Concerns are rising that the Greater Downtown Miami condo resale market may be nearing — or already even passed — its peak for this current real estate cycle that began in 2011.
The growing pessimistic sentiment about the outlook of the Greater Downtown Miami resale market gained some statistical merit, of sorts, with the recent revelation that average resale prices and the number of condo resale transactions were both down in the first half of this year.
The drop in year-over-year resale prices and transactions comes at a time when about 17 months of condo supply — about three times the generally accepted level of balanced market — is already available for purchase in Greater Downtown Miami. Typically, more months of supply suggests a buyer’s advantage in a deal, and fewer months indicates a seller’s advantage.
It is impossible to know definitively if the area’s condo resale market is at its high-water mark for this cycle, but it is clearly worth monitoring in the upcoming months.
A review of the recent statistics shows that buyers purchased 986 condo resale units at an average price of $405 per square foot in Miami between January and June of this year, according to data from the Southeast Florida MLXchange.
By comparison, 1,037 condo resale units traded at an average price of $406 per square foot during the same six-month period in 2014, according to the data.
This is a sudden change from recent years in which the number of condo resale deals was falling as the average resale transaction price was rising on a trajectory to levels not seen since the peak of the last cycle in 2006.
Back then, the average condo resale units transacted a price of $420 per square foot, according to the data.
Now, both resale market indicators are headed downward in Greater Downtown Miami at a time when another South Florida preconstruction condo boom is underway, the global economy is slowing, and foreign currencies are weakening against the U.S. dollar.
Added to this: It is still unclear what impact the surprise move earlier this month by China — the world’s second-largest economy — to devalue its currency in hopes of jump-starting its slowing economy will have on the global markets in the months ahead.
Global markets are a key driver for the Miami market because some 85 percent of the condo purchases is done by international investors, according to a recent report by the Miami Downtown Development Authority.
International buyers who are willing to financially commit to putting down hefty 50 percent deposits on preconstruction units are the primary force behind the current condo boom underway in Greater Downtown Miami.
In the past four years, developers have announced plans to build at least 72 new condo towers with nearly 20,200 units in the Miami market that stretches from the Julia Tuttle Causeway south to the Rickenbacker Causeway, and Biscayne Bay west to Interstate 95, according to the preconstruction condo projects website CraneSpotters.com. (For disclosure, my firm operates the website.)
In Greater Downtown Miami to date, developers have already completed seven new condo towers with nearly 1,900 units and are currently constructing 21 more new condo towers with at least 5,300 units, according to the data.
An additional 44 new condo towers with nearly 13,000 units are in the planning or pre-sale phase of development.
For context, consider that developers created more than 22,000 new units during Greater Downtown Miami’s previous condo boom-bust cycle that stretched from 2003 to 2010, according to an analysis of Miami-Dade County records.
Despite growing concerns about the Greater Downtown Miami market on multiple fronts, the recent actions of some developers clearly show that a high level of optimism about the area’s growth prospects still exists.
For example, a West Palm Beach developer announced plans on Aug. 10 to build a new 57-story condo tower with 100 luxury units fronting Biscayne Bay in the Edgewater neighborhood.
A couple of days later on Aug. 12, a Miami developer was reportedly scheduled to hold a groundbreaking ceremony to formally initiate the construction of a new 45-story condo tower with 388 units that is also slated to be located in the Edgewater neighborhood.
The unanswered question going forward is whether the drop in the average condo resale price and unit transactions in the first half of this year is a statistical anomaly or a clear indicator that the market has changed in Greater Downtown Miami.
Peter Zalewski is a principal with the Miami real estate consultancy Condo Vultures. Zalewski, a licensed Florida real estate professional since 1995 and founder of CVR Realty and Condo Vultures Realty LLC, advises developers, lenders and institutional investors. Zalewski also runs the preconstruction condo project website CraneSpotters.com in conjunction with the Miami Association of Realtors.
Market stalls in first half of 2015
This is a year-over-year comparison of condo resale transactions in Greater Downtown Miami for the first six months of the year since 2006.
Year (Jan. to June)
Average unit resale price per square foot
SOURCE: CraneSpotters.com compiled this list with data from the Southeast Florida MLXchange.