Thursday, June 29, 2006

Retirement Condos Flooding the Florida Housing Market

The founder of the Boca Real Estate Investment Club scanned the multiple listing service last week and found 2,700 condominiums for sale just in Palm Beach County retirement communities. That represents roughly 9 percent of the county's total listings.

"That's a staggering number," Dweck said.

Century Village west of Boca has 282 listings, he said. Kings Point west of Delray has 255, and roughly 20 percent of those have been on the market for 200 or more days.

"A lot of these buildings took a beating in the hurricane," Dweck said. "And a lot of these people are too old and too frail to go through the repairs."

In the days following Hurricane Wilma last October, many seniors struggled to stay alive after winds ripped off roofs and power outages prevented those on upper floors from using elevators. Hurricanes Frances and Jeanne wreaked similar havoc in 2004.

But don't blame the storms alone for the over-55 condo glut, Dweck said.

Some of the building facades haven't been updated in years and aren't appealing to existing residents or buyers, he said.

"That market will continue to correct downward," Dweck said. "I don't expect it to pick up at least for another year."

South Florida's housing prices might be out of whack, but at least we're no Naples.

That tony city on the other side of the state has the nation's most overvalued housing market, according to a study released this month by Global Insight and National City. Homes in Naples are overvalued by 102 percent.

After Naples, the nation's most overvalued markets are Salinas, Calif. (79 percent), Port St. Lucie-Fort Pierce (77.4), Merced, Calif., (77) and Bend, Ore. (76).

Broward County almost looks cheap by comparison. Broward homes are overvalued by 57 percent, followed by Miami-Dade at 64 percent and Palm Beach County at 65 percent.

Florida and California account for 17 of the top 20 overvalued markets.

Economists at Global Insight and National City crunched the numbers after factoring in median sales prices, median income, population and historical values.

While there is the potential for price declines in these overvalued markets, most of these areas won't experience widespread problems, said Jeannine Cataldi, senior economist for Global Insight.

"In most of these markets, the growth will just slow or flatten until market conditions catch up to prices," Cataldi said.

Meanwhile, the folks at Homekeys in Miami, an online real estate service, have done a little analysis of their own.

They've determined that 23 percent of properties in Miami-Dade are priced at or below the company's estimate of market value. In Broward, 37 percent of properties are at or below market value, and in Palm Beach County it's 59 percent.

Bottom line: Sellers are getting more realistic with asking prices, said Mario Villena, vice president of marketing for Homekeys.

"The pricing gap is beginning to go away," he said.

Don't expect a break anytime soon from the rising costs of construction materials, said Ken Simonson, chief economist with The Associated General Contractors of America in Washington, D.C.

In the past year, the industry has seen increases of 87 percent for copper and brass, 48 percent for asphalt, 40 percent for diesel fuel, 26 percent for drywall, 18 percent for plastic construction products and 15 percent for cement.

Some of those increases will level off as the U.S. housing market continues to soften, Simonson said. But the rising costs are a result of strong demand in Asia and elsewhere, and the worldwide building boom isn't likely to let up.

"If you're trying to get a bid on a home, you're going to face much higher materials costs," Simonson said in a phone interview last week.

Consumers need to factor the price increases into their budgets and contractors need to buy materials sooner, Simonson said.


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