Home prices continue steep riseREAL ESTATE
Home prices continue steep rise
Broward and Miami-Dade home prices continued climbing skyward in June, as home prices nationwide leaped at the biggest rate in more than two decades.
Amid fretting that soaring home prices are hitting unsustainable heights, South Florida existing single-family home prices continued a dizzying rise in June, while home prices nationwide jumped at the fastest clip in nearly a quarter of a century.
The median price of a home in Broward soared 29 percent in June compared to June 2004, and prices in Miami-Dade surged 27 percent, according to figures released Monday by the Florida Association of Realtors.
Across the country, existing single-family home prices jumped 14.7 percent in June from a year earlier, the National Association of Realtors reported. That marks the biggest increase since November 1980, the Washington, D.C.-based trade group said.
''I have never seen a time like this,'' said Marilynn Obrig, a real estate broker at Intercoastal Realty in Fort Lauderdale with 26 years experience. ``I have seen a lot of ups and downs, and this is the longest up.''
In Miami-Dade, the median price of a home in June was $363,100; in Broward it was $378,000. Those prices mark hefty gains from just the prior month, May 2005, when a median-priced home sold for $354,600 in Miami-Dade and $367,000 in Broward.
Statewide, the June median price jumped to $248,700, a 31 percent rise compared to the same period a year ago and more than double the price of an existing single-family home in Florida five years ago.
Nationally, the median price for all types of housing now stands at $219,000. The median price is the point at which half of the homes are sold above and half sold below.
Experts attribute the roaring housing market to a range of factors, including stubbornly low interest rates and home-financing mechanisms like interest-only mortgages that enable people to buy homes they otherwise couldn't afford.
Observers say South Florida's robust job growth -- unemployment for instance is at a 20-year low -- is helping fuel the price gains. Meanwhile, the supply of South Florida homes remains exceptionally tight as the region continues to be a favorite for second-home buyers in the Northeast, Europe and South America. In addition, many investors now prefer real estate over the stock market.
But the lofty price hikes continue to raise concerns. Affordability, even for relatively well-paid wage earners, is becoming an increasing problem. Some employers and recruiters consider rising home prices a primary impediment to the region's economic development, because people can't afford to move here.
And the galloping market in South Florida, across the country, and in many parts of the world, has spawned worries the housing market is over inflated and poised for a tumble.
Last month, The Economist, a respected news magazine, asserted that the global housing boom is ``the biggest financial bubble in history.''
Yet many local observers contend the worst that will happen is a market wide slow-down in the rise of prices rather than a decline.
Bradley Hunter, South Florida regional director for research firm Metrostudy, said home prices are ''sticky,'' adding: ``If someone owns a real estate asset, especially if they are living in it, they can just hold rather than sell at a loss. A lot of people will have lost value in their house but won't realize their loss in a financial sense because they won't sell.''
Hunter predicts prices will begin to cool next year. And one real estate broker said there is already anecdotal evidence of a softening.
''The breaks are starting to be applied,'' said Jo Sumberg of the Masters Brokers Forum and Avatar Real Estate Services in Coral Gables. ``While people are asking crazy numbers, they are not getting them [sold] as fast.''
Some economists suggest that China's recent move to link the yuan to a basket of foreign currencies rather than solely the dollar may push up U.S. interest rates, which in turn would make real-estate mortgages costlier, damping housing demand.
Meanwhile, the number of existing single-family homes sold in South Florida in June was mixed. Broward was down 15 percent in June compared to a year earlier and Miami-Dade volume was up 2 percent.
Key Biscayne Sonesta to become condo hotel Officials at Sonesta Beach Resort on Key Biscayne announced plans Tuesday to convert the facility to a condo hotel with expectations of netting $650 million on sales of the units.
Fortune International is to market the development.
The existing property, built in 1969, will remain open until 2006 while the project is planned. The resort will close during a two-year construction.
Sonesta has sister properties on Sunny Isles Beach and in Coconut Grove.
The project will allow Boston-based Sonesta International Hotels Corp. an opportunity to double the size of rooms and upgrade to five-star quality, said Roger Sonnabend, the company's executive chairman.
