Miami Condo Bust Much Worse than Industry Numbers Show

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Condo prices plunge in granular data. 

Condo sales in Miami-Dade County have plunged. Condos on the market have surged. Supply has hit 14 months. Developers are sitting on completed units they can’t sell, and months’ supply in their projects has reached several years.

With this kind of supply-and-demand imbalance – sales down 25% from February 2014, inventory up 90% since early 2013 – you’d expect prices to head south. But the median price of condos in February, according to the Miami Association of Realtors, increased 6.3% year-over-year. This is the mystery we’ll shed some light on (chart by StatFunding):

StatFunding conducted an analysis of sales price per square foot in four condo projects with 2,634 units in Brickell, an area of Miami that is part of the “condo corridor.” These projects – 1050 & 1060 Brickell, Axis Brickell, Plaza Brickell, and Jade Brickell – are representative of the overall condo market. Turns out, per-square-foot prices in those four projects peaked in 2014 and 2015 and have since dropped between 10% and 16%.

So what’s going on?

One of the projects was completed in 2004, the other three in 2008. Hence there is a sales history. They’re “newer” and well-maintained projects in the aspiring-luxury and luxury categories of the market. Each project was built by a different developer (pricing data as of March 2017, based on the Multiple Listing Service (MLS) and the Miami-Dade Recorder).




The three projects completed in 2008 got caught up in the foreclosure crisis when these units were liquidated at prices as low as $200 a square foot. Whoever bought them at this price more than doubled their money by 2014! But that party has now ended.

1050 & 1060 Brickell (2008), “aspiring-luxury” category; two towers, none on the waterfront; 576 units, with studio, 1-bedroom, 2-story 1-bedroom loft, 2-bedroom, and 3-bedroom penthouse units; 55 units (9% of total) for sale on the MLS, or 26 months’ supply (25 units sold in 12 months). Average price per square foot (blue line) has dropped 16% since the peak in 2014.

In this particular project, studios, lofts, and units below the 14th floor were excluded. Here’s why:

The layout of the building is peculiar: The parking pedestal is shared by both towers, and the amenities and the pool deck are on the 12th floor. The units below the 12th floor are squeezed in leftover spaces of the project, and are almost all 1-bedroom 2-story lofts. Given their proximity to parking, they have a street-level feel, and according to Andrew Stearns, CEO of StatFunding, “the pricing on the units is all over the place and not representative of the project as a whole.”

Studios were excluded because the 1050/1060 is the only project of the four with studios, and there is no comparable data from the other projects.

Penthouses were excluded for all four projects since are all unique and sales don’t occur with enough frequency.

Axis Brickell (2008), aspiring-luxury category, two towers, neither on the waterfront; 718 units, with 1-bedroom, 2-bedroom, 3-bedroom, and penthouse units; 89 units (12% of total) listed for sale on the MLS, or 45 months’ supply (24 units sold in 12 months). The average price per square foot (excl. below 10th floor and penthouse units) has dropped 11% since the peak in 2014.

Plaza Brickell (2008), two towers, neither on the waterfront, aspiring-luxury category; 1,000 units, with 1-bedroom, 2-bedroom, 3-bedroom, and penthouse units. 84 units (8% of total) listed for sale, or 26 months’ supply (36 units sold in 12 months). Average price per square foot (excl. below 11th floor and penthouse units) has dropped 10% since the peak in 2014.

Jade Brickell (2004), waterfront luxury category; 340 units, with 1-bedroom, 2-bedroom, 3-bedroom, 4+ bedroom, “townhouse,” and penthouse units. Completed in the middle of the prior condo bubble, the project “became a hotbed of mortgage fraud and subsequent foreclosure activity.”

Currently 37 units (11% of total) are listed for sale, or 22 months’ supply (20 units sold in 12 months). The average price per square foot (excl. below 8th floor and penthouse units) has dropped 16% since the peak in 2015.

This chart shows the average sales price per square foot for all four projects’ averages combined:

Among the reasons prices have declined:

  • The strengthening dollar makes real estate more expensive for foreign purchasers, a big force in Miami.
  • Foreign purchasers could also be chased off by the efforts of the Treasury Department’s Financial Crimes Enforcement Network to target hotspots of money laundering in real estate, and cash sales in February plunged 18% year-over-year… How Much Money Laundering is Going On in the Housing Market? A Lot
  • The change in pricing momentum could be making prospective purchasers skittish.
  • New supply from the preconstruction condo boom that now too is running into trouble competes with existing condos.
  • The surge in resale inventory.

