Once-hot Miami struggles to
weather housing downturn

by Juan Castro Olivera  
26 Aug 2007

MIAMI (AFP) - Cars parked around the construction sites for 17 apartment buildings in the Bayside district of central Miami are covered in a film of work dust, but locals fear the buildings could become empty monuments to the housing downturn.

Giant new housing projects are still being erected in Miami despite the bursting of a property bubble in 2006 following a years-long construction binge that played out across America, with South Florida one of the hottest markets during the boom.

But now, diving property sales, surging foreclosures and concerns over subprime mortgages -- home loans granted to people with little savings -- have unleashed an economic storm across the United States, and especially in this sun-drenched corner of Florida.

The downturn is being felt across the city in neighborhoods like Little Havana, Liberty City and suburbs like Hialeah.

"I've had to rent my apartment to a good friend. The rent money enables me to pay my mortgage. It's the only way I can avoid foreclosure," says Sandy Hernandez of Opa Locka, who has moved back in with her mother.

While Hernandez is holding onto her apartment, others are struggling to sell properties in a market scarce of buyers amid a supply glut. "For sale" signs and vacant apartments dot the landscape.

"A lot of apartments have been on the market since last year. But I haven't noticed many people looking around to buy," Hernandez said.

Increased local property taxes have also ratcheted up the pressure on those already under financial strain.

The property pain being felt in Miami is also afflicting other regions, especially states such as Ohio, Nevada and California which also saw building frenzies during the boom years.

Speculators, who stoked prices in Miami during the boom by buying properties which they then "flipped" for higher prices after holding the residences for short periods, have disappeared.

And foreclosures are spiking as hundreds of thousands of Americans struggle to pay their mortgage repayments. Some lawmakers in Washington are mooting the possibility of special funds that could be used to help stricken families.

"The situation could deteriorate, and we have a large number of families at risk of not being able to pay their mortgages," says Kevin Burns, mayor of North Miami.

Burns, who is also a real estate broker, said the government needs to review mortgage regulations, saying the effects of lax lending are evident in some communities.

"We're working with residents who are having problems meeting their mortgages and trying to offer them advice so they don't lose their homes," the mayor said.

Carlos Davila, a lawyer experienced in foreclosures, said home repossessions have jumped dramatically.

"There are many cases of people that bought properties for investment who are now in trouble and can't pay their mortgages," he said.

Davila said some neighborhoods have also fallen prey to "vultures" who offer to buy homes from people struggling with their mortgages, but who exact tough financial terms from sellers.

Despite the downturn, some real estate agents and developers remain optimistic.

David Donnet, a real estate agent, says there are homes that are not selling, but says buyers from Colombia and Venezuela are helping to shore up housing demand.

"Miami is an island. It has been insulated from the slowdown affecting the national market thanks to a microeconomy sustained in good part by foreign buyers," he says.

Some developers are still financing new projects, particularly in the hopes of netting affluent home-seekers, despite the housing market's shaky outlook.

Alejandro Jimenez-Ness is the president of the Domus One Development Group which is developing the luxury "Eloquence on the Bay" project of 20-story apartment buildings priced between 450,000 and one million dollars.

"We've received strong interest from Mexicans who are moving here or buying homes in larger numbers," Jimenez-Ness says.