March 19, 2000

THE HOUSING MARKET BORDERS ON DELIRIUM

By STEVE FRIESS
Staff Writer

Joann Kern Peart was sure she'd made a $135,000 mistake. The Delray Beach native had just moved her family into a 2,500-square-foot ranch home near Lake Ida, just west of Swinton Boulevard and north of a decrepit, depressed downtown area along Atlantic Avenue.

The home, with green shutters and a white picket fence on a sprawling corner lot, was built in 1955 and needed work. But more significantly, Peart looked around and wondered whether it was wise to invest in this neighborhood.

This was, after all, an area between Federal Highway and Interstate 95, long considered the alley throughout Palm Beach County most unlikely to succeed. Too close to busy, noisy highways, not close enough to the beach, the critics said.

"When we first moved here in 1987, a lot of us were thinking we'd made an error," said Peart, now president of the Lake Ida Property Owners Association. "The neighborhoods were shabby. But now everybody's fixing up, changing things, redoing their rails or their porches. Everybody's painting."

It's also a boon for the property's value. More than a decade later, with a tremendously successful Atlantic Avenue revitalization project overhauling Delray Beach's once-downtrodden image and a bustling U.S. economy providing a steady stream of homebuyers enamored by Palm Beach County, Peart and her neighbors find themselves sitting on a possible gold mine.

Peart's home is assessed by the county at $155,000, but that's just because the county can't increase assessed valuation on homestead properties by more than 3 percent a year unless she sells or the home undergoes a major renovation. County appraisers think Peart's property actually could fetch at least $229,000 on the market, and some of Peart's neighbors have sold similar homes for almost $250,000. By the time Peart sells -- and she's not planning to anytime soon -- her home easily could have doubled in value, real estate experts say.

A special case? Not really.

A study by the Sun-Sentinel of assessed valuation across south Palm Beach County, as well as a consensus of opinion among dozens of Realtors and homebuilders, shows an exuberance and optimism about Palm Beach County's housing market that borders on delirium.

"We've never seen anything like this before," said Glen Trotta, owner of DiVosta Homes Corp., which recently sold the last of 278 new lots in 2-year-old Hammocks Reserve, west of Congress Avenue on Linton Boulevard. Some of those homes are reselling at 15 percent mark-ups, records show. "The demand for housing in this county is unbelievable, and I don't see anything short of a major economic disaster that will keep it from only getting hotter and hotter."

Several factors contribute to the good news, from downtown revival efforts like that in Delray Beach to rampant efforts to tear down older homes along the coast and rebuild. The Boca Raton area continues to thrive on the back of its unbeatable location along the Broward County line and the fact that the steaming economy has created dizzying new personal wealth. Boynton Beach and West Boynton are capitalizing on available vacant land to provide working-class families with large, affordable new homes.

The proof is in the assessment numbers:

Only 164 of 2,533 subdivisions of single-family homes in Palm Beach County saw their average assessed valuation drop between 1998 and 1999. Most declines were due to homes being torn down, thus lowering the assessments until they are rebuilt, county assessment officials said.

More than 92 percent of the 184,755 single-family homes on the tax rolls in both 1998 and 1999 saw an increase in their valuation in 1999.

More than 96 percent of the subdivisions in the region south of Lantana Road, which envelopes all of Boynton Beach, Delray Beach and Boca Raton as well as the burgeoning unincorporated communities west of those municipalities, rose in average assessed valuation.

Countywide, assessed valuation on single-family homes rose 3.5 percent.

County officials caution that assessed valuation does not necessarily equate to the value of a home, and sales figures do show there is a significant discrepancy between the assessed and market values.

But assessed valuation does reflect trends in home values, rising and falling most when houses are sold or rebuilt and remaining steady when an area is in a stagnant era. Dramatic shifts give observers clear evidence of changes in the market.

"This is really a great time," said broker Terry Eichas of Homes of Distinction Realty in Delray Beach. "You pick an area, and it's doing well."

