Florida's Luxury Home Market Shows Signs of Wear
The surprisingly healthy market for oceanfront mansions and palatial condos in Florida, one of the most toxic states in America's housing meltdown, may finally be showing some cracks.
While many luxury properties are selling briskly thanks to Europeans and Canadians pouring their strong currencies into Florida, billionaire Donald Trump recently dropped the price on a Palm Beach mansion by 20 percent, and some market watchers say the U.S. housing woes have finally touched the wealthy.
At a recent luxury property auction in Fort Lauderdale, the auctioneer took home after home off the block within moments after opening the bidding when nobody made an offer.
On one highrise condo in the Miami enclave of Williams Island, a 3,100 square foot penthouse previously listed at $5.6 million, he opened bidding at $5 million, lowered his price to $3.5 million, $3 million, $2.5 million, and then closed the auction, all within a minute.
"There's just not that much enthusiasm or activity in the luxury market," said Jack Winston, a real estate analyst with Goodkin Consulting in Miami.
After the local real estate market peaked two years ago, local brokers said high-end real estate was the only thing propping up the condo market in Miami, one of the most overbuilt and overpriced in the United States.
Sales figures from the Florida Association of Realtors supported that notion.
The median price of Miami condos gained 6 percent last year while price declines of 25 percent or more were seen elsewhere in the state amid the U.S. mortgage crisis, soaring property taxes and hurricane insurance woes.
Miami's vast Atlantic Ocean and Biscayne Bay shoreline offers thousands of water-view properties that have held their value better than cheaper houses and condos inland, where the foreclosure crisis has battered homeowners.
The Miami condo market finally had a bad month in December, when the median price fell 10 percent.
Auctioneers sold "north of 20" of the 50-plus properties on sale at the Fort Lauderdale auction, said SKY Sotheby's president, Chad Roffers. The event offered up an estimated $300 million in properties ranging from a $2.45 million, one-bedroom on ritzy Fisher Island, to mansions in the $15 million range.
"The high end is resilient," Roffers said. "Certainly the market has corrected since the peak of 2005. What we are seeing is that quality waterfront inventory is holding value."
But many properties were quickly pulled from the auction when no one bid. And bargain hunters had an open field.
One man, in short order, snapped up two bayfront houses in Miami Beach's pricey Venetian Islands, one for $500,000 and the other for $1 million. The homes sold for $2.75 million and $2 million respectively in mid-2005, according to county records.
Guido Teichner, a would-be buyer who said he attended the auction looking to make a killing, put in a $500,000 bid on a two-story, 4,000 square foot penthouse condo in downtown Fort Lauderdale that had previously been listed at $3 million.
"At that price I'd be thrilled. That would be a killing," he said of the bid, which was accepted at auction but still awaited seller approval because it was below the minimum bid.
"Fifty cents on the dollar is not good enough in this market," he said. "I don't think we've hit bottom yet so you've got to get a real steal to allow for a little remaining downside."
There were signs of both strength and weakness in Florida's luxury market.
In Palm Beach, one of the priciest postal codes in the United States, the average price of a single-family home climbed to $5.11 million in 2007, up $618,000, according to The Evans Report, a closely watched monitor of the town's market.
An oceanfront estate owned by philanthropist Sidney Kimmel sold this month for $81.5 million, the full asking price, broker Dana Koch of Corcoran Group said. He would not reveal the buyer, but a local newspaper identified him as John Thornton, former president of Goldman Sachs.
"We had a lot of people through the house. Sports team owners, athletes, captains of industry, a Saudi prince," Koch said. "It might be the highest sale of a single-family home on the east coast.
Trump's Palm Beach mansion could top that, if he gets his price for the 6 acre property, which includes 82,000 square feet of buildings and 475 feet of Atlantic Ocean front.
He dropped the asking price by $25 million after two years on the market, but still wants $100 million for a home he bought for $43.3 million four years ago.
Another property, Canyon Ranch Miami Beach, a massive oceanfront condo-hotel, is doing well, just a few months before completion, but its developer, Eric Sheppard, said he would not start another big Miami project in current market conditions.
Sixty-five of 100 units closed in the first six weeks they were on offer, Sheppard, chief executive of WSG Development, said.
"We're thrilled. There's only about 3 percent that just don't have the funds to close, and we've already resold most of those units," he said.
But analyst Winston warns a "disaster" is coming soon, when thousands of new apartments in Miami receive their certificates of occupancy.
"The disaster is really going to start to show its ugly head in the middle to end of this year," he said. "As higher priced units come to closing, we think you will start to see 30 to 40 percent defaults."