Demand cools for Miami-Dade’s coastal condos, a year after deadly high-rise collapse
Ashley Wilson traded the Bronx for Miami Beach in 2020 during the first year of the pandemic. After renting in Mid Beach, Wilson and her two children were sold on South Florida and she decided to look for a home to buy.
The thought of beachfront living appealed to Wilson, who works as a real estate agent with North Bay Village-based Ancona Real Estate. Then, on the same day last year Wilson turned 32 — June 24, 2021 — the unthinkable occurred in Surfside that caused her to change her mind on a waterfront home.
Half of the 12-story Champlain Towers South condominium collapsed, in one of the worst building collapses in U.S. history. The Surfside tragedy took the lives of 98 people. Only a few survived. Over a year later, questions remain about the definitive cause. Federal investigators continue to study the condo collapse and expect to have answers by 2024.
“Since there have been no answers of what happened, it makes you side-eye the waterfront buildings,” Wilson said in a recent interview. “It’s not for me.”
Other prospective buyers also have second-guessed the Miami-Dade coastal condo market, in the aftermath of last summer’s horror that drew international media coverage. Sales and prices dropped along the coastline during the first half of this year, the first indication of the effect of the condo tower collapse on the real estate market.
Total condo sales fell by 1% in coastal communities, when comparing data from January through June 2022 to the same period of 2021, according to figures from the Multiple Listing Service and Miami real estate consultancy firm Condo Vultures Realty LLC. Fisher Island, Miami Beach, Surfside, Bal Harbour and Sunny Isles Beach recorded 3,077 condo sales in the first half of this year, down from 3,119 closings at midyear 2021.
Median condo sales prices also dipped 1% in the same coastal areas, to $520,000 from $525,000 the prior year. However, condo closings along the coast during the first half of this year still remained higher than Miami-Dade County’s median condo price of $410,000 in June.
Among the coastal communities, condo buyers showed great hesitancy about buying in Surfside, where the condo tower fell down. The beachside town had 62 condo sales this year as of June 30, or 41% fewer than the 105 sales a year ago. Only Fisher Island, a small enclave that’s one of the wealthiest communities in the nation, experienced a bigger condo sales decline of 46% in the same period, from 67 sales at midyear 2021 to 36 this year.
Age of condo buildings matter
Besides softening, the coastal condo market has changed in other ways over the past year, forcing consumers to learn more about the age and safety of properties before making a decision to buy or not. Also, with so many condo buildings along the Miami-Dade coast 10 years old or older, investors have been snapping them up thinking eventually they can make money, if entire aging properties are sold to developers who will build new luxury high-rises.
Ultimately, the ability for many white-collar professionals to work remotely from anywhere during the ongoing pandemic has served as a sort of safety net for the coastal condo market, and that work flexibility has boosted Miami-Dade’s housing market overall.
Champlain’s tragedy motivated luxury buyers to ask sharper questions, said Rejane de Paula, Realtor-associate with Circle Group Miami, an affiliated brokerage firm of Fortune International Realty.
“Buyers didn’t ask much before. Now, they want to see how is the structure and they want to see the structural reports. They back off from a contract if they are not satisfied with how a building is maintained,” de Paula said, adding that a building’s reserves for potential repairs also became a hot topic. “The more conservative with reserves, the better.”
Coastal condo market conditions have so far countered the doom-and-gloom forecasts in the days and weeks after the collapse in Surfside. Experts had reason to worry — many beachfront sellers resisted listing and buyers canceled contracts or walked away from talks.
Tight supply buffers market
Prospective condo buyers returned after two months. High demand and short supply — not just along the coast but in all of Miami-Dade — sustained the market, according to researchers at the University of Florida. Digital nomads, technology firms, corporate financial executives like Citadel CEO Ken Griffin and employees following corporate expansions here continued in 2022.
Bill Hughes, clinical professor and research director at the University of Florida’s Kelley A. Bergstrom Real Estate Center, has studied the effects of last year’s Surfside condo building collapse on South Florida’s real estate market with Fernando Mattar, assistant director of the University of Florida’s Warrington College of Business. Hughes and Mattar have analyzed condo sales volume and pricing in Miami-Dade, Broward and Palm Beach counties since September 2021 using data from Zillow, an online real estate marketplace.