Delray Beach and Boca Raton

The most dramatic real estate turnaround in Palm Beach County during the past decade is the revival of Delray Beach. The city spent more than $20 million on new streets, tax incentives for businesses and other renovations to turn the city into a South Florida destination.

Whether that investment paid off for the city's coffers remains a controversial question, but the boost to the area's home values and utterly overhauled Delray Beach image is an undeniable fact.

"North, east, south and west, East Atlantic Avenue was great for everybody," Eichas said. "We haven't seen an area that was left behind."

But some areas haven't benefited quite as handsomely. Assessments on homes in the region surrounding the lower-income, less-refurbished West Atlantic corridor from Swinton Road to Military Trail rose 2.7 percent on average, far below the 10.8 percent jump in assessments for homes around Atlantic from Swinton to the ocean.

Delray Beach enjoyed a 4.6 percent surge in average assessed valuation for its single-family homes, a huge year-to-year increase outpaced in Palm Beach County mainly by luxury coastal communities like Palm Beach, up 11 percent, Manalapan, up 9.6 percent, and Gulfstream, up 7.7 percent.

By contrast, assessed valuation in Boca Raton rose 3.7 percent and in Boynton Beach, 3 percent.

"We just fell in love with downtown Delray and decided to spend a little more for a little less," said Janice Gonzalez, who last year left a condominium in Hialeah for a 1,200-square-foot home she bought for $77,000 in the Southridge subdivision.

That 180-home area, south of 10th Avenue between I-95 and Dixie Highway, saw assessments rise 3.5 percent in 1999. "My house needs a lot of work, but I believe in this location."

Wealthier folks also are lining up to live in Delray and West Delray, shelling out millions for the more lavish new properties that compete with Boca Raton communities. While new subdivision builders once had to cajole and plead with the Boca Raton branch of the post office to designate their area in Boca and not Delray, "that line is now completely blurred," said Toll Homes marketing director Kathleen Murphy.

Toll Homes two months ago opened the sales office of the 500-lot Mizner Country Club in West Delray to a flood of interested buyers, including Marie Wendworth of New York City. Wendworth and her boyfriend, whom she won't name but refers to as her "Internet millionaire," visited Mizner, at Lyons Road off Clint Moore, to consider building their $1 million dream home. They're not sold on Mizner yet, she said, but she's seen enough to make her satisfied that "Delray is just like Boca these days."

That's not to say Boca is hurting. Some of the fastest-rising subdivisions in the entire county are there, including Le Lac, Golden Harbor, Sanctuary and Addison Estates.

The $400,000-plus market isn't all that's thriving in Boca.

Boca Rosa Heights, up 12.4 percent, and Boca Raton Riviera, up 8.3 percent, are two of the many neighborhoods priced between $150,000 and $250,000 east of I-95 and south of Spanish River Boulevard to the Broward County line.

"Boca still has an amazing allure," said Jeffrey Winikoff, presidenl continue to rise no matter what happens."

While some analysts say that's an overstatement, they also don't expect potential competition for new homes expected to be built in the Agricultural Reserve to have much of an effect on existing markets in Boca, Delray and along the coasts.

The Ag Reserve, a 21,000-acre region roughly from Lantana Road to Clint Moore Road west of Florida's Turnpike, is now largely undeveloped and mostly still in agricultural use. Fearful that rampant growth would erase the farming culture of Palm Beach County, the County Commission identified the area for stringent development rules and passed a $100 million bond referendum last March to buy land for preservation.

County commissioners have consultants designing a vision for what type of development should go in the Ag Reserve. The first draft was rejected this winter because it allowed higher densities than some commissioners wanted and didn't do enough to preserve agriculture. The aim now is to design a region where there would be, at most, one unit per every five acres.

While commissioners continually insist the Ag Reserve will be a place where people of all economic strata will live, Realtors and builders insist the restrictions make it a lock for the luxury market.

"A lot of projects will go up in the Ag Reserve, but I don't see many new projects that are going to be below a $200,000 average sale price anywhere south of Boynton Beach Boulevard," said Timothy Hernandez, vice president of land and marketing for Pulte Homes Corp.'s southeast Florida division.

