Miami Real Estate Flounders On Sinking Prices
For a while it seemed that Miami might be one part of Florida that was if not immune from the real estate slowdown, protected a bit by its size and cachet. But now prices have started to plummet and putting many real estate speculators in trouble. The Miami skyline is dotted with cranes as buildings continue to go up but thousands of condo units are waiting either unsold or in foreclosure.
The numbers in Miami are startling, According to a report in Canada's Globe and Mail, prices citywide were 17.5 per cent lower in December than a year earlier with the value of some condos down by as much as half. And as more condo projects in progress are finished up the numbers could even go lower. Condos with sexy names and alluring promotions such as Jade and Vue are now facing millions of dollars in mortgage defaults and foreclosures. It's been a disaster for both investors and developers. In fact, two prominent Miami condo developers who were facing condo problems have died of heart attacks.
The problem in Miami is just part of Florida's boom and bust cycle. Whole towns sprung up over the last few years and many have gone bust just as quickly often leaving half-built homes abandoned (for a great photo series on this check out this piece on Rotunda Sands in Mental Floss). At this point, practically the entire state of Florida is in some sort of foreclosure crisis making it easy pickings for those from across the country and around the world looking for a real estate deal. Both homeowners who owe more than their homes are worth and developers forced to sell condos at cost or in some cases for even less than it cost to build them are ready to accept all sorts of offers.
For now, the temporary bandage seems to be real estate auctions. The other day I mentioned that two prominent real estate firms in Florida are working with a major real estate auction company. And just about every day I learn of a new auction of a condo complex in Florida. Many of the auctions are absolute, meaning that bidders will take whatever they can get. The good news is that this slump cannot last forever and for those who have the means to pick up a warm weather getaway there are major bargains to be had. Maybe this is the time for Miami developers to reach out to Russian investors looking for a place to wait out the winter chill.
Reader Comments (Page 1 of 1)
Toronto realtor Mar 17th 2008 7:17PM
East coast's Miami is unique city with its variety of economic and cultural aims. Not very surprising that the city's affected by the 'mood' of the region. Size doesn't count..But this might be a present global tendency as we faced a drop in selling condos here in Toronto as well. Lots of them are listed unsold. Even though the solution might be, of course, to lower the prices, both sides are waiting for the other to take action.
3rd gen Floridian Mar 18th 2008 3:06PM
Wake Up! Greater Miami is 4th poorest city in U.S. Tourism is number one business, but Each Day Miami, Ft Lauderdale, and Palm Beach Pump 300,000 Million Gallons of mimimally-treated Sewage into ocean 1 mile off beaches?
Miami-Dade wants to spend $ 3 Billion for a truck tunnel, a baseball stadium, an art museum in the Public's waterfront BiCentenial Park...... But NOTHING to STOP Polluting Our Beaches?
Vanessa Mar 19th 2008 8:34PM
Miami is a unique US city that is probably one of most diverse in the nation.
The city has a healthy mix of international residents, and is also a booming economic, cultural and social center. The city has established itself as one of the two largest commercial ports in the U S, mainly thriving on high-volume import and export businesses. In addition, Miami has become the second most important banking center in the East Coast, second only to New York.
As it is often the case, along with seeing robust growth in the real estate market, comes a time when fortunes change, and a period of pessimism hovers, as a result of overly optimistic view of how many new housing units could the market absorb, because of the excessive number of either unsold or foreclosed residential properties, especially condos. The market has been for a rough ride lately, however, it’s not that hard as some would like everyone to view it.
What Factors Would Help The Market Overcome The Slump
In view of the existing slowdown in home sales, mortgage rates and interest rates. If we check some of the major variables influencing the real estate market at these specific times, we may be able to see some very positive trends, such as: Interest rates on long- term mortgages have long stabilized at historical low levels, favoring the purchase of real estate; the increase in in-migration toward the state of Florida and the Miami area in particular has noted to be among the highest in the country and should expect to raise strongly into the next 20 years, and creating higher demand for residential market; and the unemployment rate, which is the single factor that can greatly influence a local real estate market
How Housing Markets Are Faring In Most Of The US
The US Commerce Department recently reported that new home sales figures dropped by 2.8 percent last month to a seasonally adjusted annual rate of 588,000 units, which represents the slowest pace since early 1995.
For January, the median price of a new home fell to $216,000, representing a slump of 4.3 percent from the December median sales price. That was the lowest median price since September 2004 and highlighted that the steep slide in housing continues to be underway. US Housing market analysts surmise that housing activity will continue to further fall this early, as a large segment of mortgage foreclosures in effect, will dump more unsold homes on an already full market.
For January of 2008, the current inventory of unsold homes has dipped, but since the pace of sales activity slowed down as well, housing market observers think that the number of months it would take to consume the current inventory rose to 9.9 months, which represents the longest period ever in more than 26 years. January’s 2.8 percent drop in new home sales precluded even larger declines of 4 percent in December and 13.1 in November, and this showed weakness in most areas of the US, except the West, where the markets there saw sales increasing by 2.2 percent.
The oversupply of housing units is a tough concern to settle. However, the state and federal governments have been moving swiftly to contain the damage, and have been implementing measures to either cushion the effect on consumers and developers, or map out newer strategies to prevent future predicaments.
The Florida state legislature and the Governor himself are seriously discussing and finding ways to tackle the insurance and property taxes issues, and are finding viable solutions that would substantially reduce the property tax and insurance coverage woes that bedevil homeowners in Florida.
Vanessa Arellano Doctor
http://www.regatta2.com
FD-Condo-hotel-South-Beach Mar 24th 2008 5:04PM
Excellent article Vanessa.
As a real estate broker I will like to add something about the fact that real estate is local.
When somebody tells me that Miami real estate market is in crisis, I like to ask which part of Miami he is referring too.
You have some condos in Downtown, and even more Brickell which will greatly suffer from this crisis. I will not be surprised to see them down by 50% or even 60%.
But other places like the luxury condos in South Beach will not suffer that much and 10% to 15% discount is already a great deal.
My criteria will be the Ocean or Bay view, and then the quality of construction. I think that many buildings not in a prime location right in the water will loose a lot. But the nice buildings in a good location on the water will suffer but will come back quickly. We have so many people coming in Miami from other cities, other states, and other countries, with cash money, and they all want to live on the water.
So crisis yes, but with different intensities.
Good luck to all the deal hunters. They are some great deals out there.
Best regards.
FD @ http://www.condhotel.com (Condo Hotel South Beach)
robert Jul 19th 2008 9:03PM
Where can I find investors from Russia, for Florida's Real Estate Market? What publications or interenet sites can one advertize?