“Buyers are willing to accept Surfside was a one-off outcome and they are confident that it’s not going to repeat itself,” Hughes said. “If the [condo] market was not as tight as it is, we would see a bigger reaction.”
Consider Benjamin Lavertu, 35, who wanted to get out of the South Beach rental market after he moved from Boston to Miami Beach in April 2021. He and most locals faced rent hikes over 50% since the start of the pandemic in spring of 2020, but some neighborhoods experienced far greater jumps. Miami Beach has had among the county’s biggest rent increases over the past two years — rents rose by 72%.
Lavertu started searching for a condo to buy, hoping to find one in South Beach with a balcony and proximity to the beach and parks. The condo collapse shortly after he moved here didn’t deter him from looking for a condo along the water.
“The building I was living in Boston was pushing 200 years old. I was used to that feeling,” Lavertu said. “Accidents happen, but [Surfside] felt random. It wasn’t a pattern.”
Lavertu finally found his new home in South Beach in November 2021. He bought an 800-square-foot one-bedroom in a high-rise built in 2002. His condo overlooks Biscayne Bay and has a balcony that’s “bigger than my living room in the Northeast.”
Fewer buyers for luxury condos
The luxury high-rise market — with prices over $1 million — in the coastal communities had 871 sales during the first half of this year, a 3% dip from 895 closings during the same stretch last year. In comparison, sales of condos priced below $1 million declined slightly year-over-year from 2,224 to 2,206.
Meanwhile, old condos on the county’s coast have outsold new ones for one of two reasons, real estate experts say. First, more buyers can afford to get a slice of direct waterfront and more square footage in an older condo property. For example, older beachfront condos had a median sale price of $380,000 during the first six months of 2022, or 73% less than the $1.4 million midpoint price in luxury condo inventory.
Secondly, investors are buying older condos since developers see opportunities to tear them down and rebuild the coastline. After Miami-Dade cracked down on maintenance of all condo buildings following last summer’s collapse, developers Mast Capital, Fortune International and Related swooped in to connect with condo owners living in buildings declared unsafe. Some owners hired brokers to find developers, preferring to take money and leave instead of facing renovations and higher condo association fees. Developers continue to shop around the coastline, seeking condo buyouts and proposing new condo projects.
“Investors are buying more in older buildings because of the condo buyout trend,” said Vivian Fernandez, a real estate agent with RE/MAX Advance Realty. “If the building has deferred maintenance, then developers will target it. These units sell for $500,000 or $700,000 each. The developer can still pay out the owners, tear it down and make money.”
Big challenges threaten condo sales
As the end of summer approaches, the sharp rise in interest rates through the year and heightened economic uncertainty present the biggest challenges to Miami-Dade’s coastal condo market.
Interest rates are nearly double from where they stood a year ago, pushing up mortgage rates. According to Freddie Mac, the average 30-year mortgage rate is now 5.55%, nearly twice as high as a year ago when the rate was 2.87%.
Economists predicted mortgage rates are going to increase more in the coming months, which would cut into condo buyers’ spending power.
“A lot of the buyers are from New York.,” de Paula said. “They feel like the market is going to have a correction.”
Peter Zalewski, a Condo Vultures principal, said other challenges loom that threaten the county’s coastal condo sales. In addition to higher interest rates and a possible recession, Zalewski said many condo owners and associations face higher property insurance costs and monthly maintenance fees, especially after new legislation requiring Florida condominium associations to begin fully funding reserves for significant upkeep and repairs.
“If you are on a tight budget,” Zalewski said of prospective condo buyers, “the prices could be catastrophic.”
Wilson, the New York transplant, continues renting in the Mid Beach section of Miami Beach. She has her fingers crossed that she’ll find a place soon to buy for around $850,000.
She wants to live in a duplex or quadplex in Biscayne Point, Normandy Isle or North Bay Village.
“Renters are at the mercy of the market. I decided I wanted to get out of the renters’ club for good and make money out of owning,” she said. “A part of me thinks I should wait a little while to see if the prices start to tumble, but if it’s right for me, then I’ll move on it now.”
This story was originally published August 28, 2022 at 4:30 AM.
