As Condos Rise in Florida, Investors Try to Flee
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As dozens of condominium towers conceived during Floridaâs real estate boom near completion, investors who snatched up units are trying to break contracts.
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Florida, which has lured more retirees and vacation homeowners than anywhere else, might be losing some appeal for the same reason it's so beautiful: its place in the tropics.Florida's hurricane-prone geography might be a growing liability. The poundings it has taken recently from hurricanes Charley, Frances and Ivan - with millions evacuated and millions left without power - are making some people think twice about buying property or retiring in a state so vulnerable. If government meteorologists are right, significant weather changes mean Florida will be seeing more hurricanes and more destructive hurricanes in decades to come.Tony DosSantos, 54, a federal employee in New York, is reconsidering plans to retire to the Sunshine State. Florida was high on his list of dream places to move to with wife RoseMaria. But Arizona, with its dry heat and quiet desert, now tops his list. Recent hurricanes convinced him he doesn't want to spend his golden years fleeing life-threatening storms."News reports did a good job of dramatizing what people go through when a hurricane hits," he says. "I don't want to experience that trauma." Santa Fe is looking better to Sheryl Kottler Oshrin, 48. The Case Western University professional in Cleveland spent 12 years in Florida as a college student and at work. She dreamed of owning a home on Florida's Gulf Coast. Now, "The idea of being down there is terrifying," she says. "You look at this storm from your safe cocoon in the Midwest, and it looks really frightening."Hurricane Frances was such a wide storm that on TV, it looked like a huge orange blob out to swallow the state. Ivan, whose strong winds made it at one point a Category 5 storm, the most destructive, was called "Ivan the Terrible." It thundered ashore Thursday near the Alabama-Florida border, crushing buildings in Pensacola, Fla., before heading inland. About 300,000 Florida Panhandle residents lost power.Aside from the fear factor, shoppers are finding that real estate in much of Florida is no longer so cheap to buy and own. Florida has no state income tax, a big draw for prospective buyers. But in some areas, home and condominium prices last year jumped 20% or more amid record-low mortgage interest rates, strong housing demand and investor speculation. Past hurricanes already have roughly doubled insurance premiums statewide. In southeast Florida, premiums have at least tripled since Hurricane Andrew, the nation's costliest natural disaster, damaged or destroyed 130,000 homes 12 years ago.With the new spate of storms, "there will be a group of buyers who say, 'I don't need this,' " says veteran real estate adviser Michael Cannon of Integra Realty Resources in Miami. "People are already paying top dollar for real estate. Now, some may decide to rent rather than buy. If that happens, prices will top off." In the first half of 2004, the average price of a new single-family home hit a record &#36;400,000-plus in Broward and Palm Beach counties, Cannon's figures show. But in the most exclusive neighborhoods in southeast Florida, homes start at around &#36;700,000, and homes right on the water start at &#36;1 million. John Talbott, author of The Coming Crash in the Housing Market, notes that baby boomers buying vacation and retirement homes are helping drive up prices, but he thinks the hurricanes might give some pause. "Such a devastating natural disaster would have to make some of them rethink their choice of location," he says.State officials are quick to point out that Florida has weathered numerous hurricanes in the past and continued to prosper. "Florida has proven itself an extremely resilient state," says Scott Openshaw, spokesman for Gov. Jeb Bush's economic development office. He says Bush and other state officials think this hurricane season will have a short-term effect on investment, but no long-term damage.Building while dodging Hurricane Andrew preceded a decade of spectacular growth in southeast Florida, fueled in part by billions of dollars in insurance payouts. But during that decade, southeast Florida was repeatedly spared a direct hit from a major hurricane. Southeast Florida became the glamorous address of choice for sports, film and music stars. Miami Beach enjoyed a renaissance, with condo towers reaching new heights and "South Beach" becoming a metaphor for everything hot. But even before hurricane activity heated up this year, U.S. retiree migration to Florida had been slowing. In 2000, 19% of people over age 60 who migrated across state lines for retirement went to Florida, vs. 26% in 1980, says Charles Longino, a sociology professor at Wake Forest University. Florida still is the top destination for retirees over age 60 moving across state lines, followed by Arizona, California and Texas, he says. But Longino's research shows three-quarters of all retirees spend their golden years in the same homes and towns they lived in before they retired, a pattern he calls "retiring in place." He doubts Florida's recent reputation as a bull's-eye for deadly storms will put a big dent in the migration there."The odds of having three or four hurricanes in one season are infinitesimal," he says. But the nation's top meteorologists say this season's storms aren't a fluke. Scientists say subtle changes in ocean temperatures and winds are likely to make Florida's annual hurricane season - from June through November - worse in coming years.Prominent academics and scientists from the National Oceanic and Atmospheric Administration (NOAA) say the region has entered a period of more powerful hurricanes than the USA has seen in a quarter century. Florida, with a vulnerable coast increasingly packed with homes, hotels and condominiums, could be at risk of much greater property damage and loss of life in the next two decades.Hurricanes have done an average of &#36;5 billion in annual damage in recent decades; Hurricane Andrew, a Category 5 storm that struck the Miami area in 1992 and did &#36;16 billion in damage (in 1992 dollars), was the exception. But since 1995, scientists