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N MIAMI CONDO NEWS — All About Condo Living in the Magic City — Edited by Heinz Dinter, PhD |
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Home sweet home? (2007-02-18) More buyers than ever choose to live in condos — but the year ahead for the market is uncertain. After two stints in Iraq as an Army sergeant, Robert Sures was delighted to come back to South Florida in the fall of 2005. Then he tried to buy a home. More than a year later, Sures is checking out condos every few weeks, but he’s “really afraid” about the cost and the risk of buying. “To spend that kind of money and worry the market is going to drop — I don’t know,” says Sures, now a party promoter in Hallandale Beach. “It is a horrible feeling.” Condos — the only kind of home many people can afford — are also the riskiest bet in the market, because there are so many of them and so many people gambling on them. Just how risky will start to become clear in 2007. This year and next, the biggest batch of condos born of the housing boom will come on the market. Their fate will help decide where the market goes and whether the rush to build was visionary or deluded. “This is the biggest expansion ever in the history of South Florida,” said real estate analyst Michael Cannon. “It has created enormous wealth but it has brought major challenges.” • • • Condos are overtaking houses as the standard home in South Florida. Condos made up about 44 percent of homes sold in 2006, according to a Miami Herald analysis. The condo share is even larger at lower prices: Condos made up 97 percent of homes for sale for less than $199,000 in December. But the condo market is in danger of choking on its own leftovers from the housing boom. The supply of available condos has tripled over the past year. There are now almost twice as many condos as single-family homes for sale in Miami-Dade and Broward counties. It will get worse before it gets better. More than 11,500 new condos are expected this year and 15,000 more next year, with the bulk coming to Miami-Dade. So far, sale prices have held more or less steady, but asking prices have declined. The average condo asking price in Miami-Dade went down 12 percent in 2006 to $532,000. In Broward, it dropped 11 percent to $354,000. Also, incentives are substituting for price cuts. For example, Fairfield Residential has offered to waive its developer fee, pay closing costs and give buyers $5,000 in new furniture at its Toscano condos in Dadeland. Peter Zalewski has compiled a database of properties that have seen a drop of $100,000 in asking prices or stayed on the market for 100 days. The single-spaced list now runs 27 pages. Zalewski launched CondoVultures.com last year in anticipation of a condo bust. “My goal is to help a buyer purchase a property at an attractive price from an unlucky or uneducated seller,” he says. The bottom line: If you’re planning to buy a condo, be prepared to keep it for three to five years. By 2010, most of the condos in the pipeline will be on the market, the worst should be over and prices may head up. Also, experts say, be most careful in less-established areas that are suddenly flooded with new condos. Zalewski expects a shakeout in Hollywood, Hallandale Beach and Sunny Isles Beach, and analysts predict condo prices may fall in areas such as the Biscayne corridor north of downtown Miami. • • • One big reason that condos are so risky is speculation. In throw-the-dice South Florida, speculators were drawn to condos like gamblers to casinos. The danger is that speculators — who bought in the hope of a quick profit — are more likely to walk away or to put their units right back on the market. Either move would add to the glut of condos for sale and possibly push prices down. The trouble is, nobody knows for sure how many buyers are speculators. If estimates are true that speculators were behind two-thirds of new condos coming onto the market this year, prices could indeed tumble. “There will be blood in the streets,” predicts Jack McCabe, a Deerfield Beach-based real estate analyst who advises investors betting on the market souring. “If I could describe this year’s market in one word, what would it be? Painful.” However, real estate analyst Cannon says reviews of condos completed in the past year show that speculators were no more than 30 percent of buyers. Cannon also argues that condos will be in demand because of South Florida’s shift toward a more urban lifestyle. “I am not calling a crash in 2007,” Cannon says. “The evidence is not there.” The Related Group — the Miami company that became the biggest condo builder in the nation during the boom — says it saw just 12 units cancelled out of 4,000 sold last year. Chairman Jorge Pérez predicts sales will stay slow and prices may drop, but he doesn’t see a major fall. “I think it is a transition year, the toughest of the years we have had in the last 10 years,” Pérez says. “My gut tells me that we will have an up market again starting a year to two years from now.” Location and price range also matter. That’s what Leon Wolfe of Cornerstone Group is banking on as he gets ready to close on a condo and town-home project of more than 300 units in Hollywood this summer. “Do I feel anxiety? Yeah, there is a fair amount,” said Wolfe, who is selling units for $250,000 to about $400,000. “But the Young Circle area of Hollywood, to me, is not an overbuilt market, and I feel comfortable because our prices are more affordable.” • • • For Sures, a condo barely seems worth the risk. He’s scouting for a place in the $100,000 to $250,000 range in Hollywood and Pembroke Pines. But so far, he has found only disappointment: Either the price is way too high, or the condo needs so much work that he can’t afford it. He’s toying with leaving South Florida altogether. “Last night, I was on the computer looking at prices in North Carolina,” Sures said. “My sister moved there not too long ago. But I don’t have a job there. I don’t know what to do.” Source: www.MiamiHerald.com • Matthew Haggman, mhaggman@MiamiHerald.com
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