In 2012, the housing market saw a switch from a buyers’ market to a sellers’ market. Since 2012, nearly 13,900 pre-construction condos have been brought to market east of Interstate 95. Most of these developments are in Miami and the Beaches, the remaining are in east Broward, and to date none are in Palm Beach.
ISG World took a 10-year sample of condo sales in the South Florida market, and the conclusion illustrates that 4,483 condo units were sold on average annually from 2004-2013 east of I-95 in Miami, the Beaches, Fort Lauderdale and Palm Beach. At the current pace of sales in today’s market, there are approximately 18 months of inventory in the pipeline. Reports that there is an oversupply of condos being brought to market needs to be put to rest.
The “Days on the Market” chart shown provides further evidence of the strength from the demand side and the dearth of supply that can be easily seen in the MLS inventory. For example, during a study, ISG looked at newer condos that were built in the past 10 years east of I-95. Our firm concluded that the “for sale” inventory was at a historic low, and, consequently, prices are rising, with the spread between the listing prices and the accepted contract prices narrowing 2 percent to 3 percent, on average.
The demand of today’s market is unique, unlike any other cycle we have witnessed. Most developers and real estate brokers selling preconstruction condos speak with ease about the strong demand from South America and the political, financial, and lifestyle motivations of these buyers. In the past, markets from Latin America have consisted of two or three countries purchasing. For the first time, however, we are observing buyers from more countries in South America, including in Brazil, Argentina, Peru, Colombia and Venezuela. These buyers have continued to hold strong since 2013, providing deposits of 50 percent and more for new condo development.
Real demand is not only measured by second-home buyers or investors from Latin America; it is also be measured by people moving from other U.S. markets to Florida and by the growing population of families within the Sunshine State.
In 2006, according to U.S. Census Bureau, the U.S. population reached 300 million. That year, they projected that by 2014, the population would reach 317 million — which is where we are today. By 2020, the population is projected to reach 336 million, and by 2040, upward of 400 million.
In the past 20 years, Florida has ranked fourth in total population behind California, Texas and New York. Most demographers agree that this ranking will change by next year when Florida’s total population is projected to reach 19.6 million, thus passing New York’s population of 19.3 million. In fact, New York’s population, along with those of most of the northern states, will begin to level off. Meanwhile, Florida, Texas and California are projected to continue to grow significantly in the foreseeable future.
Craig Studnicky, co-founder and principal at ISG World, can be reached at CraigS@isgworld.com.
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Preconstruction developments brought to market since 2012
The following is a breakdown of preconstruction developments brought to market since 2012 east of I-95 and the frequency of sales:
Source: ISG World