South Florida expert panel from left: Ron Kriss of Akerman Senterfitt; Bill Yahn from the Corcoran Group; Cynthia Shelton, president of Florida Realtors; Jack McCabe, CEO of McCabe Research and Consulting; Jay Massirman of Rivergate Companies
Most of South Florida’s real estate industry won’t be sorry to say goodbye to 2009 tonight. Once-ambitious developers saw their empty condos sold in bulk at deep discounts and unloaded incomplete projects in foreclosure auctions or deeds in lieu of foreclosure. Caving under the weight of their troubled commercial real estate portfolios, regional banks failed by the dozens. The indefatigable flood of residential foreclosures bestowed the courts with an unmanageable case load, clogging the system. For homeowners who managed to stay current on their mortgage payments, toxic Chinese drywall rendered many of their properties both dangerous and worthless.
But as the handful of hours left in this tumultuous year for real estate wind down, many are wondering whether 2010 will be any better. The Real Deal turned to a panel of South Florida real estate experts to find out what they’re predicting for 2010.
How far do home prices still have to fall before they bottom out?
Cynthia Shelton, president of Florida Realtors and director of investment sales at Colliers Arnold:
I think 2010 is going to be flat. Do we
expect major shifts? No. Do I think it will drop a little bit more?
Maybe, because of foreclosures and short sales.
Jack McCabe, CEO of McCabe Research and Consulting: Single-family homes priced under $250,000
have bottomed out and I don’t expect to see a price decline next year.
In the $250,000 to $500,000 range I expect prices to drop 5 to 10
percent. In the $500,000 and up range prices will decline by 10 to 15
percent. South Florida’s condo market is the worst in the country. I
fully expect that prices are going to drop another 15 to 20 percent in
the condominium sector.
Will we still be asking this question on the eve of 2011?
McCabe: At that time, we’ll have weeded through
many of the foreclosures and distressed sales. We’ll see more positive
predictions for the market a year from now but we still may be asking:
“Is it finally over?”
Will brokerage firms be cutting back next year?
Bill Yahn, senior vice president for the Corcoran Group in South Florida: I don’t see any cutbacks in 2010 as most did their belt tightening in 2009.
Shelton: Anyone who hasn’t already made [cutbacks] is in for a rude awakening. I think those who have made it so far and made the shifts and changes will be okay, and for everyone that’s left, it will be a better industry in the end.
What patterns will we see in the
housing market come April, when the homebuyer tax credit is set to
expire (for real this time)?
Shelton:
I think it will slow up [for] all the lower-priced homes — $300,000
and below — by then, the market will have gobbled up a lot of the
inventory. The good news will be this: the homes that first-time
homebuyers are buying, they’re going to live in them. Once you’re a
homeowner, you’re going to maintain [your home] and pay the property
taxes and the insurance. That will help stimulate the economy beyond
the April deadline.
McCabe: I don’t know if
we’re going to see that much of a major effect. I think all that’s
happened is that [it has] taken a lot of 2010 buyers and pulled them
into 2009.
Are all those condos purchased in bulk deals going to come back on the market any time soon?
McCabe: The vast majority are going to come back on the market as rentals for the next three to five years. I don’t think anybody has deep pockets enough or purchased at a low enough price that they can sit on these units without receiving some type of rental income.
What has to happen before foreclosures will ease up? Do you think the pace will slow down in 2010?
Yahn: We’ll likely still have a significant number of them in 2010.
McCabe: As
many foreclosures as Florida has experienced in the past few years, the
biggest wave has yet to hit and it [will begin] in 2010. I also expect
to see a large increase in short sales. The only way to stem the tide
of foreclosures is to have principal reductions coupled with loan
modifications.
What does the bulk buying trend mean for investors and residents?
Ron Kriss, chairman of the distressed property group at the Akerman Senterfitt law firm in Miami: Investors will have an all-you-can-eat buffet during 2010. Prospective residents — that is, tenants — will get residences they never dreamed they could afford, for a short-term lease. They’re smart if they negotiate an option to purchase and apply a portion of the rents.
How do you foresee the Chinese drywall saga panning out? Are homeowners going to get any real relief?
Yahn: Chinese
drywall has been a nightmare for buyers and I fear they are not going
to get relief unless they bought from a major national builder. I don’t
see the state stepping in to assist.
McCabe: To
try to sell those properties now would be catastrophic because no one
is going to want to touch them unless they can buy them for pennies on
the dollar.
How many more Florida bank failures are we looking at next year?
Jay Massirman, managing director of Rivergate Companies: Unfortunately, there are probably going to be quite a bit more in Florida because there were a lot of small local banks started by high net worth individuals that catered to small businessmen.
Kriss: At least a dozen or so, mostly very small banks.
If you had $1 billion to invest in South Florida real estate market right now, where would you put your money?
Massirman: You probably wouldn’t be able to put $1 billion into South Florida real estate. I think that hospitality is probably up to the plate. There are going to be some very good opportunities with land. Office, I think, is going to be a bit of a longer haul.
Kriss: Fractured condos are deeply discounted. Of all the different property types, that’s probably the most discounted of all.
Are there bright spots in Florida’s commercial real estate market?
Massirman: Single-family may turn in [2010] to a positive uptick. Apartments may have a chance at turning toward the middle or latter part of 2010. Those product types, because they were the first ones to go, may be the first ones to come back.
Kriss: Investors will be the big winners. If you’re a bank, no, there’s not a bright side. If you’re a developer, no, there’s not a bright side. But if you’re an investor, you can make a profit from their misfortune.