South Florida has experienced its worst winter buying season for condo and townhouse resale transactions in the past four years in the tricounty region of Miami-Dade, Broward and Palm Beach.
A number of factors, including overly optimistic sellers, rich pricing expectations and widespread competition from preconstruction projects, contributed to the unexpected year-over-year drop in condo and townhouse transactions in South Florida during the historically strong winter months when out-of-towners escape to the region for the weather, events and nightlife.
In the recently concluded South Florida winter buying season stretching from November 2013 through April 2014, purchasers acquired fewer than 24,215 condo and townhouse resales, representing a 6 percent decrease from the nearly 25,700 unit transactions that occurred during the same six-month period in 2012-13, according to data from the Southeast Florida MLXchange.
A year earlier, in the 2011-12 winter buying season, buyers acquired at least 24,400 condos and townhouses in South Florida.
Before the 2013-14 winter buying season, the last time fewer condos and townhouses transacted in South Florida was near the bottom of the real estate market crash in 2009-10. That year fewer than 21,275 units traded in the region, according to the data.
The decrease in condo and townhouse resale transactions was experienced in all three counties of South Florida.
Miami-Dade experienced a 5 percent drop year-over-year in the number of condo and townhouse transactions in the winter buying season of 2013-14 with fewer than 8,650 units trading.
Broward suffered a 7 percent drop year-over-year in the number of condo and townhouse transactions in the 2013-14 winter buying season as fewer than 8,365 units traded.
Palm Beach realized a 5 percent drop year-over-year based on fewer than 7,215 condo and townhouses transactions in the 2013-14 winter buying season.
The decrease in condo and townhouse transactions in the tricounty region this past winter comes at a time when average resale prices are reaching their highest levels in years in South Florida.
During the 2013-14 winter buying seasons, South Florida condos and townhouses sold at an average price of about $189 per square foot. In previous winter buying seasons, units sold for an average price per square foot of about $153 in 2012-13, $135 in 2011-12 and $118 in 2010-11.
Even with the recent run-up, today’s prices still lag behind the more than $260 per square foot average achieved at the peak of the last South Florida real estate boom — the winter buying season of 2005-06.
News of the rising resale prices in South Florida has contributed to a cycle in which an increasing number of unit owners want to sell their condos and townhouses at prices that are higher than those levels currently being achieved in today’s tricounty market.
For example, the current average asking price for a South Florida condo and townhouse is nearly $315 per square foot, a 66 percent increase over the average price during the recently completed winter buying season, according to the data.
Compare this rich asking price with the $178 per-square-foot average listing price for those condos and townhouses currently under contract and waiting to transact, according to the data.
Despite the price premiums being sought by sellers, South Florida still has a relatively healthy amount of condo and townhouse inventory on the resale market.
As of May 20, fewer than 24,350 condos and townhouses are listed for resale in South Florida. This amount of units listed for resale represents about six months of available inventory based on the more than 4,035 condo and townhouse transactions that occurred during the recently completed winter buying season.
A healthy real estate market typically has about six months of available inventory. Inventory levels that are greater typically suggest a buyer’s market while lesser levels represent a seller’s market. It is unclear going into the summer months whether South Florida’s condo and townhouse resales will continue at their current pace or if more units will be listed.
Adding to this uncertainty, an increasing number of buyers are reportedly bypassing listings for existing condos and townhouses in favor of entering into contracts to purchase some of the nearly 31,000 new units proposed to be developed in South Florida.
As of May 20, developers are building — or have recently completed — more than 70 condo towers with nearly 8,000 units east of Interstate 95 in South Florida, according to the preconstruction condo projects website CraneSpotters.com. (For disclosure, my firm operates the website.)
The unanswered question going forward is whether the 2013-14 winter buying season is an anomaly or the beginning of a new trend in South Florida’s constantly changing condo and townhouse market.
Peter Zalewski is a principal with the real estate consultancy Condo Vultures. Zalewski is a licensed Florida real estate professional and founder of CVR Realty and Condo Vultures Realty. He also runs the preconstruction condo project site CraneSpotters.com in conjunction with the Miami Association of Realtors.