Miami-Dade County

Hardluck Homestead lags in housing recovery

This story is part of the 'Boom, Bust & Back' series. There is an enhanced version of this story available here

When the housing market careened off the cliff, Caribe Homes Corp., one of Homestead’s most prominent local developers, shut its doors and liquidated half-built communities and vacant land to meet obligations.

In March, a revived Caribe led by Fernando I. Martinez launched pre-construction sales at Leeward Isles II, a single-family home community where the developer regained control of 60 weed-covered lots.

After years of sitting idle, marring the ambience for neighbors in finished homes, the former strawberry fields, already outfitted with utilities, are set to sprout new homes in coming months, according to Martinez.

“I’m trying to create affordable housing, considering the lack of inventory [for sale] and that prices around Miami have been driven up,” said Martinez, past residential president of the Miami Association of Realtors and a principal in FM Realty Corp. brokerage and Caribe.

Prices at Leeward Isles II for a 4-bedroom, 2-bath home spanning 1,830 square feet start at $179,900. That’s about 33 percent less than what a comparable Caribe home was fetching there during the boom.

“People who want an affordable home will come to Homestead,” said Martinez, whose strategy mirrors giants like Miami-based Lennar Corp. and Fort Worth-based D.R. Horton, both of which are back building in Homestead in a big way.

The big crash

It seems that Homestead’s trajectory was never destined to be a straight line. Flattened by Hurricane Andrew in August 1992, the rural community struggled for years to get on track.

Fifteen years later, a speculative homebuilding boom on cheap farmland in the far reaches of Miami-Dade County turned into a spectacular bust.

In sunny orchards and fields that once produced strawberries, tomatoes and okra, new housing developments stalled halfway through construction.

Hard-hit homebuyers walked away from contracts or surrendered to foreclosure as property values nosedived. Vacancies ran rampant.

In the beachside and high-end neighborhoods, Miami-Dade’s historic housing crash was brutal enough, but the downturn proved shorter and shallower than in the less-desirable, outlying areas of the county like Homestead.

As many neighborhoods from South Beach to Brickell Avenue to Coral Gables showed signs of revival, Homestead’s housing prices sank and sank some more.

Amid a mountain of foreclosures and abandoned properties, Homestead could offer little to recommend it when prime locations in Miami could be had at bargain prices.

“The ‘A’ locations came back stronger and quicker than the ‘B’ locations,” said Jaret Turkell, a managing director at HFF in Miami who has handled bulk sales of homes in Homestead. “Homestead is definitely a ‘B’ location.”

Few spots in the nation can claim worse scars from the housing crash.

Between 2003 and 2007, the median single-family home price in ZIP 33033 in Homestead more than doubled to $255,000. But by 2011, that median had plunged 73 percent to bottom at $68,000, according to an analysis of state and county data by the Miami Herald and the Florida Center for Investigative Reporting. In 2013, the median single-family home price soared to $152,000, skewed by sales of newly built homes in the area but still off sharply from its high.

The median price of a townhouse in ZIP 33033 plunged 76 percent from its peak to bottom at $47,000 in 2010. By 2013, it had climbed to $90,000, still less than half its frothy top.

When the housing crisis tightened its grip, new houses and townhouses in projects like Waterstone ended up in the hands of investors who rented them out, often under the federal government’s voucher program for low-income tenants.

With many people losing homes to foreclosure and struggling with damaged credit profiles, demand for rentals skyrocketed.

“Section 8 is one strategy that was utilized during the downturn and was fairly viable,” said George Cadman III, chairman of ERA South Dade Realty Inc., a family-run brokerage that has operated in the area for six decades. Even today, lists dozens of townhomes and houses for rent in ZIP 33033, many of them newer residences.

The city never seems to catch a break. In the wake of Andrew, the storm-battered Homestead Air Force Base was diminished to an Air Force Reserve facility. In 1993, the Cleveland Indians, citing the town’s bleak post-hurricane environs, reneged on plans to use its new baseball stadium for spring training.

