Study Says Miami's Condo Market Losing Money, Could Be in Bad Shape

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Real estate is the heart of Miami's economy. In the past four years, more than 3,000 condo units have been built, and a whopping 11,000 are slated to finish construction by 2018. It might seem an insane proposition to sell 14,000 new luxury condos in six years, and it appears market experts agree. Real-estate analysts have been saying for months that Miami's condo market is headed for a nosedive, and a study released yesterday suggests the Magic City might already be in that slide.

Real-estate expert Andrew Stearns released a study yesterday that suggests, yet again, that demand for luxury condos in Miami could be hitting its breaking point. Though there were more than 700 post-2012 "preconstruction" condos on the market in August, Stearns reported that only eight of them had sold. And all of them lost money on the sale.

"There appears to be something going on," Stearns said via phone.

("Preconstruction," of course, means the condos haven't been built yet.)

According to Stearns' figures, seven of the eight sales lost money outright. When you account for developer fees, "association contributions," and other costs, he said, the eighth condo lost money too:
Stearns' website, StatFunding.com, has been compiling data all year. This past May 5, Stearns reported that Miami's condo market might be hitting an "inflection point," wherein there are simply too many new condos, and people trying to resell even 1- or 2-year-old condos will be selling them at "significant losses."

"At [the] current rate of sales, there is over 10 years of inventory of recently completed condo projects due to lack of sales activity," he wrote. "If current sales trends continue, in the next 24 months there will be over 57 years of inventory of newly completed condos on the resale market."

This, he said, would then cause spillover problems with Miami's rental market. In the next 24 months, he wrote, "rents will likely tumble as preconstruction buyers unwilling to take losses on their condos flood the rental market with new units."
For yesterday's study, Stearns said it was important to separate condos built before 2012 and condos built after that. Newer condos, he said, tend to get bought up by wealthy investors from other countries.

"It's two distinct markets, the existing resale before 2012 and post-2012 stuff," he said. "The pre-2012 buyers might be more realistic. But the post-2012 buyers are different. They were buying when America was in distress, and flooding Miami with investment."

This past August, the Miami Downtown Development Authority reported that condo prices downtown fell precipitously for the first time in five years. Perhaps it's time to prepare for winter.

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