Miami has a New Vice of bottom fishing for Miami condo bargains. New condo buyers from the U.S. and abroad are descending on Florida to buy condos that have suffered from depreciation along with the excessive inventory, subprime mortgage crisis and credit crunch. Some are searching for investment properties, confident today’s prices will eventually rebound. Others are hunting for vacation or retirement homes along the Atlantic Ocean.
In heavy hit Miami Dade County (Downtown Miami), condos originally costing as much as $1.4 million at the peak of the market now sell in some cases for $840,000, a 40 percent drop while Oceanfront Condos have dropped approximately 25 percent since 2005. Such price drops have people like Bruce and Suzanne Bowen, of San Juan, Puerto Rico, and fishing for deals. The Bowens have visited Miami three times since November to scout for properties, and recently bought a two bedroom, 1,200 square foot unit on a high floor with Biscayne Bay views in Miami’s fashionable Brickell district. Mr. Bowen made his move after prices in the building fell to $290 a square foot from nearly $400 in September.
Now, the couple is looking for a second condo.“We’ve been coming here for 10 or 12 years, and I know how much cheaper it is today,” says Mr. Bowen, a 46 year old banker. “I may miss the bottom by 10 percent or so, but five years from now, that will be irrelevant. The underlying fundamentals are still very strong here.”
Florida is a reflection of what’s happening across the country. As the price of condos which tend to be popular among investors, retirees and second home owners took a dive in many once hot markets, buyers are emerging to grab Miami properties very cheap. They’re finding plenty to choose from and driving hard bargaining power. Because of Florida’s perennial popularity among real estate investors and vacation and retirement home buyers and as young families have migrated there from other states many areas were flooded with great new projects in recent years. Now, amid the downturn, Florida condo sales are sharply down, off an average of 27 percent in 2007 from the year before, says Sean Snaith, an economist at Orlando’s University of Central Florida.Perhaps nowhere is the carnage as well as the opportunities and risks of condo bottom fishing more evident than in Downtown Miami real estate (Dade County), where about 2,391 condos are currently for sale, according to Multiple Listing Service statistics. Cranes line Downtown Miami’s skyline, and though several projects have been cancelled, new condo towers in various stages of completion rise up everywhere. By most estimates, 2,000 to 5,000 more condo units will become available over the next 18 to 24 months. Given that about 400 condos are sold in a typical year in the area, the supply overhang means prices may fall further. The result is apparent on Biscayne Boulevard, where four towers sidle against each other. Though the views, location and materials are all similar, two buildings Marina Blue and Ten Museum Park began construction prior to the hurricanes, and units there are priced today at roughly $400 a square foot. The other two 900 Biscayne Bay and the Marquis began going up after the hurricanes and are priced in the $600 per square foot range.
Another potential hazard for buyers is foreclosures. In some buildings, foreclosures represent as much as half the units, according to Florida’s Office of the Condominium Ombudsman. A high foreclosure rate means special assessments will likely be imposed on unit owners of remaining condos at some point to help pay for common maintenance costs. This will unexpectedly raise your cost of ownership. Moreover, foreclosed properties in South Florida tend to be priced near the mortgage amount. Given the run up in prices before the shakeout, that means foreclosure buyers could pay inflated prices at the auction block. A better approach is to simply wait for banks to reclaim property that doesn’t sell at the auction. You’re more likely to be able to negotiate a better bargain then as it hits the market at great pricing.
One crucial note buyer’s should be aware of are the differences in Miami Downtown vs. the Miami Beaches. With limited space and inventory along the Atlantic Ocean, there are not as many foreclosures as found on the mainland of Miami. Buyers with cash might expect 75 to 80 cents on the dollar on oceanfront condos in Sunny Isles and Miami Beach FL real estate. True, the inventory and selection on the ocean is excellent and there are plenty of deals to be had on oceanfront real estate, yet there is no blood bath found along the Beaches as we see in Downtown Miami. MLS Statistics show 2008 properties selling on average at 90 cents on the dollar. Notice the Bank United’s Black List did not contain one oceanfront property! My perspective is another 18 months of great Miami Oceanfront Deals. Take advantage of today’s low interest rates if you must finance, buy and hold as to time this market perfectly is a roll of the dice. To buy at the bottom and sell at the top is everyone’s desire but also an easy target to miss.
This article originated from the Wall Street Journal and the original article was written by Jeff Opdyke Sunday March 2, 2008. Feel free to add your insights and thoughts to this blog posting and make it a great day.