Real estate panel: International investors, declining vacancies to help stabilize market
By Yudislaidy Fernandez
Higher affordability is to propel the sales of more homes in 2010, with international investors expected to play a key role in helping stabilize the housing market, a panel of residential experts forecast.
Market expectations and trends for 2010 were discussed at a residential outlook forum last week at the Westin Colonnade in Coral Gables. The Realtor Association of Greater Miami and the Beaches, Coral Gables Chamber of Commerce and Miami Today sponsored the annual event, moderated by Miami Today Publisher Michael Lewis.
Supply continues to decline as homes in the lower price points are selling rapidly, said Panelist Paul Bishop, managing director of real estate research for the National Association of Realtors. The first-time homebuyer tax credit has contributed to the surge in sales, he said.
The supply of US homes in the $100,000 to $249,999 range is almost five months and in the $250,000 to $499,999 range is close to 6.5 months as of August, data from the National Association of Realtors show.
The pieces are in place to move the housing market forward, Dr. Bishop said, such as relatively low mortgage rates, the effect of the first-time homebuyer tax credit, which Congress is considering extending, higher affordability and positive consumer views about homeownership.
About two-thirds of people queried about the main reason for buying a home respond they want the experience of owning a home, he added.
But restoring consumer confidence is key to long-term market stabilization, Dr. Bishop says, which would require signs of stability in the job market, better performance from the financial markets and reducing the fear premium.
"When we get to the point things look less uncertain, things move in the right direction," he said.
As the No.1 market for international buyers, continuing to engage the international investor to buy in South Florida is vital as this segment represents one-third of home buyers locally. Not only have they played a main role in helping stabilize the housing market this year, but they are expected to be just as important to the residential market in 2010.
Panelist Teresa King Kinney, chief executive officer of the Realtor Association of Greater Miami and the Beaches, with 50-plus international partners, says the association markets local properties in foreign markets, such as Latin America, Europe and Canada.
The association is "establishing strong partnerships with associations around the world," she said.
And the partnerships are working. One in every four international buyers chooses Florida over any other state, and of those, one in four buys in the Miami-Fort Lauderdale area, realtor association figures show.
For example, Miami-Dade is the preferred market for Canadians and Latin Americans, she added.
European investors have regained interest in buying properties here as well, Ms. King Kinney says, as today South Florida represents a top market for these investors.
"There are great opportunities for investments out there and the international buyers are coming in masses," she said.
Panelist Patrick O'Connell, managing broker and senior vice president of development services at Esslinger Wooten Maxwell Realtors, agrees that international investors are boosting housing sales.
He recently sold several condos to that buyer profile, he said, citing a South American family that two weeks ago purchased multiple condos in Midtown Miami to hold as a long-term investment. Most investors are looking for part-time residences, he added, as many don't plan to reside in Miami fulltime.
Panelist Enrique Villaronga, senior vice president of TotalBank, said 30% of the bank's residential pipeline comes from international investors and 45% from first-time home buyers. International buyers, from countries such as Venezuela, Brazil and parts of Europe, usually put 30% down, he noted, and are less delinquent on their mortgages.
But with the recession and high unemployment driving many homeowners to default on mortgage payments, a local financing group has seen a rise in mortgage delinquencies.
Panelist Claudine Claus, president and chief executive officer of Home Financing Center, said those homeowners facing foreclosure "still want to stay in their homes." In more than half of those loans, the financing center is doing workouts, she said, "so we don't have too much inventory out there to further decline value."
But on the positive side, the company's mortgage portfolio has doubled from last year, Ms. Claus said, as the center is gaining market share from those buyers taking advantage of federal incentive programs, such as the first-time homebuyer tax credit and Federal Housing Administration financing options.
With many international investors paying cash, some at the forum wondered if this could inflate prices in the housing market. The consensus was that many banks are not using cash sales as comparables because they want to see examples of sales that involved financing. Ms. King Kinney chimed in that cash buyers aren't overpaying for properties, as they are savvy investors well-educated in the local market. "Just because they have cash doesn't mean they want to pay more."
They are often buying higher-priced properties, she said, "but are still getting a great deal." For example, the median price for homes purchased by Latin Americans locally is $238,000, according to the realtor association. About 55% in this category pay cash and 44% use mortgage financing.
International investors are also major contributors to the tax pool.
These property owners pay more taxes because they don't get homestead exemption, Ms. King Kinney said, while using less of the services those monies go toward, such as schools. Plus, she added, "They spend more money than most of us when they are here shopping and eating outů"
An issue expected to keep haunting Miami-Dade's housing market in 2010 is foreclosures, a plague that hasn't been eradicated yet.
Another wave of foreclosures is anticipated to flood the market next year, Ms. King Kinney said, but this time, buyers will be waiting to put offers down on those listings.
"Lots of buyers and investors," she said, "are waiting for those properties."