Back in 2007, I predicted that, by the time the fallout in the U.S. housing market was over, at least one major American homebuilder would go bankrupt. While many smaller homebuilders have closed their doors since last summer, on Monday, WCI Communities, Inc., a major large player in the U.S. new homebuilding market, filed for bankruptcy protection.
WCI started up back in the 1940s and was awarded the National Association of Home Builders coveted award “America’s Best Builder” in 2004. The company listed debt of approximately $2.0 billion dollars in its bankruptcy filing. It was a major player in the Florida home-building market with a focus on high-end condominiums.
Having spent the last week in Miami, I can attest firsthand to the soft Florida realty market. But the activity and lower prices are becoming more and more select.
The market for older, non-core location product has fallen the most in price. A listing I have on my desk right now shows a condominium unit that sold in 2006 for $350,000. Now foreclosed upon, the bank that owns it is asking $175,000 for the unit. This unit is at least 30 years old. Across the street, and on the beach, a building that had 35 units for sale last year only has 25 units for sale now. Prices for three bedrooms in this building sell for over $1.0 million. In this building, prices have not gone down and activity is brisk.
So, it’s the old real estate cliché: location, location, location, quality, quality and quality. If you are looking for a deal, maybe a vacation home, you will not find it on the beach in a new building. But you will find it inland in older buildings that “caught the fever” during the real estate boom.
Of the five real estate agents I called last week who have active listings, only one returned my call. While housing prices are not rising, the market is busy with “bottom fishing” investors picking up the best deals they can. And that is keeping the agents in traditional vacation states like Florida busy.
Is the bottom in for the real estate market? From what I can see from the charts of the remaining “solid” homebuilders and the activity in the marketplace, I’d say we are almost there. But as for prices, I would not be surprised if they do not rise for years to come.