say, the waters of the Atlantic and Caribbean have warmed slightly, and wind patterns that served to prevent formation of hurricanes, or break up existing ones, have weakened. As a result, experts foresee more hurricane damage, because storms will be stronger and because so many affluent people now live along Florida's coast in expensive homes and condos. About three quarters of Florida's 16 million residents live near the coast. Frances and Charley together have done about &#36;11 billion in insured damage so far this season. Ivan's damage is yet to be tallied, and hurricane season isn't over.In this new hurricane period, "a &#36;10 billion hurricane won't be a once-in-a-lifetime event. It could happen every three or for years," says meteorologist Chris Landsea of NOAA's Hurricane Research Division in Miami."There's no way Florida won't get more of these destructive storms," says Colorado State University professor Bill Gray, who has studied hurricanes since the '50s.More hurricanes would surely raise the price of paradise: higher building costs due to stricter building codes, higher insurance costs and more storm evacuations. Backing out of buying Already, some real estate agents have seen deals fall through. Paulette Butcher of Century 21 Aaward Associates in Port Charlotte, near where Charley came ashore, says one buyer backed out of a waterfront canal lot with a sale price of &#36;240,000. Another canceled a deal for a single-family home priced at more than &#36;400,000.But agents say the risks haven't deterred buyers elsewhere, especially when they think they're getting a deal. Greg Antonich, a ReMax agent in Daytona Beach, has seen no letup in demand for condo units starting at &#36;200,000 in a converted oceanfront hotel there. Because of hurricane scares, developers haven't been able to line up insurance and close sales. Even so, "We have people clamoring for units," Antonich says. "They are upset because they can't get reservations."Many people outside Florida still think the state's warm weather beats where they live. Bill and Mary Kalmar of Lake Orion, Mich., north of Detroit, plan to relocate to Florida next year, hurricanes or not. The winter cold and snow in Michigan are worse than anything they can imagine in Florida."I think I can outrun a hurricane," says Bill Kalmar, 61. "You can't outrun a Michigan winter."Deep thoughts But even some longtime Florida residents are having second thoughts this hurricane season. Carmel Ellis, 27, who owns a condo near Clearwater, is re-thinking her Florida dreams. Hurricane Charley missed her area, but gave her pause about a long-term plan to live on the Florida coast. "Growing up in Des Moines, I always had a dream about opening my doors and walking out onto a beach," says Ellis, a Web designer. After Charley, she says, she'd be happy with an inland house and backyard pool.To those who lost homes during Hurricane Andrew, that storm was a wrenching financial and emotional loss. Every new storm warning makes them uneasy.Linda and Irwin Bernstein evacuated their 3,800-square-foot home in the suburb of Pinecrest, south of Miami, before Andrew hit. When they returned, "It looked like an atomic bomb had struck," recalls Linda, 65. Their block was unrecognizable. Half their house was gone, and what contents were left were strewn everywhere.They sold the house as is, and moved to a condo on Miami Beach. When Frances brushed the Miami area Sept. 4, they evacuated again."I've thought about leaving Florida," says Linda, who has lived in the state 43 years. "I'd love to have two homes, so we could spend the winter here and summer somewhere else. You can keep hurricane season. We're tired of it."
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Maybe real estate investment trusts are burnt out. But there are other ways to get some real estate into your portfolio.
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Here's something more scary than  Chucky: A growing number of people are borrowing against their  homes to invest in the stock market.
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The realty space is being disrupted.
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The hard-charging homebuilding stocks are making believers of some investors.
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REITs are getting pummeled, and it's time to start paying attention.
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Buoyed by the strong economies and currencies in their own countries, foreign investors now see an opportunity to scoop up coveted Manhattan real estate.
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By Steve Bonser, Santa Barbara News-Press, Calif.  Feb. 13--Jim Wooster, a retired investor, brings up a Web page on his  laptop in his New York high-rise condo. After a few mouse clicks, he's viewing  the activity log of the security system that's protecting his upper Riviera  home.
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Single-family home builder M/I Homes Inc.  said on Monday it has sold land in its Florida markets to help reduce debt, and is exiting the West Palm Beach market, where its assets included about 500 lots in four communities.
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Florida homeowners are facing higher deductibles put in place to induce insurers to keep offering coverage there in the wake of  Hurricane Andrew more than a decade ago.
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U.S. homeowners began the foreclosure process at a record pace in the first quarter of 2007, largely due to a sharp rise in previously hot real estate markets such as California and Florida.
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Property investors smarting from this year's housing bust in the United States might do well to look farther afield -- even out of this world.
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U.S. real estate investors are heading  south of the border, putting their money in an array of  projects and properties they believe will generate attractive  returns from Mexico's growing economy.
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As owner of a beachfront home in Hernando County, Cheryl Labbe has gotten used to rising rates for her homeowners&#39; insurance. During Florida&#39;s four-hurricane barrage, letters