Miami Condo Priced Have Plummeted By Half In Past Year Though Sales Remain Steady
Written by Yudislaidy Fernandez on June 25, 2009
By Yudislaidy Fernandez
Miami condominiums continue to sell steadily but prices have endured a 50% drop in the past year.
Real estate analyst Jack McCabe projects an additional fall in prices of 10% to 15% in the months to come.
The median sale price for a Miami-Dade condo unit in May 2008 was $280,700, a price that has fallen to $140,300 this May, according to a report released Tuesday by the Florida Association of Realtors.
Peter Zalewski, principal of Bal Harbour-based consultancy Condo Vultures Realty, agrees with the report, saying units originally priced at $300 to $400 per square foot — which cost about $250 a square foot to build — are now selling for $200 a square foot.
He noted a deal recently reached at 570-unit 1060 Brickell, where he said an investor bought 31 units at $203 per square foot.
"Who would have thought you could?" he said. "But it’s happening."
Miami-Dade’s condo market’s sales rose to 571 in May, 151 more sold than in May 2008, when the figure was 420.
Condo prices dropped most in Orlando, 60%, and 55% in Fort Pierce, the report says.
Mr. Zalewski says in the downtown Miami and Brickell areas about 30,000 units exist, of which about 10,000 are in the hands of the developers and about 2,500 are marketed as re-sales.
"When you look at that, about 37% of the market is for sale, and a healthy market is at about 10%," he said.
In 2007, 2,677 new condo units were finished in downtown and Brickell, adding to existing inventory. That inventory rose 12,395 units in 2008, according to the Official Condo Buyers Guide.
The drastic drop in condo prices is a sign of the depressed residential market, said Mr. McCabe, chief executive of Deerfield Beach-based McCabe Research & Consulting.
Prices aren’t going up despite the increase in sales because of the rollercoaster ride the market has taken in recent years, he said.
"The reason why we are seeing that is because we went from a normal to an artificial to now a distressed market," he said.
Prices of single-family homes in Miami-Dade also dropped 39% in May from May 2008 despite the increase in homes sold, the state’s realtors report shows.
Single-home prices dropped to a median sales price of $194,700 in May from the $320,900 median reached in May of last year, the report says.
Sales of single-family homes rose 76%, with 597 sales reported in May, 258 more than the 339 sold in May 2008.
But the quality of the investors looking to buy is improving, with more long-term real estate investors and first-time homebuyers entering the market, Mr. McCabe says.
Many investors are buying condo units for cash because they can buy them at a low price and rent them out, "earning a positive cash flow," he said.
First-time homebuyers are also taking advantage of an $8,000 first-time buyer tax credit, which runs out at the end of November, he added.
Mr. McCabe says the worst is over but he forecasts residential prices dropping another 10% to 15% because the biggest wave of foreclosures hasn’t hit yet.
With the unemployment rate rising, more foreclosure filings should be expected as more people lose their jobs, he said.
The foreclosure process is also taking much longer, about one to two years, as more foreclosures are filed.
About 60% of the properties selling are auction, short sales or foreclosures, he said.
Prices are going to hit bottom and remain there for about a year and a half, he said.
But he hopes by 2012 to see a brighter, more stable real estate market, he said, as foreclosures are weeded out and the market sees an upswing in prices and sales.