Since the 1980s, Miami residents have been able to judge their city's relative economic health by counting the number of cranes in the sky. More than ten? Congrats, the city is in the midst of a housing bubble. Zero? Recession.
Right now, the downtown Miami skyline is absolutely flooded with cranes, and it's impossible to drive more than ten blocks in any direction without hitting construction traffic. But a study released this week by the Miami Downtown Development Authority (DDA) might be the first hint that the city's latest construction boom is finally ending: Following five straight years of price hikes, downtown Miami condo resale prices have dropped 4 percent this year.
After the 2008 housing crisis evaporated much of the city's wealth, it's long been expected that foreign investors — many of them shady characters laundering dirty money away from their home countries — have been propping up the city's latest real-estate boom. As the Real Deal South Florida reported yesterday, more rental units will be built in Miami this year — 6,500-plus — than in any year since 1999.
Additionally, a whopping 11,000 condos are slated to be built across the county in the next two years.
According to the DDA, the greater downtown area might be reaching a point where it really can't sustain additional growth. (For the purposes of the study, "greater downtown" stretches from Brickell up to the Design District and includes Wynwood and Edgewater.)
Miami Downtown Development Authority
Through the first half of the year, "few projects continued to be announced and planned, and some observers and media continue to issue dire predictions as to the future of the downtown market," the study says. "However, most developers are taking a wait-and-see approach."
In essence, the price drop shows there have been so many new condos built over the past few years that investors simply have no need to buy old units. This is a problem, because gigantic condo towers are a bit harder to dispose of than last year's BMW X6. A city with no resale market means entire towers could end up empty in a few years' time.
"A review of monthly listings indicate[s] a large increase in the level of inventory offered for sale," the study says. As more condos get built, the DDA predicts that "resale pricing will adjust. This will likely continue if for-sale inventory remains at a level exceeding 2,500 units a month."
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(The study was also published before the Zika virus hit Wynwood, and it's unclear how, or if, the virus will damage the city's economy in the long run.)
Though the DDA expects things to "level off" as more condos are built, Miami doesn't exactly weather that whole "leveling off" period well. As famed cocaine importer Mickey Munday told Vice in February: This city is basically one gigantic pyramid scheme, centered around selling condos to an ever-increasing list of outside investors.
Granted, the study took only condo prices, not overall rents, into account. But until the city diversifies its talent pool and starts drawing in more high-earning millennials in science and technology jobs, building new towers is pretty much all we've got.