some analysts predict, South Florida will become even more attractive to foreign investment. Risky Business? Distressed sales, foreclosures and short sales in Miami are down, with the Miami Herald reporting that "only 9.9 percent of the sales in January involved properties in trouble, including bank-owned and short sale properties. Those kinds of properties accounted for 12.7 percent of the sales last year - and 70 percent in 2009."
But they're baaack! Borrowers and investors are hot on the trail of so-called "nonprime" mortgages, according to CNBC.com. These are basically the same subprime mortgages, only supposedly better underwritten, for people with poor credit scores, the self-employed and others who are unlikely to qualify for a prime mortgage.
Time will tell if these loans will translate into delinquency. O