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Florida's High-End Real Estate Goes Limp
Some Tips On Selling Homes In VegasSelling home in Vegas is a different situation. It doesn't constitute the same requirements as other states because of their uniqueness. If you have a plan to sell your home in Las Vegas, the ... Once upon a time, the warm and sunny weather of Florida beckoned all who would hear its call. From retirees wanting the perfect environment in which to stay active, to water lovers who didn't want to treat their jet skis and yachts as vacation toys, Florida seemed to offer it all.
And real estate investors sat up and took notice. Obviously anyone looking to make money from real estate development would head in the same direction as the population, so it only made sense.
And when there is a large concentration of population in any one area, it's natural to respond by offering condos rather than actual houses.
Condos made sense in Florida for decades for many reasons. Retirees no longer want to keep up with yard work and maintenance, and neither did the young crowd who preferred to spend their free time on the beaches or ocean. Condos meant all the privileges of ownership with fewer responsibilities.
For the developers, condos also meant they could cash in on quantity. When building a private home, you can have only so many on a plot of land. By building condos upwards, a developer could have hundreds of units on that same acreage.
So while getting a condo in Florida became something of a stereotype, rite of passage for some, there are obvious reasons why one would choose this style of living.
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And condos were not just for retirees either. Soon the high-end developers realized the appeal of living in the sun and sand, and luxurious units began to be developed and snapped up by celebrities and the wealthy alike.
This brought about a boon to the economy in Florida. As high-end developers came along and their customers brought their wallets and checkbooks, so other businesses saw their niche being created and followed suit. Florida soon became a mecca for not only water sports, but incredible nightlife as well. Because of the warmer weather, people would often stay out on the streets longer, meaning that several areas of the major cities soon played host to block after block of nightclubs catering to the late crowd. Miami was referred to as a "boomtown" and older buildings were being razed to make way for luxurious condos that sold out within a few days of offering. Whether a developer, speculator, real estate flipper, or private owner, everyone seemed to be buzzing about Florida, and making money from that buzz.
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But as we know, the housing market has seen a sharp downturn in the past few months and years, with woes from the sub-prime mortgage market sending a ripple affect throughout the entire industry. Many who really couldn't afford homes, and those who were unfamiliar with the lending industry, got caught up in the enticement of homeownership only to find that their balloon payments - or unsteady income - has forced them out through foreclosure.
And of course this type of crisis would affect developers in many areas. With far too many home for sale on the foreclosure market, new homes were not saleable, at least not for their intended asking price. Many builders and developers have seen their stocks plummet some 60% in the past few years.
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Would this crisis affect the affluent and seemingly untouchable area of one of the hottest - no pun intended - states in the country? Would the supposedly untouchable wealth of those who've flocked to the areas of South Beach and other hotspots of Florida be hit by this issue as well?
Unfortunately, this seems to be the case. It was reported in the Wall Street Journal on March 10, 2007, quite plainly that "there are signs that some high-end real estate developers are also being hit by the slowdown."
As an example, the article noted, "Last night, a condo-hotel developer who was a partner with celebrities in selling luxury perches from Miami to Chicago let the mortgage on the Royal Palm Hotel in South Beach, a trendy section of Miami Beach, expire. The missed deadline places another luxury condo project into the hands of bankers specializing in troubled mortgages."
The project in South Beach was to develop 160 of the Royal Palm's more than 400 rooms into condo-hotel units. The developer, Robert Falor Investments, apparently failed to sell any of the units and subsequently put the hotel up for sale.
This trend seems to continue in high-end areas of Miami in particular, with consumers and purchasers backing away from such sales.
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Instead, Wall Street bankers, baby boomers and Europeans are more often snapping up condominiums from developers with projects that are being built from the ground up."
Warren Buffett, the billionaire investor who always manages to stay one step ahead of the market, also singled out areas of Florida, specifically Dade and Broward counties, as examples of unsold real estate inventory and stagnant real estate growth.
One of the main reasons for this is that when real estate becomes as hot as did Miami's and other surrounding areas, this brings in a glut of speculators - those who buy real estate on the presumption that they will get someone else to purchase it. Back in 2005, Jack Winston, an a real estate analyst, saw a boom based on shaky foundations.
Florida's High-End Real Estate Goes LimpOnce upon a time, the warm and sunny weather of Florida beckoned all who would hear its call. From retirees wanting the perfect environment in which to stay active, to water ... "The equation is that you have speculators buying units, and they're trying to flip their contract to other speculators who in turn are trying to flip their contract to other speculators," he said at the time. "Somewhere along the line, you are going to run out of speculators."
Winston and others have estimated that around 70% of Miami's real estate, especially the condo units, was purchased by speculators looking to get wealthy from their purchases, as opposed to private owners who actually planned on living in those areas.
This isn't to say that Florida has somehow lost its appeal when it comes to living conditions, and the problem certainly should not compared to or equated with other areas that have seen a vast exodus of their population, such as Michigan, Indiana, or Ohio, all of whom have been hit hard by job losses in the automotive and manufacturing industries. There are many who still view south Florida as "the" hotspot for entertainment, luxurious living, and amenities galore.
The cautionary tale is simple. Speculating on real estate, no matter how high-end or luxurious, is not without its risks, as many will attest to, especially when using Florida as an example of such.
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