Why do the numbers not add up? But they do add up

Why do these price declines not show up in the median prices published by the Miami Association of Realtors? Stearns explained:

The realtor’s aggregate data is flawed because from 2009-2016 the data was full of sub $150k sales of bombed-out foreclosure borderline worthless properties – and those properties have worked their way through the system and are the weak comps that make the reported year-over-year average or median gains “true” but entirely meaningless.

So the median price is up 6.3% year-over-year, but it’s meaningless because the prior-year data was pushed down by nearly worthless foreclosed old condos working their way through the process. These units are still not totally gone (Miami Realtors Association lists them as under $50,000 on page 8 of its report).

The consequences when Realtor-published data shows median prices are rising though in reality prices of good condos are declining? Stearns:

What is driving real estate agents crazy is that the local and national real estate associations keep on putting rosy reports out there saying “prices up 7% this month, etc.” but then the agent has to explain to their client that the pricing in their condo building is actually down 20% over the last 18 months with a 5-year supply of units listed for sale.

Most people who make the decision to sell cannot wait five years to find a buyer, which means they have to price the unit at the low end of the market to get their unit sold, which explains a lot about why prices are falling in this market with surging inventory.

The rosy reports might be true in the aggregate, but they mask the distress in certain segments of the market, which makes for painful conversations between real estate agents and their clients.

Miami-Dade’s spectacular condo flipping mania is once again in turmoil. Read… Condo Flippers in Miami-Dade Left Twisting in the Wind




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  36 comments for “Miami Condo Bust Much Worse than Industry Numbers Show

  1. mean chicken
    Apr 3, 2017 at 5:13 pm

    The FED saved the economy with their monetary policy! Oh wait, no, they rescued special interest groups from being wiped out….

    Mission Accomplished!

  2. Jungle Jim
    Apr 3, 2017 at 5:17 pm

    It’s hard to work up any real sympathy for the developers. You’d think they would have learned by now. These crashes are more the rule in Miami than the exception. The first one was in the late 1920s and they’ve recurred ever since. The first talking movie the Marx Brothers did was Coconuts which was a send up on Miami real estate. Idiots !

    • Michael Fiorillo
      Apr 4, 2017 at 10:58 am

      “You can even get stucco! Boy, can you get stucco!”

      You’d think Groucho would have learned that lesson, but he lost much of his fortune in the stock market crash of ’29.

  3. tk
    Apr 3, 2017 at 6:34 pm

    A new start-up in San Francisco is renting out bunk space from empty high end condos.
    The article stated that currently twenty two thousand high end condos are sitting on the market,with more condos on the way.
    The article was from a site named—sfist…

  4. Gershon
    Apr 3, 2017 at 6:36 pm

    Maybe letting a criminal private banking cartel handle our money issuance wasn’t such a hot idea after all.

  5. deploy plunge protection team
    Apr 3, 2017 at 6:42 pm

    surely all those northern retired gov’t employees on their multi million Cadillac pensions will soak up all that excess inventory,or simply sec 8 the mofo’s,miami’s homeless rate is off the charts or maybe the fed will ppt condo’s,shoot, ppt the crap outta everything

  6. George McDuffee
    Apr 3, 2017 at 6:53 pm

    Will someone please tell us again how “free” money, deregulation, and “the market” are going to solve all our problems.

    • Your Good Friend
      Apr 3, 2017 at 7:15 pm

      Given the fact government interference distorted housing beyond all recognition resulting in suspension of market forces, it is the market that will correct it.

      Remember my good friend…… Nothing accelerates the economy, creates jobs and raises the standard of living like falling prices to dramatically lower and more affordable levels. Nothing.

    • JZ
      Apr 3, 2017 at 7:22 pm

      Easy, if the market were truly free, where everybody pay for their mistakes, house prices now would be close to zero since without the 2009 bailout and followed QE, ZIRP, the swamp would have been drained.
      Yes it would be painful, very very painful but a true market would have cleaned up all the sins.

    • Gershon
      Apr 3, 2017 at 7:38 pm

      The Federal Reserve was not created to solve your problems. It was created to be the oligarchy’s chief instrument of plunder against the 99%, which means you. The only “problem” left to be solved is that not all wealth and power has been concentrated in the greedy hands of a corrupt and venal .1% in the financial sector…but the Fed is most assuredly working flat out to fix that “problem.”

      Read “The Creature from Jekyll Island” for the true story of how the robber barons of 1913 formed the Federal Reserve and perpetrated the greatest swindle in American history against the middle and working classes.

