Brokers optimistic as Miami's housing glut melts away
By Marilyn Bowden
Leaders of some of Miami-Dade's larger realty brokerages say that based on last year's performance and record-breaking levels of investor interest in the area, they're feeling optimistic about the future of the local residential market.
"I think we are on the verge of another boom," said Patricia Delinois, incoming president of Miami Realtor Association and president & CEO of Century 21 Premier Elite Realty. She cited National Association of Realtor Chief Economist Lawrence Yun's prediction of dramatic increases in sales in 2012.
"Sales prices per square foot are up; the luxury market is doing well; distressed sales are down from 2010; we're seeing sharp increases in the numbers of second-home buyers, especially in Miami Beach and South Beach, and the numbers of first-time buyers converting from renting is astounding," said Vanessa Grout, president and CEO of Douglas Elliman Florida. "All of that is very positive."
"We have been through one of the longest low cycles in South Florida's history, and the biggest high cycle just before it," said Mike Pappas, president and CEO of The Keyes Co., which closed on 20% more units in 2011 than in 2010.
Ron Shuffield, president of Esslinger Wooten Maxwell Realtors, said the 28,277 properties sold countywide in 2011 represents an 18% increase over 2010 sales and is the highest number reported since records have been kept.
The market has still not recovered from the dramatic price hit it took in 2008, Mr. Pappas said, but "we are eating through the inventory at a lot higher rate than anyone expected. There's a fire sale in South Florida real estate, and the world market is coming here bringing global cash.
"I believe the foundation has been laid for a new strong real-estate cycle. We are budgeting a 10% increase over last year in number of units sold."
Pricing increases, Mr. Pappas said, will depend upon getting through whatever inventory of distressed properties remains unreleased by lenders.
According to the Clear Capital Home Data Index Market Report, Miami's annual price gain of 5.6% in 2011 was the third highest in the nation, which correlates to its position as the market with the third-strongest decrease in REOs, or distressed properties. Clear Capital's economists predict Miami will be among the five highest performing metro areas in 2012, with an estimated 7.4% growth.
Right now, Mr. Shuffield said, there's a problem no one expected to see so soon: inventory unequal to demand. When the market faltered in 2008, there were 42,000 homes on the market locally. At the end of December 2010, there were 23,272 listings. Now, there are only 14,129.
"The challenge we're going to have this year," he said, "is getting more inventory."
"We're starting to have to push to get listings," Ms. Delinois said.
In 2011, 55% of all home sales were foreclosures or short sales, Mr. Shuffield said, down from two-thirds of all sales in 2010. That has resulted in some positive price adjustment, "but it's very building-specific and area-specific. Waterfront and Brickell properties are seeing solid increases, but outlying areas don't appeal as much to international buyers, so they're lagging behind."
Low inventories have sparked a small flurry of new project announcements.
"A lot are still in the planning stages," Ms. Grout said, "so the exit won't be for another five years. It could be that many are too optimistic right now, but it does show that there is demand and an optimistic attitude."
The global nature of real estate marketing these days is driving a continuing trend towards consolidation in the industry. Small brokerages are being absorbed by larger firms with the resources to compete on a global scale; larger brokerages are expanding their footprints.
Douglas Elliman Florida is expanding into Boca Raton and Palm Beach, Ms. Grout said.
"We do encourage smaller companies to fold into our platform," she said. "That is part of our growth strategy. They can still maintain their individuality and independence to some extent.
"With the capital it takes to market these days, it's difficult for small shops to compete. We offer strong brand recognition, a strong network, back-office infrastructure."
Ms. Delinois said she chose to operate as a Century 21 franchise "because we saw what was happening with the global trend. Foreigners know the names of the large brokerages worldwide, and that recognition is what you need now. Branding is a must."
She said she is currently hiring at least one new agent a week, and is in the process of expanding to two new locations.
One Sotheby's International Realty, which reported a growth of more than 250% in sales in 2011, opened new offices over the past year in Key Biscayne, Coral Gables, Fort Lauderdale, Miami Beach, Aventura and South Beach-South of Fifth.
"I think our industry consolidation will continue," Mr. Pappas said. "The free agency game of associates has driven the margins down so dramatically that only volume will allow a brokerage to provide excellent services to its associates."
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