Mike Lewis (pictured) is starting to worry about the Florida real estate market. Florida Mortgage Solutions Group president told MPA he saw the affordability crisis that ensued particularly acute in South Florida Younger first-time buyers hit particularly hard, but make their way through the demographic spectrum.
Lewis explained that the condominium market, so important to young buyers and retirees, is being challenged by a heavy down payment requirement that prices out a range of first-timers and those on fixed incomes. Lewis stated that he and his mate Mortgage professionals do what they can to make room for these buyers, but it is an uphill battle given the market trends that benefit cash buyers and high net worth individuals.
“My first call is when first-time buyers see a $ 100,000-150,000 condominium and think they can cut three and a half percent and buy it,” said Lewis. “With the financing rules, most condominiums don’t allow this FHA and these properties typically come down by 25%. Well, that poor little shopper who has maybe three and a half percent didn’t even know about the closing costs, thinks he can use this FHA product and only wants to spend $ 1,200-1,500. This buyer is not on the market. “
One solution, Lewis said, is to get a first-time buyer to buy a multi-unit property with high rental income. However, this solution usually requires some down payment assistance from a parent or family member who has sufficient cash. Lewis is concerned that the average shopper, who alone or less than the estimated median income of Miami Dade of around $ 55,000, will be ousted from the market.
Cash buyers, Lewis explained, play an outsized role. He sees international and non-government buyers with incomes completely independent of the local economy, buying up property at prices and speeds that a conventionally funded borrower cannot match. Florida tax incentives attract New York CEOs, and Lewis believes the trickle of wealthy buyers will turn into a flood in June as schools close for the summer and families move. Snow birds from Canada and wealthy Latin American emigrants are also driving up prices. Lewis noted that this influx is extending the affordability crisis beyond first-time buyers to middle-class homeowners and potential retirees who had dreamed of South Florida for years.
Younger shoppers are being pushed to central Florida or smaller towns like Port St. Lucie, Lewis noted. Older buyers are more appealing in certain municipalities of 55+, where barriers to entry are not causing prices to rise as quickly. While many of these communities have accommodations for children and families, for many shoppers moving there means a cleaner separation from a multi-generational household.
Lewis’ solution to this crisis is to find small savings and incentives where he can. He credits his commission up to 2% for borrowers who may not have the cash to pay for closing costs. He sees this loan as a long-term investment in its volume. He wants to strengthen his partnerships between realtors and builders to find the right angles to bring his clients into a home. Even so, he fears that the market he works and lives in could become one of the cautionary stories in the US housing market.
“We are displacing people and people are making a lot of money in this real estate market when they migrate. But if they don’t buy here and don’t gain a foothold, they can’t access that wealth, ”said Lewis. “It could be a San Francisco where someone says they’re making 55 grand and asks where there’s a home for them because they can’t find a home. Property values here have risen 10% a year since the 1980s, and you can’t keep up with normal income. “