Florida Luxury Real Estate Market Showing Cracks

Oceanfront Demand is here to stay!

Reuters.com is a trusted source for businesses and professionals looking for industry expertise. An article came up yesterday regarding the South East Florida (Miami) market “Florida Luxury Home Market Showing Signs of Wear” Read Here. It goes on to talk about the influx of investors from Canada and Europe pouring their strong currencies into luxury properties and how Donald Trump lowered his Palm Beach mansion by 20% as housing woes now touch the wealthy.

“The surprisingly healthy market for oceanfront mansions and palatial condos in Florida, one of the most toxic states in America’s housing meltdown, may finally be showing some cracks.”

They go on to quote local Miami brokers and FAR (Florida Association of Realtors) sales figures relaying that Miami is overbuilt and overpriced for the United States… but really though, for a major metropolitan city with the Forbes vote on the cleanest City in America along with perfect 80 degree weather year round, I’d have to disagree on it being overpriced today. YES, overdeveloped and the market is and has been correcting itself with prices back to 2002 levels. DOWNTOWN MIAMI still has a lot of new inventory coming and not as desirable or in demand as the oceanfront luxury condos. Tourists, Baby Boomers, Foreign Investors and alike want what? OCEANFRONT. Enough said. There is a great selection of luxury condos in Miami available today along the Atlantic ocean but my figures show inventory going down each consecutive month since the 1st quarter 2008 along the Miami Dade oceanfront communities including Sunny Isles Beach, Bal HarbourNorth Bay Village, South Beach and Miami Beach.  

“The median price of Miami condos gained 6 percent last year while price declines of 25 percent or more were seen elsewhere in the state amid the U.S. mortgage crisis, soaring property taxes and hurricane insurance woes.”

Who is this coming from? Reuters, the trusted name for business news? I don’t think they’ve interviewed the right brokers here in Miami. My point is this…don’t buy into everything you read as Miami’s median price of condos did not gain Diddy last year, yet on the flip side, depreciated 6 to 10% in 2007 with an average oceanfront depreciation since 2005 (at peak) of -25%!

“Miami’s vast Atlantic Ocean and Biscayne Bay shoreline offers thousands of water view properties that have held their value better than cheaper houses and condos inland, where the foreclosure crisis has battered homeowners.”

Reuters finally got it correct here. There is a noted separation of demand from Miami Beach vs. Miami Dade inland. There is new inventory coming along the ocean that will suffer for the short run so don’t think I’m 100% optimistic. The last developments to deliver this year will probably get what the original speculator paid for the condos or less depending on timing, financial abilities and seller motivations. Specific to Sunny Isles Beach real estate, developments such as Trump Tower I, II and III, Trump Royale then Jade Beach and Jade Ocean are being released this year. Today at Trump Tower I there is 11% of inventory (29 out of 271 condos) for sale. There should be up to 20% of the total inventory on the market at each release so if we figure 300 total units per building times these six new luxury towers, there should be approximately 360 condos available with 5% of these at outstanding deals. More and more savvy investors are seeing that now is the time to buy as pending sales and closed inventory increases throughout each quarter.

“The high end is resilient,” Roffers said. “Certainly the market has corrected since the peak of 2005. What we are seeing is that quality waterfront inventory is holding value.” But many properties were quickly pulled from the auction when no one bid. And bargain hunters had an open field. One man, in short order, snapped up two bayfront houses in Miami Beach’s pricey Venetian Islands, one for $500,000 and the other for $1 million. The homes sold for $2.75 million and $2 million respectively in mid 2005, according to county records.

The Venetian Islands selling a single family home for $500,000? Show us the county records because I don’t find this sale anywhere. You CAN get something in the 900’s. Here are both MLS and private sales for the most recent closings on the Venetian Islands…

    Comparable Properties
    830 W DILIDO DR
    MIAMI BEACH , FL 33139-1154
    Lot: 13,407 sf

    Int. 3,734 sf
    Last Sale: $3,150,000 on 02/19/2008 ($843.60/sf) 3,734 sf
    MVR: 0.917 Market Value: $3,436,020 Yr. 1947
    302 S COCONUT LN
    MIAMI BEACH , FL 33139-5166
    Lot: 8,738 sf
    Int. 3,746 sf
    Last Sale: $3,125,000 on 02/05/2008 ($834.22/sf) 3,746 sf
    MVR: 1.090 Market Value: $2,867,973 Yr. 1985
    620 W DILIDO DR
    MIAMI BEACH , FL 33139-1158
    Lot: 10,497 sf
    Int. 3,499 sf
    Last Sale: $2,550,000 on 11/01/2007 ($728.78/sf) 3,499 sf
    MVR: 0.910 Market Value: $2,802,044 Yr. 1959
    1 PALM AVE
    MIAMI BEACH , FL 33139-5137
    Lot: 17,672 sf

    Int. 3,499 sf
    Last Sale: $3,695,000 on 11/30/2007 ($1,056.02/sf) 3,499 sf
    MVR: 1.380 Market Value: $2,678,474 Yr. 1957

But analyst Winston warns a “disaster” is coming soon, when thousands of new apartments in Miami receive their certificates of occupancy. “The disaster is really going to start to show its ugly head in the middle to end of this year,” he said. “As higher priced units come to closing, we think you will start to see 30 to 40 percent defaults.”

“Coming soon”… The disaster has been unfolding since 1Q 2006, especially in the inland Miami real estate market as it did in the 80’s when the Cocaine Cowboys fueled the condo boom of Brickell. This is true in most cases of new construction especially in Downtown Miami as buyer remorse sets in. What was a most opportune time in 2003 and 2004, turned to smoke and mirrors for the hopeful speculator looking to do a quick flip for a fast buck upon completion. Those days of the fast flip are over with as Miami regroups itself for the next potential boom after 2010. My outlook for Miami Beach is a slow & steady market improvement for the next 18 months with good deals and excellent value to be had at any time in between.

There are deals happening today and there will be deals happening in the summer months. All is dependant on your favorite location, then favorite building. Start watching the Live Miami MLS closely for new inventory in the brand new oceanfront luxury condo towers as 2 to 5 seller’s compete with pricing to get theirs sold first. The big picture is that oceanfront and prime waterfront areas are not likely to depreciate like the mainland of Miami but instead hold their value.

Sunny Isles condo inventory went from 1,664 JAN08 to 1,256 total condos today. Bal Harbour from 614 JAN08 to 383 today. North Bay Village condos went from 434 JAN08 to 404 total condos today. South Beach condo inventory went from 2,401 JAN08 to 1,999 total condos today while Miami Beach real estate has gone from 2,081 JAN08 total condos for sale to today 1,826. Insignificant Inventory Drop, YES. In the right direction for signs of market improvement, YES. Miami Beach is highly desirable, yet feared by the consumer with media glitz and glam painting disastrous Miami real estate news and not knowing how to lay it out correctly to the readers. Reuter’s reported both positive and negative in this news article yet it’s good agents studying stats and trends in this local market on a day to day to deliver it straight to the reader. I continually add to this Miami Beach real estate blog so if you’d like new updates once available, you can be notified by email (automatic) or by RSS feed (see upper right column) each time a new posting occurs.