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Week of July 13, 2000 |
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Higher waterfront prices show gap in home costs rising By Marilyn BowdenAs waterfront residences continue to command higher and higher prices, the gap between the average and highest home costs in Miami-Dade County is growing wider. While some real estate professionals say this could be a signal for caution, all agree that for the present the market remains strong. The average price of a home in Miami-Dade in first quarter 2000 was $153,045 — 4.6% higher than it was at the end of first quarter 1999, says Michael Pappas, president of Keyes Co. Realty. In contrast, two recent sales of high-end properties were recorded at $7.5 million and $8.425 million. "A large gap like this occurs when there's a feeding frenzy at the high end," Mr. Pappas says. "It usually means the market is at the end of its turn. I don't think there's any question that that holds true today." The 10% hike is a result of the numbers getting pulled up by larger numbers of more expensive homes, he says. "The dot-coms, the sizzle of Miami, the economy, have made the city's east markets — the waterfront properties — in great demand," Mr. Pappas says. "Demand outstrips supply. It's simple economics." While ultra-luxury was not too long ago defined as $1 million, he says, "today even off the waterfront it's not unusual to see prices of $1.5 million." Usually when the market jumps up because of a high-end feeding frenzy, Mr. Pappas says, there's a corresponding collapse at the bottom of the scale. "We've seen a little slow down lately," he says, "though there is certainly no recession. We are certainly not at panic levels. In fact, we may be headed for a more controlled and sustainable market." Walter Defortuna, president of Fortune International Realty, says the rise in prices of luxury homes is indicative of specific market conditions. "The Miami-Dade market has been growing larger and larger," he says, "and for waterfront property there's much more demand than supply." Prime waterfront homes in Key Biscayne or Miami Beach don't come on the market often, he says, and owners are able to ask higher rates. In addition, he says, very unusual — and pricey — properties have changed hands recently, including homes formerly owned by film actor Sylvester Stallone, singer Madonna and the late designer Versace. Increases that seem large in the sales price of ultra-luxury properties are actually comparable to across-the-board increases, he says. "Compared to the rest of the country," Mr. Defortuna says, "Miami-Dade is still cheap." Besides, he says, the ultra-luxury category represents only a small fraction of the market. Ron Shuffield, president of Esslinger Wooten Maxwell Realtors, also stresses that the numbers at the high end of the scale are very small. >From March to May 2000, he says, 29 homes sold for more than $2 million in Miami-Dade — double the comparable period in 1999. Meanwhile, the inventory of homes priced over $2 million has increased 15%, he says, while the total county inventory of resale homes has decreased 24% a year for two years. "What that says is we have seen a much greater appreciation at high prices than at other price levels," Mr. Shuffield says, "because we have such a finite number of them — 1% of the overall market. "Is that a cause for concern?" he says. "No. The spike at the high end is not negative. It's just that living in a million-dollar home is not as big a deal as it used to be. "People are recognizing Miami as a world center and want to be here. We are just now entering the level of super-luxury. "We probably will see further appreciation in 2000 but I expect the rate of appreciation to slow in 2001." "In 1975 Harvard Business Review published an article about the three global communities of tomorrow — Coral Gables, Honolulu and Paris," Mr. Shuffield says. "Now that has happened."
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