Last year, Homestead drew an embarrassing spotlight when its mayor, Steve Bateman, was indicted and suspended on corruption charges. He is awaiting trial.

Still, the housing market is slowly coming back, as rising prices in closer-in communities like Kendall force house-hunters to weigh the tradeoff of a longer commute for a nicer house at a cheaper price.

“This place is dramatically better than it was a year and a half ago,” said veteran broker Cadman as he wheeled his convertible along a stretch of Homestead, with groves to the left and townhomes on the right. “I’m optimistic about what’s going on. There was a time they called Homestead ‘Deadstead.’ There was nothing happening.”

Buying up

Investors have poured into Homestead from near and far to pick over the carcasses of the housing bust. Some pursued bulk sales of new homes, some went after raw land, some assembled portfolios of single-family homes and townhouses one by one at foreclosure auctions and short sales.

In March, HFF’s Turkell brokered a private equity fund’s purchase of Palm Breeze at Keys Gate, a former Shoma Homes project at 1140 SE 24th Rd., in Homestead’s ZIP 33035, that included 375 townhomes and 370 finished lots. The sales price was $40 million.

Scottsdale, Ariz.-based Colony American Homes, a large real-estate investment trust that buys and rents homes, has rental properties in several Homestead ZIP codes, including 33032 and 33033.

Marching to a different beat, Leonard Abess Jr., a wealthy retired Miami banker, has been buying farmland around Homestead and keeping it in agricultural use. Not many others, however, seem focused on preservation.

Miami-based 13th Floor Investments, a real-estate investment firm, swept in to Homestead in 2008 and scooped up distressed land, fractured communities and bulk sales of single-family homes and townhouses. It already has cashed out of most of its holdings there.

“We saw it as an opportunity to buy a lot of product really cheap in good condition built by good builders,” said Arnaud Karsenti, 13th Floor’s managing principal. “We were able to buy way below replacement cost.”

13th Floor sold some land to Lennar and currently has an arrangement to sell lots on another tract to D.R. Horton. In December 2012, 13th Floor sold a portfolio of 116 single-family homes in Homestead, most of them near Homestead Hospital, a key employer in the area. The buyer was an Orlando investor.

“Homestead is a simple tradeoff between location and price, but the quality is very nice. The homes are very nice — they’re comparable to homes in areas that get more attention,” said Karsenti, whose company has moved on to co-developing luxury high-rise condominiums at 1010 Brickell Avenue and 400 Sunny Isles with Key International.

seeing growth

Despite its ongoing struggles, Homestead was the first spot in Southeast Florida where D.R. Horton resumed building after the crash. The company has four housing developments under way there.

“The need for new housing in the Miami-Dade area along with the affordability this market offers makes it a great combination for us,” D.R. Horton said in a statement.

Lennar, which never completely stopped building in Homestead during the crash, has ratcheted up the pace of construction in its four active communities there. A key reason is the county has little undeveloped land left. Homestead is one of the few spots that has open spaces.

Lennar, which is listed on the New York Stock Exchange and is one of the nation’s largest builders, began building master communities in Homestead in the early 2000s and continued buying land throughout the crash.

Lennar bought a note from U.S. Century Bank and in March initiated a foreclosure action against some 82 acres of Homestead farmland held by developer Michael Latterner. “We’ve had an interest in that property for quite some time. We’re looking forward to acquiring and developing it,” said Carlos Gonzalez, Lennar’s division president for Southeast Florida.

The land at 117th Avenue and Southwest 248th Street in ZIP 33032 is adjacent to D.R. Horton’s Hemingway Point development and next to vacant land owned by Baptist Health South Florida.

“We are really firm believers in Homestead because of the land constraints,” Gonzalez said. “We knew Homestead would be great even in the darkest moments of 2009.”