"The rooms are 1960s sizes. They are 330 square feet, and we intend to build rooms of 500 to 600 square feet," he said. "Also, Miami could use an additional first-class hotel."
Neighboring Ritz-Carlton, Key Biscayne, Four Seasons Hotel and the region's only five-star hotel, Mandarin Oriental Miami, are obvious rivals, he said, though the Brickell and Brickell Key properties don't qualify as resorts.
"We're determined to at least equal if not better them," he said. "There is a shortage of truly luxurious hotels, and Key Biscayne lends itself to that quality. Other cities boast a number of five-star hotels, Miami doesn't."
That would be achieved, Mr. Sonnabend said, by offering better service.
"Training of personnel will be even more important. In a five-star property, more service is expected, more service on the beach."
Consumers weren't necessarily becoming more demanding, he said. Rather, others were looking at saving money.
"It goes both ways," Mr. Sonnabend said. "There's also tremendous demand for less expensive hotels with less service - a growth in the budget market."
The 10.5-acre site could accommodate a 930,000-square-foot facility, he said, with 200,000 square feet of public space and 700,000 square feet in guest rooms.
Mr. Sonnabend declined to reveal construction costs, though Fortune is to pay Sonesta $30 million in cash and discharge a mortgage of the same value as part of the transaction. Sonesta is to transfer the four-diamond AAA site to Fortune for $60 million and enter into a 50-50 partnership in the deal, set to close by mid-April.
W Hotel and Residences South Beach!["w.jpg"]("http://www.hansenhomesaventura.com/blogmiamirealestate/archives/w.jpg")
W South Beach Hotel and Residences
The Related Group and W Hotels are getting set to start taking reservations for their latest project on South Beach. The W Hotel and Residences is one of the hottest names in the hotel industry. This is your opportunity to get in at first level pricing. W Hotel and Residences South Beach will be located at 2201 Collins Avenue on the ocean. Building features include:
19 Floors
511 Units
Studios of 600 square feet
1 bedrooms from 800 to 1100 square feet
2 bedrooms of 1200 square feet
5 bungalows of 1350 square feet
Pricing from $800,000 to $8,000,000
Fully furnished units with plasma TV
9 Ceilings
2 restaurants including Mr. Chow
10,000 Square foot Bliss Spa
These units are set to start taking reservations in August with a reservation fee of 10%. Checks should be made payable to the Chicago Title Insurance Company. Second 10% should be due in December. For information on the W Hotel and Residence South Beach pricing and availability please call Paul Hansen 786-586-4778.
It's not your father's mortgage market anymore
The feverish real estate market that hit a new peak last week has been fueled not just by historically low interest rates but also by a host of new home mortgage products that might make a banker of yesteryear keep a hand on his or her wallet.
Is the house you want beyond your financial reach? Maybe not with an interest-only mortgage. Need a loan with no proof of income or assets? You may well get one called a "no-documentation loan."
Can't scrape together a down payment? You may not need it because mortgage bankers are offering so-called 80/20 loans that combine first and second mortgages in one package, even for first-time buyers. As little as a decade ago, such nontraditional mortgages accounted for barely a sliver of the home-loan business. But in white-hot coastal markets, where housing has become unaffordable to average buyers, they have become commonplace, and they quickly are gaining ground in heartland regions, including Western Pennsylvania.
The most popular of the new mortgage vehicles are interest-only loans, which allow borrowers to defer principal payments for five years or more.
Last year, interest-only mortgages exploded to nearly 23 percent of all home loans. That was more than a tenfold increase from 2001 when interest-only mortgages represented less than 2 percent of all home loans, according to Loan Performance LLC, a San Francisco firm that gathers and analyzes mortgage market data.
In San Diego, interest-only mortgages claimed nearly half the home loan market last year, 25 times the number in 2001.
In Pittsburgh, with its relatively stable housing prices and slow real-estate market, the share for interest-only mortgages last year stood at 5.7 percent.
