South Florida condo market faces headwinds amid the new construction boom
08/22/2014 10:00 AM
08/22/2014 8:36 PM
Three years into South Florida’s impressive housing recovery, demand for existing condos is showing signs of sputtering, even as single-family home sales chalk up new highs.
Blame the condo headwinds on stiff competition from a wave of glittering new-condo construction that is remaking the skyline and cementing South Florida’s place as a magnet for foreign money.
Meanwhile, prices on existing condos have skyrocketed, making them less attractive to investors. And traditional homehunters face tough mortgage guidelines even more stringent for condos than for houses.
In Miami-Dade County, the volume of existing condo sales fell 8.8 percent in July to 1,403 units from 1,538 a year earlier; and they were down 2.8 percent from June, the Miami Association of Realtors said.
Year-over-year sales of existing condos in Miami-Dade have declined every month since February, though sometimes by small amounts.
“Condominium resales are being impacted by all of the new and pre-construction projects now being marketed,” Liza Mendez, chairman of the Miami Realtors, said in a statement. Total condo sales are actually higher when combining existing sales with new construction, she added.
“I believe the prices of existing inventory are catching up to the prices we are offering new inventory,” said Edgardo Defortuna, president of Miami-based Fortune International Realty, which is marketing 14 new condo projects. The cutting-edge amenities and the appeal of a brand new unit are a strong draw “for the buyer who doesn’t need the unit immediately,” he said.
Despite the increase in inventory, the median price of an existing condo in Miami-Dade rose 5.6 percent to $190,000 in July, up from $180,000 a year earlier and flat with June, the Realtors’ group said. While that marks solid gains, it’s far below the double-digit increases of recent years.
In Broward County, the picture is similar: year-over-year sales of existing condos flattened in October 2013 and fell eight of the last nine months. Sales of existing Broward condos dropped 7.1 percent in July to 1,420 closings and were down 5 percent from June levels, the Greater Fort Lauderdale Realtors.
The median price of an existing Broward condo rose 18 percent in July to $128,000 from $108,500, but fell 1.5 percent from June.
Ron Shuffield, president of EWM International Realty in Coral Gables, said the pullback by investors is clearly affecting the existing condo market. “Investors are feeling the prices have gotten a little higher than what they can justify for rental,” he said.
Grant Stern, president of Morningside Mortgage in Miami, concurred. “You’ve got a lot of price run-up for condos. The good deals have been plucked out of the market. So the value buyers have gotten a little shy. They’re on the sidelines.”
Cash sales of condos, which often signal investor purchases, dropped more than 16 percent in both Miami-Dade and Broward counties in July from a year earlier.
And it’s not just South Florida that is seeing the downshift in condo demand. Statewide, condo and townhouse sales fell 6.7 percent in July from a year earlier, Florida Realtors said Thursday.
In a statement, John Tuccillo, Florida Realtors’ chief economist, said the state’s housing market “is settling into a stable pattern,” singling out softer condo sales as “the only troubling area.”
Some slowdown in the existing condo market seems inevitable, given all the new competition. According to Cranespotters.com, a Miami-based firm that tracks the preconstruction condo market, 76 projects with 90 towers and 14,205 units are currently for sale. The mean price per square foot is $825.
Michael V. Smith, an agent with Fortune International Realty, said the spate of new condo towers launching one after another has an unreal air, reminiscent of the last boom that turned bust.
“It looks a lot like 2004 or 2005. I’m Miami’s biggest promoter, but you’ve got to step back and be realistic,” said Smith, who estimates he attends a fancy condo launch party every couple weeks. South Florida’s buyer-deposit model for new construction of condos — in which unit buyers typically put up 50 percent of the price in stages during development — “is the only reason I’m not completely freaked out,” Smith said.
The slowdown in the existing condo market also is evident in the pace of sales: Existing condos in Miami-Dade sold after a median of 59 days on the market, up from 45 days a year earlier.
The slowdown also showed up in prices. Condos sold at an average of 93.5 percent of the original listing price in July, down from 97.1 percent a year earlier, Miami Realtors said.
Meanwhile, buyers have a lot more to choose from. The inventory of existing condos listed for sale ballooned 30 percent to 10,986 units from 8,452 units in July 2013, the Miami Realtors said. That amounted to 7.8 months of supply, compared with six months of inventory a year ago. Broward’s existing condo inventory swelled to 7,986 units in July, a 33.5 percent spike from a year earlier and 5.9 months of supply.
Experts generally consider six months of supply — or six times monthly sales — to be a balanced market between buyers and sellers, with less than that tipping the balance toward sellers and more than that favoring buyers.
According to the recent numbers, South Florida’s existing single-family home market remained on a stronger footing.
Sales of existing single-family homes in Miami-Dade totaled 1,229 units in July — the same as levels a year ago, but down 4 percent from June. So far this year, the volume of single-family home sales are higher than they were in 2013, which was a record year, Miami Realtors said.
Prices remain strong. The median price of a single-family home in Miami-Dade rose 11.3 percent from a year earlier to $255,950 and was up 5 percent from June.
The inventory of existing single-family homes for sale in Miami-Dade rose 20.7 percent to 6,181 listings. That amounted to a 5.6 month supply, up from a tight 4.9 months of supply in July 2013.
With buyers enjoying more choices, single-family homes in Miami-Dade sat on the market slightly longer than last year but still sold at a healthy pace: The median number of days on the market increased to 43 days from 35 days in July 2013.
Charlette Seidel, manager of Coldwell Banker’s Coral Gables office, said sellers are still calling the shots on entry level homes in the $400,000 to $600,000 range. “Close-in city living is very popular,’’ Seidel said. “Houses are in great demand, and they’re not really building them anymore unless they are very expensive. There isn’t any land left.’’
In Broward, the median price of an existing single-family home rose 3.3 percent to $285,000 in July from a year earlier, according to the Greater Fort Lauderdale Realtors. Sales of single-family Broward homes increased 3.1 percent in July to 1,516 closings.
Luxury single-family homes continue to do well. Sales of Miami-Dade houses priced above $1 million increased 28 percent for the three months that ended in July, even as condo sales in that price range declined 8 percent, according to EWM’s Shuffield.
“We know with those choice locations — on the water, on the golf course — and the brand new homes, we could sell all we could get,’’ he said. The higher end of the market continues to be “very strong.’’
“People feel there is good value in million-dollar, single-family homes,’’ he said, noting South Florida has no more undeveloped land.
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