By Deborah Goonan, Independent American Communities
Let’s face it. Florida is a boom-or-bust, volatile real estate market. And Miami is at the center of it. Investing in a home or condo in most of the Sunshine State, but particularly South Florida, is not for the faint of heart.
According to several reports, and based upon recent MultiList data and local real estate research consultants, sales are way down, and prices are headed in the same direction. Meanwhile, there is an oversupply of new condos, a by-product of overzealous developers of condo towers.
Miami’s Condo Frenzy Ends With Inventory Piling Up in New Towers
Prashant Go Pal
Miami’s crop of new condo towers, built with big deposits from Latin American buyers and lots of marketing glitz, are opening with many owners heading for the exits.
A third of the units in some newly built high-rises are back on the market, though most are listed for more than their owners paid in the pre-construction phase. At the current sales pace, it would take 29 months to sell the 3,397 condominiums available in the downtown area, according to South Florida development tracker CraneSpotters.com.
Experts blame the slow down on a weak economy in Central and South America, coupled with the strong U.S. dollar. Reals estate has become more expensive for buyers, at the same time that their income is waning.
But what about the rash of construction defects and protests over condo corruption? Hard to believe that the following issues have failed to garner the attention of domestic and foreign buyers.
There have been numerous reports of theft, fraud, and embezzlement involving condo and homeowners associations in the Sunshine State.
And then there’s the nationwide trend of dying golf course communities, many of them located in Florida.
What’s different this time?
And this time as prices drop, speculative condo and home buyers – especially foreigners that were looking for a safe haven for their money – have a lot more to lose. This time, it will not be so easy for condo buyers to walk away. Instead, they will likely have to bear the brunt of the risk associated with a slow housing market.
As reported in the above referenced Bloomberg article:
Investors have much more at stake than the speculators who walked away from deals in last decade’s crash and left the market with thousands of unsold homes. In the latest construction boom, projects required cash deposits of as much as 60 percent, and contracts had stiff cancellation penalties.
Because owners of condos in new towers signed contracts over the course of a couple years, it’s difficult to know how many made purchases at prices above today’s values, said William Hardin, a professor of finance and real estate at Florida International University in Miami.
Read more here:
The slow down has also spread to areas surrounding Miami.
Miami’s housing market hits the brakes: Elliman reports
Other South Florida cities also showing signs of volatility
By Sean Stewart-Muniz
The reports, commissioned by brokerage Douglas Elliman, cover first-quarter data from several major housing markets in the U.S. including all three of South Florida’s counties.
What the numbers show is that both mainland Miami and its barrier island Miami Beach are continuing to cool off as sales and price growth slow.
In the mainland, which covers neighborhoods east of I-95, 3,583 condos and single-family homes were sold in the first quarter, a reduction of 17.5 percent from the 4,344 closings made during the same period a year ago. Prices saw a small 2.7 percent bump, from a median of $393,343 per property last year to $404,020 in the first quarter.
The Miami Beach section of the report, which covers everything from Sunny Isles Beach to Fisher Island, shows an even larger dip. Sales reached 810 properties, down 21 percent year-over-year. And for the third quarter in a row, prices on the beach for both condos and single-family homes have dropped. Median prices fell from $437,750 a year ago to $408,750 last quarter, according to the report.
Read more here:
So, once again, Miami and the surrounding metro area will have thousands of unfinished condo units and dozens of zombie HOA subdivisions.
At the same time, there are plenty of people eager to sell their condos and homes, even at a loss. The strong dollar will alleviate some of the sting for foreign property owners. Domestic home and condo owners who were counting on price increases to continue will be bitterly disappointed.
Buyers will likely see a drop in home and condo prices in the coming months. But perhaps it’s best to be cautious before purchasing.
The rental market is still very hot, so one has to wonder whether there will be more real estate vultures swooping in to acquire condos at rock-bottom prices, for the purposes of converting condominiums to rental apartments.
Remember, Florida’s condo statutes are still full of loopholes that allow investors to force condo owners to sell at a loss.
And when subdivisions are left incomplete, especially if the developer walks away, a relatively small number of people are left to pay ongoing assessments.
Here we go again.