But even here, the appetite for interest-only mortgages is growing, said Andrew Dodd, regional vice president of Citizens Bank's mortgage unit. Four years ago, fewer than 1 percent of Pittsburgh mortgages were of the interest-only variety.
"At the high 1/8income3/8 end, we see quite a bit of activity," Dodd said.
What these new mortgage options bode for the housing market, for homeowners and for the economy remains to be seen.
For the most part, bankers deny the new products are inherently risky. The new mortgage options, they contend, are merely a way of customizing loans to suit more buyers, particularly among high-income borrowers whose earning power can't always be measured by pay stubs and whose tax and investment considerations weigh into where they deploy cash.
As for lending standards, it's not that they have changed, bankers argue. Rather, automated application processing has enabled mortgage underwriters to refine how they measure risk -- taking into account a host of factors affecting creditworthiness that could not all be considered when applications were processed by hand.
As more people take out these mortgages, however, some economists and industry analysts say there's reason for wariness. Particularly in robust markets, many of the nontraditional mortgages are being underwritten based on expectations that borrowers will see either significant appreciation in their home values or gains in income.
Moreover, current default rates, which have been falling, are not a reliable indicator of what the future holds because the most popular of the new mortgages shield buyers from the full impact of their debt for five years or more.
"We are in uncharted territory," said Susan Wachter, a real estate economist at the University of Pennsylvania's Wharton School.
Wachter said a combination of Wall Street capital and demand in markets where average housing costs have far outpaced average household incomes are among the factors behind the proliferation of the nontraditional mortgages.
One thing is certain: It's not your father's mortgage market anymore.
"You can literally walk into a bank and get a mortgage loan with no money down," said Keith Gumbinger, vice president of HSH Associates, a New Jersey-based publisher of mortgage and housing market data. "Ten years ago, that was the stuff of late night TV."
The most flexible new products are Option ARMs, a twist on adjustable rate mortgages that enable borrowers to change payment options monthly, much like credit cards. Under the options, borrowers pay interest only, or pay interest and principal, or make a minimum payment. By choosing the minimum, buyers are deferring not only principal but also interest.
In lenders' jargon, this results in "negative amortization." In plain English, it adds to the homeowner's total mortgage debt.
In addition, Gumbinger said, borrowers can get mortgages with monthly payments that amount to as much as 35 percent of their monthly gross incomes, up from 28 percent a decade ago. Total debt payments for mortgage borrowers, including credit cards, may now go as high as 50 percent of monthly gross income, up from the old standard of 38 percent, he said.
Condo Sales Sizzle In Hot Miami MarketWatching as the Miami real estate market soared, Alexander Midler decided to make his move.
After eyeing a number of condo projects, the 32-year-old Boston software engineer recently settled on a one-bedroom condo at Jade Beach in Sunny Isles near North Miami Beach.
The price: $800,000.
It wasn't the cheapest place he found, but he figured an oceanfront view in an exclusive building filled with wealthy South Americans and Europeans would buffer him from a potential economic or housing downturn.
"I was looking for the safest investment I could make," said Midler, who is planning to move to Miami in a couple of years.
And with condos in the immediate area appreciating as much as 75% annually, Midler figured that he might sell the unit before he closed and make a tidy profit.
That would make him one of the market's many "flippers," people not looking for a place to live, but rather a way to make a quick buck.
While some booming housing markets have cooled, Miami's continues to get even hotter. With land scarce, most of the growth is coming from high-rise condos.
In Miami, nearly 70,000 condo units are under construction or in the pipeline, including high rises designed to soar more than 70 stories.
Miami home prices, which include condos, have shot up about 30% over last year. Relative bargains just five years ago, the average condo now costs about $300,000.
"We are going through the greatest expansion in housing in south Florida particularly in Miami- Dade in its history," said Michael Cannon, president of Integra Realty Resources-South Florida.
A long period of low interest rates has fueled a housing boom nationwide. Miami stands out as a relative newcomer to the hot list of markets and for the sheer number of new condo projects under way.
Fueling demand are buyers from South America and Europe as well as second-home