ULI Residential Panel Sees More Pain, Little Gain Ahead
For those who complain about enduring a recession, real estate builder/developer Harry Posin had some grim humor: “In the fourth year of a downturn, we feel we’re already in a depression – and are hoping we can move up to just a recession.”
Previous recessions finished in 18 months, but the current, difficult economy now feels like a freefall – and 75 percent of private builders won’t make it out, Posin predicted.
He was one of six industry executives who gathered on Jan. 23 to discuss a 2009 economic and residential development outlook for South Florida.
The well-attended, half-day meeting was sponsored by the nonprofit Urban Land Institute and held at the Seminole Hard Rock Hotel & Casino in Hollywood.
Posin, a former executive VP with Coconut Creek-based Minto Communities, is now president of his own firm, Fort Lauderdale-based Label & Company Developments.
Other panel members included:
- Panel moderator and real estate analyst Lewis Goodkin, president of Miami-based Goodkin Consulting.
- David Goldberg, director of building and building products for New York City based-UBS Investment Research.
- Jed Smith, managing director of quantitative research for the National Association of Realtors.
- Craig Werley, founder and president of Focus Real Estate Advisors.
- Peter Zalewski, broker/owner of Bal Harbour-based Condo Vultures Realty.
Goldberg expects a trough in the broad housing market by 2099’s fourth quarter, after foreclosures peak during the summer.
He said unknown factors ahead include tighter mortgage lending standards and loan modifications, rising unemployment and the elimination of developer down payment assistance – which accounted for as much as a fourth to a third of buyers for Lennar, D.R. Horton and Centex.
Positives, Goldberg said, include builders reducing starts below long-term demand and expected government stimulus plans on the way.
Smith reiterated that all housing markets are local, and doesn’t see 2009 as a disaster – although he said it won’t be barnburner. Low interest rates are a plus. Negatives are unemployment, drooping consumer confidence and South Florida’s overbuilt inventory. He expects a local recovery in the fourth quarter or early 2010.
Werley sees prices down in 2009 and 2010 to levels not seen since 2002. The limited land supply is positive, but he contrasted that with the 15- to 50-month supply of existing inventory throughout South Florida.
Using the old refrain “stay alive in ’95,” Werley came up with his version: “We’ll be in heaven if we make it to ’11.”
Zalewski not only saw the downturn coming, but planned his company around it and said he now has 35 brokers working for Condo Vultures. His business is booming as a buy side-only brokerage firm dealing in distressed South Florida properties.
“There are two typical all-cash buyers in the market today,” Zalewski said. “The legacy buyer who thought he’d never be able to afford a waterfront property and plans to use it himself and hand it down to his children and grandchildren – and the flipper is still alive.”
Today’s flippers are different from those of a few years ago. Now, they are all-cash buyers, ready to rent and flip in three years – and they only wants deals with the choicest prices.
“The good news is that everyone from Europeans to South Americans and hedge funds want a piece of Miami,” Zalewski said. “The bad news is that we estimate we have a two-year run as we quickly burn through the existing inventory.”