Luxury home Realtor Al Curcio agreed, noting the requirements that homebuilders dedicate 60 percent of their property to land conservation in order to build on the other 40 percent. "If they keep the low density, it will only increase the value of the property. Only the rich will be able to live there, because who else could afford that?"

Mansionization

"Old house, new house new house, new house old house, new house," rattles real estate broker David Roberts as he cruises along a hole of a golf course in Boca Raton's Royal Palm Yacht and Country Club in his 1957 Corvette convertible. "It's an unbelievable thing that's happening here."

There, and almost anywhere you look along the Intracoastal Waterway and the Atlantic Ocean in Palm Beach County. Roberts' subdivision was built by Arvida Realty Co. more than 45 years ago along the Intracoastal south of Glades Road in Boca Raton. Now it's being rebuilt, lot by double lot, by the nouveau riche seeking more than the relatively ordinary ranches first built there.

Roberts, 40, is a part of the trend. He spins his Corvette around, trots up the road and halts in front of some concrete walls and the crowd of construction workers piecing together his dream home. He now resides in a nondescript 2,851-square-foot home on the other side of the development, but a prosperous career and a new family prompted him to go for more.

He has knocked down a 1,500-square-foot home that he bought for $1.2 million in August 1998 to make way for a 7,000-square-foot, $4 million mansion. Among the new amenities he'll install: a four-car garage, a golf-cart garage, a circular, two-story study with walls lined with bookshelves, a 60-foot-long pool and a main spiral staircase.

Forty other lots, out of 750 in the subdivision, are under similar construction in Royal Palm, with some families buying neighboring multimillion-dollar homes only to knock one house down and plant gardens while building something massive next to it.

Such activity along the coast -- and, to a lesser extent, in older luxury subdivisions farther west -- stuns and delights observers. The sheer magnitude of some of the projects is staggering, but "it's really the best way to keep the areas desirable and new," real estate analyst Joanna Kopps said. "What's surprising is how new some of the houses are that are coming down."

Even homes that aren't demolished benefit from the rebuilding going on next door, as seen in Delray Beach's Seaspray Estates area. The cul-de-sac along the Intracoastal just east of downtown Delray saw a huge boost in all land values when one family replaced a 2,500-square-foot 1950s ranch home, then worth about $300,000, with a 7,100-square-foot, two-story gated palace of gabled roofs and elaborate décor now valued at about $2 million.

William Jedlick, owner of a 1,400-square-foot home across the street, saw his assessments jump $75,000 in 1999 thanks to that construction. Jedlick, who lives in Pennsylvania and rents out the property, doesn't qualify for the homestead exemption or the assessment increase caps set out in state law for homestead owners.

The increase, which is accompanied by a surge in property taxes, rankled Jedlick somewhat, but he also saw the positive end of it.

"This land is becoming more and more valuable," he said. "That's only really a good thing."

Seniors

If any housing in Palm Beach County has lost value or remained stagnant, experts say, it's the senior housing market, especially in the Boynton Beach and Lake Worth regions.

The granddaddy of such areas is Leisureville, an 1,802-home area west of I-95 and south Boynton Beach Boulevard where row after row of small, identical white homes stand before neatly mowed postage stamps of lawns. Assessments rose an average of only 1.8 percent in 1999 for the area, nearly half of Boynton Beach's 3 percent gain in the same period.

Leisureville is a tranquil, well-kept neighborhood, but the senior designation limits who can buy to people with no children younger than 18. At least 80 percent of homeowners must be 55 and older, and many of those who sell are prompted by dire need, such as a death, instead of profit motives.

"We took a bath on my mother-in-law's house there," said Fred Greene of Dania. "We let it go at less than $60,000, but we had to do it quickly because she needed the money to hire health aides."

Many of those who live in such areas aren't looking to make big money, said Leisureville office manager Betty Collins. Rather, they're seeking a specific lifestyle to retire and relax.

