So much for the housing crash

David Streitfeld has an article in The New York Times about the housing market in Miami:

South Florida is the default capital of the country. In Miami-Dade County, one out of five households with mortgages is in foreclosure. Nearby Broward and Palm Beach counties are not far behind. Nearly two hundred thousand South Florida families are stuck in the mire of default.
And yet much of Miami is gripped by a housing mania, as the oversupply of distressed homes dries up and foreigners and investors swoon. Only a few years after it seemed there were so many unwanted high-rise condominiums that the only solution was to tear some of them down, there are plans to build even more. Home sales in the metropolitan area during the first half of the year rose sixteen percent from 2010 for the best spring since 2007, according to the research firm DataQuick, far outpacing the negligible growth in the rest of the country. Two-thirds of the sales were all cash.
Prices, after a brutal drop, are firming up or even increasing. During the first six months of the year, there were 439 sales for at least two million dollars, up thirteen percent from last year. “People thought it would take at least a decade to get back to this point,” said Peter Zalewski, founder of Condo Vultures, a real estate consultant.
Gil Dezer, who co-developed the beachfront Trump Towers, saw ninety percent of the buyers in the project’s uncompleted second and third buildings abandon their deposits in the crash. Last week, Dezer achieved a milestone: he sold enough condos to pay off the $265 million mortgage on the property. Only about twelve percent of the apartments remain. “The Brazilians walk in, they don’t even negotiate,” said Dezer, who said he would announce two new projects by the end of the year. “It’s a no-brainer for them.”
For more than four years, the fate of the housing market here and across the country has been closely tied to the tremendous wave of foreclosures. In some communities, more than half of all home sales were bank repossessions. These cheap, often half-destroyed properties undermined neighborhoods and accelerated the market’s descent, prompting even more owners to walk away. But now, as new foreclosures slow and lenders are forced to let old cases languish for legal reasons, some of the regions that were worst off when foreclosures were at flood tide are much improved with the process stalled.
“People should thank the foreclosure mills,” said Zalewski, referring to the law firms that brought about freezes in foreclosures when they were caught using illegal methods. “They gave the whole market a reprieve.”
As a result, the balance between supply and demand in South Florida is shifting. In late 2008, as the financial crisis was peaking, there were just over one hundred thousand properties for sale and hardly any buyers. The region became a symbol of excess. Buyers abandoned their deposits and reneged on deals, buildings went bankrupt and squatters moved in. Now there are fewer than 48,000 properties for sale, Condo Vultures said. And, with supply diminished, homes have value again.
Whether Miami and other stricken markets like Phoenix, Las Vegas, and parts of California will continue to make progress depends on the fate of the two million American households in foreclosure and another two million in severe default. The nation’s attorneys general and the Obama administration are negotiating with the top mortgage servicers for new procedures for those in trouble. If the lenders get immunity from prosecution, foreclosures might speed up and the housing market could suffer another relapse.
In the meantime, the South Florida market is busy, although it offers a problematic blueprint for a national recovery. For the traditional buyer who wants to put down no more than twenty percent, loans are somewhere between tough and impossible. Many of the sales are to investors, rich people, or foreign citizens benefiting from a weak dollar.
“Two years ago, everyone was gripped with fear,” said a mortgage broker, Grant Stern. “Now investors are gripped by greed.” Stern is suffering the consequences of better times. The landlord on his high-rise rental finally managed to make a deal with the bank to sell it for less than he owed. Last week, Stern had to move. His old place, a three bedroom, was $1,300 a month. Across the street, he is paying $2,179 for a two bedroom. “I’m downsizing my space by thirty percent, yet spending fifty percent more,” he said.
Projects that were left for dead during the bust have sprung back to life. The Everglades, a two-tower, fifty-story project that went bankrupt in 2009 with fewer than ten percent of its units sold, has been reintroduced under the name Vizcayne.
Paramount Bay, a 47-story condo building that was supposed to open in 2009, but ended up foreclosed, is finally on track to start selling in September.
A developer and marketing team that suffered sharp reversals in the crash, the Related & International Sales Group, issued a promotional report a few weeks ago asserting that “the next chapter begins.” The tens of thousands of new condos built during the boom and abandoned during the crash will all be occupied by the end of next year, they said.
“Do I want to say ‘boom’? ” Philip Spiegelman, a Related ISG executive, wondered in an interview. “That’s a little overly aggressive, but we clearly are being rewarded for offering very inexpensive real estate.” Inexpensive is a relative term. Miami prices are about half what they were at the peak, but units in the project, called Apogee Beach, start in the high six figures. All fifty condos were reserved in sixty days. If construction begins as planned in November, it will be the first postcrash building in the area.
Some experts think Miami’s reprieve will be short-lived. “The banks will only keep the Grim Reaper at bay for so long,” said Jack McCabe, a real estate consultant. “There is going to come a day of reckoning when they will have to move this inventory.” Indeed, Dade County foreclosure filings in June ticked up thirty percent from May, for the highest monthly total since October. Even so, the rate is about a third of what banks were filing early last year.
For some investors, the unknown future is all the more reason to do deals right now. Andres Zapata was a young, inexperienced real estate investor at the end of the last boom, trying to flip houses. “I went down like a lot of other people did,” he said. He went to Iraq with the National Guard and is now back in real estate with several like-minded buddies. After about four months of looking for good deals, they just bought two houses in a Miami suburb. “We’ll either flip them or rent them out,” said Zapata. “So far, so good.”