REAL ESTATE/AHEAD OF THE DEAL

Peter Zalewski: South Florida condo prices still 15 percent off peak of last real estate cycle

 
 
Peter Zalewski
Peter Zalewski

Special to the Miami Herald

Despite a run-up in condo and townhouse resale activity in the past three years, the average price for a South Florida unit east of Interstate 95 is selling for about 15 percent less today than at the peak of the previous real estate cycle in 2006.

Between January and June of this year, buyers have acquired an average of about 1,911 condos and townhouses a month at an average price of about $298 per square foot in Miami-Dade, Broward and Palm Beach counties, according to data from the Southeast Florida MLXchange.

By comparison, buyers acquired about 1,068 units monthly at an average price of $352 per square foot in 2006.

The infusion of investment dollars from foreign buyers armed with strong currencies combined with luxury-oriented domestic buyers searching for value has turned the condo and townhouse resale market around in South Florida.

The record-high rental prices being achieved by landlords leasing out units east of Interstate 95 has also contributed to the strong investor demand for condos and townhouses in coastal South Florida.

The coastal Miami-Dade County market — where foreign nationals are the most active in South Florida — has experienced the greatest rebound in condo and townhouse resale prices.

The average condo and townhouse resale price in coastal Miami-Dade has fluctuated from $375 per square foot in 2006 down to $209 per square foot at the bottom of the market in 2009 before rebounding to $351 per square foot in 2014.

This represents an overall decrease of 6 percent in condo and townhouse resale prices in Miami-Dade in 2014 compared with 2006.

During the same period, condo and townhouse resales in coastal Broward — a market comprised of domestic buyers with some foreign investors — have fluctuated from an average of $307 per square foot in 2006 down to $151 per square foot at the bottom of the cycle in 2011 before rebounding to $201 per square foot in 2014.

The average condo and townhouse resale price in coastal Broward County in 2014 is down about 35 percent from the peak of the last cycle.

Palm Beach County’s condo and townhouse resale market — which is dominated by domestic buyers — has experienced the weakest recovery.

Condo and townhouse resales have dropped from an average price of $264 per square foot in 2006 to $137 per square at the bottom of the market in 2011. The average price for a condo resale in 2014 is about $165 per square foot, representing a 38 percent decrease from the peak in 2006.

Closer examination shows the condo and townhouse resale market’s recovery varies by areas within coastal South Florida.

Miami Beach is the only one of the seven largest coastal South Florida markets to have a higher average resale price in 2014 than at the peak in 2006.

This year, buyers have paid an average price of $512 per square foot for a condo and townhouse resale in Miami Beach. This average price represents a 7 percent increase above the year 2006 when condos and townhouses traded for $480 per square foot.

The bottom of the condo and townhouse resale market in Miami Beach was 2010 when buyers paid an average price of $325 per square foot.

The markets of Greater Downtown Miami and Sunny Isles Beach are both tied for second in terms of the next best performing condo and townhouse resale market with today’s average resale prices down only 2 percent from the peak levels.

In 2014, buyers have paid an average price of about $405 per square foot in greater downtown compared to $415 per square foot in 2006.

At the bottom of the market in 2009, condo and townhouse resale units traded at an average of $218 per square foot in greater downtown Miami.

In Sunny Isles Beach, buyers have paid an average price of $428 per square foot for a condo and townhouse resale in the first half of 2014 compared to $435 per square foot in 2006.

The bottom of the Sunny Isles Beach condo market was 2009 when condo and townhouse resales traded at an average of $230 per square foot.

As the coastal condo and townhouse market in Miami-Dade County has recovered back to nearly 2006 price levels, the climate is dramatically different in the other four major coastal condo markets in South Florida.

The worst-performing condo and townhouse resale market is Downtown West Palm Beach, where the average condo resale price in 2014 is still down more than 42 percent from the peak levels.

Buyers have paid an average price of about $241 per square foot in Downtown West Palm Beach in the first half of 2014. Back in 2006, condo resale units transacted at an average price of $416 per square foot.

The next worst South Florida coastal market is Boca Raton-Deerfield Beach, where today’s prices are down an average of 39 percent from 2006.

In 2014, buyers have paid an average price of $234 per square foot in the Boca Raton-Deerfield Beach market. At the peak, the average condo and townhouse resale unit traded for $383 per square foot.

Prices in the Hollywood-Hallandale Beach condo market in Southeast Broward County are down an average of 34 percent in 2014 from 2006.

Condo and townhouse resale units have traded at an average price of $198 per square foot in Hollywood-Hallandale Beach in the first half of 2014. By comparison, buyers paid an average price of $298 per square foot in 2006.

Downtown Fort Lauderdale and the Beach represents the median market for recovery in the coastal South Florida region. The average resale price today for a condo and townhouse in the Downtown Fort Lauderdale and Beach market is down 23 percent from the peak. In 2014, buyers have paid an average price of $291 per square foot in the Downtown Fort Lauderdale and Beach market. Compare this to 2006 when units traded at an average price of $377 per square foot.

It is impossible to predict the future of the coastal condo and townhouse resale market, but at least one indicator — the supply of units available for purchase — suggests an overall improvement is underway in South Florida. The coastal tricounty region currently has about 7.3 months of condo and townhouse resale supply actively being marketed for purchase.

The best-positioned market is Palm Beach County with 5.4 months of condo and townhouse inventory available, and the worst market is Miami-Dade with 8.9 months of condo and townhouse inventory. Broward has about 6.5 months of condo and townhouse resale inventory available for purchase.

A healthy condo and townhouse market typically has about six months of units available for resale. A market with fewer months of inventory is considered a seller’s market while more months of supply suggest a buyer’s market.

The unanswered question going forward is whether the region’s condo and townhouse resale prices will continue to improve as developers move forward with plans to build more than 250 new condo towers with nearly 35,000 units east of Interstate 95 during this newest cycle.

Peter Zalewski is a principal with the Miami real estate consultancy Condo Vultures. Zalewski also runs the preconstruction condo project website CraneSpotters.com in conjunction with the Miami Association of Realtors.

Read more Real Estate News stories from the Miami Herald

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