During the Great Recession, South Florida real estate got pounded. The housing bubble and the resultant collapse of securities tied to mortgage payments caused property values to crater.
That crisis whacked city and county budgets, which depend most on property taxes. Homebuying, except for high-end properties, stalled. It took several years for home prices to recover.
So what about the Coronavirus Recession?
Last week, Wells Fargo forecast “double-digit drops” nationally year over year in sales of new and existing homes for March and April after a “strong start”—21 percent ahead of last year—before virus restrictions began. Mortgage applications hit an 11-year high in early March, but then dropped almost 30 percent.
Those are national numbers. What about locally? I spoke with Jarrod Lowe. He’s president of the newly formed Broward, Palm Beaches & St. Lucie Realtors Association. In January, the group expanded from Broward and Palm Beach counties, becoming the third largest in the country. Lowe is a Realtor in St. Lucie County.
Lowe acknowledged, “There will be a bit of a slowdown, but pre-existing contracts are moving forward.” Overall, though, “It’s far too early to say.”
For the residential market, it seems fairly straightforward. Will the market stall for a long time while people who might have been looking pull back because they’re worried about not having a job?
“Realtors are all fairly optimistic by nature,” Lowe said, noting that he had put two properties under contract in the two days before we spoke. Mortgage rates, he pointed out, remain very low.
All Realtors, Lowe said, had been moving to virtual presentations before the virus. Now it’s possible to offer buyers a house tour that’s almost as good as visiting. Though local governments have suspended open houses, most haven’t addressed showings, since they don’t involve gatherings of more than 10 people. Lowe said his organization would like cities and counties to “expressly” say that showings can continue.
Keith O’Donnell is a principal in the Boca Raton office of Avison Young, the commercial real estate broker. He is watching to see how the “functionality” of the financial system holds up.
Example: What will investors do with home mortgages that are packaged and sold? How will the crisis affect insurers that write policies for business losses? Most coverage doesn’t include pandemics, but this crisis has brought government shutdown of healthy businesses. And how generous will lenders be about mortgage forgiveness?
“The good thing,” O’Donnell said, “is that there’s a lot of communication. Everyone is talking with everyone else. It will help if we understand that everyone is in this together and needs to come out on the other side.”
For large, investor-financed projects, the short-term outlook is bleak. A Daily Business Review story quoted a developer as saying that lenders aren’t even looking now at the sort of large, multi-family projects that have sprung up in Boca Raton and Delray Beach in the last decade. That could delay redevelopment of the former Office Depot headquarters in Delray Beach.
Unlike the Great Recession, there’s no glut of property, residential or commercial. The question will be whether the Coronavirus Recession wipes out those who want to buy the properties on market.
Virus effect in county
I’ve written a lot about how the virus is affecting Boca Raton and Delray Beach, but the effects have started to hammer Palm Beach County.
Commissioner Robert Weinroth, whose district includes Boca Raton and Delray Beach, said tourist tax collections in March were down nearly 90 percent from a year ago. That’s the tax on hotel and motel rooms.
Fortunately, the tourist tax doesn’t support the county government or school district budgets. But the tax does finance projects designed to draw tourists. Weinroth said the plan to renovate Roger Dean Stadium in Jupiter—the spring training home of the Miami Marlins and St. Louis Cardinals—is “off the table.”
Sale tax revenue should drop less than tourist tax money. People are still buying, though to a lesser degree. But there will be a bit, and a prolonged slump could mean that some projects from the surcharge don’t get finished.
Also, the one-cent increase was supposed to last for 10 years after voters approved it in 2016. Weinroth said projections had been that the surcharge would raise the $2.7 billion early, perhaps in nine years. Now the plan may end without raising all the money.
In addition, the commission has discussed putting two property tax referendums on the November ballot. One would raise money for environmental projects. The other would be for affordable housing. Commissioners must decide in July, but I’d be stunned if they put either before the voters this year.
