Florida Real Estate Tantalizes Canadians

Published by peter | Filed under Market Trends, Real Estate

Despite the calamitous state of the U.S. economy, and street after street of foreclosed homes in  Florida, real estate there is still not as affordable as opportunistic Canadians would like. Most waterfront properties continue to be expensive, even if they’re down a million or so from a couple of years ago. In fact, with the recent decrease in the relative value of the Canadian dollar, Florida homes just went up in price after a decline that almost mirrored the drop on the New York Stock Exchange. However, it’s difficult for cold Canadians not to think their chance for perpetual warmth is tantalizingly close.

Of course, if you want a new home miles from nowhere - and likely on reclaimed swamp - you can get it cheap. There are thousands of foreclosures. Most of these homes have little vacation potential, suitable for retirement only if you’d consider Elliot Lake an ideal neo-retirement community for your summer home. If you do find a nice foreclosure (and there are a few, even in gated communities) make sure it has been well maintained since the departure of its owners. While winter can be rough on houses in Canada, Florida’s high humidity and salt air can destroy a building even faster. The least expensive new homes are often not well built; mould appears quickly when air-conditioning systems are turned off and exteriors are not regularly power-washed. Even well-built homes require maintenance to be habitable, and many owners can no longer afford to do this. They’re struggling to hold on to an asset that’s depreciating as it’s being reclaimed by the jungle.

“Waterfront property is holding its value,” an agent told me during a recent tour of properties south of Miami. “Being on the water is important and, unlike golf courses, there’s not an endless supply of shoreline.” A good waterfront property, she estimates, is worth about 20% less than it was at its peak. Other top-end brokers confirmed that statistic.

And what about golf course properties? “The most expensive, established golf course communities are comparable to waterfront in that we’re holding up better, but most of the newer ones are in trouble,” the agent says. “One of the first things people cut back on are golf club memberships and few buyers want to live on, or are allowed to live on, a golf course if they’re not members.”

In the best gated communities, with extensive facilities, there’s a push to lower costs. Though maintenance isn’t obviously suffering, newsletters from three of the more exclusive enclaves indicate that reduction of staff costs and fees is a common theme.

Gated communities matter. “The market today appreciates security. If you’re buying for investment, don’t ignore the benefits of being in a secure community. Bargain homes in marginal neighbourhoods are not as safe as they are in Canada,” the agent says.

As it happens, buyers, this year, are older. “Two years ago, the majority of my sales - and these were houses averaging US$3-million - were to buyers who were 40 years old,” says one agent. “Most, however, needed financing. This year, all my sales are to people who are 60-plus. They don’t need mortgages.” She notes that, in one affluent neighbourhood, a terrible price has been paid by formerly successful young businessmen who took big risks that didn’t pay off. “Two suicides this year; one left a family with three young children.”

For nice houses, but not those at the top, brokers say asking prices are down about 15% from what they were at their peak, and sale prices are an additional 15% to 20% below asking. During the boom years, asking prices and sale prices were almost the same.

These days, if you don’t need financing, that’s a good thing, as even qualified buyers are said to have trouble getting it. Curiously, though, mortgages are advertised in the Miami Herald with interest rates at 5% to 6%, and some claim to require only a 10% down payment to qualify. In Canada, however, few people qualify for mortgages without 20%.

Should I buy now, I ask?

“People aren’t selling unless they really have to, and I don’t think the nicest properties are on the market. If you’re trading houses, though, it’s not a bad time,” my agent says.

“The house you like has been on the market for nine months, no offers. The price has come down slightly,” my agent adds. I think she means no, don’t buy yet. There are more bargains to come, she assures: People will keep up appearances through Christmas, then bite the bullet and deal with the financial mess by selling.