"The people who are here and come here love what we have here," said Collins, a resident for 14 years, noting the homeowners association paints the houses every other year for the residents. "In the years I've been here, I don't know anyone who left because they were unhappy here. There's always an instance, like a spouse died or something, but there are at least 100 people living here for 30 years."

Real estate agent Kathy Clarke, who has sold in Leisureville for two decades, insisted property values "are not stagnant by any means," claiming that in the past six months she has witnessed a sudden pop in prices all the way into the $80,000 range.

If so, that would be up from the $50,000 and $60,000 prices the same homes were going for just a year ago, but the county's most recent assessed valuation and market-value figures wouldn't reflect such an uptick yet.

"The prices really have risen, and it's a great demand area," said Clarke, of Century 21 Luxury Homes in Boynton Beach. "It's really Boynton's best-kept secret. There's not much for sale anywhere, so this is really a hot seller in a really hot market."

Broward build-out

Gail Brunetto, 37, was fed up with Tamarac.

Her townhouse in Inverrary was nice enough, but the traffic heading 14 miles to work at First Union Bank in Pompano Beach was "becoming the biggest nightmare."

Brunetto and her boyfriend decided to search for a house in Broward County.

They found little in the size, 1,800 square feet, and the price range, up to $140,000, they sought.

"When we went out and looked at these properties in Broward, the only things we could find in our price range were these very old, old homes that needed a lot of work," Brunetto said. "It just couldn't compare to what we found in Palm Beach County."

The search took them a bit farther north than they expected because Delray -- once a working-class family's refuge -- is now too expensive, she said. Eventually, she settled on a 5-year-old, 1,600-square-foot house in the Charleston Shores subdivision, about four miles west of Florida's Turnpike off Hypoluxo Road.

"At first I thought, `My God, it's 40 miles to work from here,'" Brunetto said. "But it really takes about the same amount of time to get me there. I just pop in a CD, hop on the turnpike and I'm there."

It's that attitude that has Realtors and builders still convinced that Boynton Beach will be a haven for years to come for middle-class homeowners wishing to live in Palm Beach County and work in Broward.

"The Boynton Beach and Lake Worth areas are by far the best deals in Palm Beach County," said Kathlein Ambridge, owner of Boynton Beach-based Destination Realty.

Delray used to be attractive to this group, but now Delray is almost as expensive as Boca. So there's Boynton, where they can buy the dream home they couldn't dream of."

With Broward County fast approaching build-out -- there will be nothing new left by 2015, and north Broward cities like Coral Springs will be finished by the end of this year -- land values south of Palm Beach County are expected to skyrocket. Boynton and Lake Worth are expected to benefit most from that shift, promising current homeowners an impressive return on their investment, Ambridge and others insist.

Some competition is coming from the Jupiter Farms and Royal Palm Beach areas, analysts say, now that the MacArthur Foundation has sold off 14,880 undeveloped acres to developers.

For many, Boynton Beach and Lake Worth remain the outer boundary of how far north they're willing to live. Any farther north, say past West Palm Beach, and homeowners say they'd feel divorced from Broward County altogether.

"It's almost like a boundary," said Brunetto. "Lake Worth is tolerable. Anything farther than that area and you might want to move your employment to West Palm Beach as well."

Brunetto noted that since her new neighborhood in Lake Charleston is not a 55-and-older area but will someday be surrounded by them, she's likely to see her land values increase.

With a school just down the block and a scarcity of neighborhoods for parents with young children, Brunetto's home will be among the most desirable.

"It's not that I planned it out that way, but I do think that will happen," she said. "I just loved this house, so we purchased it. A lot of people buy homes as an investment, but I was mainly figuring I would not be taking a loss in my investment. Now I see I should do pretty well, too."

Brunetto said she loves the fact that her new home is somewhat isolated -- for now.

"I know there's going to be a lot of development up here because we see the trucks and all the building," she said. "But at least this gives me a couple of years of peace, anyway. I mean, no matter where you go in Florida, eventually you're going to get overrun."

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