Weinroth said he’s still getting emails about the county’s decision to close all golf courses—private and public—and community pools—private and public. It’s another example of resistance to social distancing.
Though Boca Raton and Delray Beach still are deciding how to hold meetings, Weinroth said the commission is set to meet in chambers on Tuesday. Some commissioners will participate remotely.
“It’s time,” Weinroth said, “to readjust the world.”
Rooms for healthcare workers
There’s been talk of using hotels to quarantine people who have been exposed to the virus. Weinroth said the county now is trying to find hotel space at reduced space for health care workers who are afraid to go home for fear of exposing their families.
Weinroth said that when he hears about problems like that and then gets another call about golf, “I just shake my head and wonder, ‘What are they thinking?’ “
Testing site opens
After fits and starts, the county finally opened its first, large drive-through virus testing site this week at the spring training stadium in West Palm Beach. More than 300,000 people called for appointments before it opened.
Weinroth said the county hopes to open a south-county site. Local officials are “working through logistical issues” with Florida Emergency Management Director Jared Moskowitz “to get this up and running ASAP.” The most likely location is the South County Civic Center on Jog Road just south of Linton Boulevard.
School construction on schedule
Speaking of the sales tax surcharge, two key projects from that program are in Boca Raton: the new Addison Mizner and Verde K-8 schools. Verde is supposed to open this August and Addison Mizner a year later. Palm Beach County School Board member Frank Barbieri said construction would continue on schedule. Money for both already had been allotted from the program.
And now we need rain
Obviously, this would be an especially bad year for a hurricane to strike South Florida or anywhere in the state. Another weather issue, however, may pose a problem much sooner than the summer.
A month remains in the dry season. March was the fourth driest in roughly a century. This region soon could approach drought conditions. The South Florida Water Management District already has closed some navigation points on Lake Okeechobee because the level is so low.
Where the Army Corps of Engineers should set that level during the winter has been a source of debate. U.S. Rep. Brian Mast, who represents Martin and St. Lucie County, wants the level low. Doing so could prevent the need for summer releases of lake water that have brought pollution to Treasure Coast waters.
Elected officials who represent western Palm Beach County and towns around the lake, however, want high levels. The lake is their backup water supply.
Regular rains usually return in early May. If April is as dry as March, the South Florida Water Management District could declare drought conditions. That at first would mean restrictions on lawn watering.
But the money keeps coming
Even as Boca Raton Regional Hospital deals with the COVID-19 pandemic, big donations keep coming.
The hospital announced that longtime donor Barbara C. Gutin has given $3 million to the Christine E. Lynn Women’s Health & Wellness Institute. A news release said the gift will allow the institute to “help show pregnant women and new mothers how to handle changes in their bodies and how to deal with pelvic floor issues as well as emotional issues, including postpartum depression. This program will also assist new mothers in knowing just what to do at home after the birth of their babies and the many other issues that arise for women of childbearing age.”
With her late husband, Irving Gutin, Barbara Gutin has made donations to create centers for robotic surgery, stroke treatment and pelvic health.
New Delray fire chief
Delray Beach City Manager George Gretsas this week made Keith Tomey the new fire chief. Tomey had been serving on an acting basis after the March 10 resignation of Neal de Jesus.
Tomey had run the department twice previously when de Jesus served as interim city manager. He has been with Delray Beach since 2016, having come from the Broward County city of Miramar, where he had been chief.
A mitzvah for Passover
Here’s another of those good-news stories from improvising during the virus crisis.
A Boca Grove couple, Shelly and Jerry Abramson, had to cancel their Passover program and found themselves with food for about 800 hotel guests. What to do?
According to a news release, the Abramsons contacted the Jewish Federation of South County. The group worked with Ruth & Norman Rales Jewish Family Services and area rabbis to raise $125,000 and deliver 10,000 meals in time for Passover. It starts Wednesday.