The real estate market is dynamic and changes with different events taking place on the world stage. In most cases we have no control over these events, but it’s how we react that will make the difference between success or failure. Many of these events were in play in previous cycles when the market went from boom to bust and back to boom again. The South Florida real estate market is now coming off the latest boom cycle but that doesn’t mean we are going back to a bust cycle. It means the market is making an adjustment from a buying frenzy and double digit appreciation to a more stable market. Also, in this most recent boom cycle, the majority of property purchases were in cash, which is quite different from 2008 when most of the purchases were heavily financed thus leading to many foreclosures.
Ironically, even though the market has slowed, that hasn’t stopped the cost of housing from continuing its upward climb. Strong demand for middle and entry level homes is driving price growth, while the luxury sector is experiencing most of the softness. This makes sense since many of the luxury properties were purchased by foreign buyers who are now struggling with devalued currency against a strong U.S. dollar, combined with uncertainty in financial markets abroad. However, as demand from Latin America and Europe has subsided, the void is beginning to be filled by buyers from other parts of the world such as China. South Florida offers a large inventory of new construction at more attractive prices than New York City and San Francisco, two traditional areas for Chinese investment.
Developers are also holding off launching new projects, while at the same time looking to purchase and hold land for the next boom cycle. Perhaps Shahab Karmely, CEO of KAR Properties said it best, “Real estate doesn’t die, it sleeps.”