      • Curious Cat
        Apr 3, 2017 at 8:28 pm

        An outstanding read. The first time I read it (5 or 6 years ago) I thought it was pure bullshit. Second reading a few years later was enlightening in view of the clear evidence of the Fed’s penchant to bail out the banks and ignore everyone else. If Trump were to deal successfully with the Fed he might end up the greatest president of the 20th century in spite of all his Tweets.

        • Apr 3, 2017 at 8:49 pm

          Only Congress can “deal successfully” with the Fed. Trump gets to appoint some people to some jobs at the Fed, that’s it.

        • JZ
          Apr 3, 2017 at 8:54 pm

          If there are enough people to shout at congress to shut down the fed, it will get shut down. But the sheeple were told that without the fed, there willl be no job, banks will go away and all savings will be gone, property prices go zero. Then people stop shouting and go home, trying to figure out what assets to buy.

      • xhidarta
        Apr 3, 2017 at 11:07 pm

        I didn’t read “The Creature…” don’t have time unfortunately but read enough otherwise to agree 100% with you Gershon. I reckon that it won’t take anything short of a bloody revolution to kill the Fed but that probability hovers around zero and nill. Second best option: a Gral Jackson type crossing the Potomac, taking the WH and cleaning the “nest of vipers”. Not gonna happen either. I’m afraid that the end of the luciferian cabal ensconced in the Eccles Bldng will come no sooner than at the very end of industrial civilization. kinda bit too late.

        • Gershon
          Apr 4, 2017 at 6:53 am

          Xhidarta, the last thing we need is a “bloody revolution” or violence of any sort. What we really need is for the sheeple to wake up, realize how badly they’re being scammed by The Powers that Be, and to then start acting like responsible citizens of the republic instead of mindless herd creatures.

        • JZ
          Apr 4, 2017 at 11:01 am

          The sheeple are sheeple because of their nature. They don’t wake up. For those who do wake up, there will be no more financial tricks. There will be true suppressions in violence form. Then revolutions follow.
          It all happened 300 years ago when the founders of America left U.K. because UK tax them too much, something like half.

          Nowadays US of A are taxing close to that number if you count federal, state, property, sales…

  7. Gershon
    Apr 3, 2017 at 9:10 pm

    Dr. Ron Paul fought a lonely battle to audit the Fed – which almost certainly would’ve exposed all manner of financial chicanery – and then shut it down. But he only got five percent of the vote in 2008, as the sheeple bent over for Wall Street by voting for “hope n’ change Goldman Sachs can believe in” or the even more repugnant GOP “alternative,” John McCain.

    Now the Fed and its central banker partners in crime have made the inevitable financial reckoning day orders of magnitude worse with their “extend and pretend” since 2008. And the slack-jawed ‘Murican electorate who voted for the crony capitalist status quo in 2008 and 2012 are going to reap the full consequences of failing to rein in the Keynesian fraudsters at the Fed before it was too late.

  8. Runoff
    Apr 3, 2017 at 11:08 pm

    Nice stats, analysis. It’s funny you can’t get this in the main stream media. Can you post us something on southern California?

    So. Cal was the epicenter of the last bubble and if the So. California market is stable then that implies that Florida has its own unique problems.

    • Apr 3, 2017 at 11:29 pm

      I would love to post this sort of data on the Southland or any market in CA. But I don’t know anyone who gathers this data. The industry doesn’t because it is not interested in seeing this get out. So it would have to be someone else.

      So if anyone among our readers knows who gathers this sort of data on other markets, please let me know.

      • Jon
        Apr 3, 2017 at 11:38 pm

        Good website for socal is

        http://www.doctorhousingbubble.com

        Real estate in socal is crazy now…

        • Your Good Friend
          Apr 4, 2017 at 7:03 pm

          We know about that has-been echo chamber. its a blog loaded full of realtors and underwater homedebtors and other assorted degenerate gamblers.

      • Wilbur58
        Apr 4, 2017 at 10:09 pm

        Wolf,

        You would definitely want to get in touch with Mark Hanson:

        http://www.mhanson.com

        He’s got all the data you need.

        • Apr 4, 2017 at 11:21 pm

          I’m on his email list, follow him on twitter, and read his site. His data is good, but as far as I’ve seen, it doesn’t fill that particular slot I was talking about.

  9. Jon
    Apr 4, 2017 at 7:17 pm

    when would be a good time to buy a condo in miami ? after 50% off in prices ?

    • Your Good Friend
      Apr 4, 2017 at 8:27 pm

      Figure no higher than construction cost for a condo($40/sq ft) and adjust down for depreciation.

      • chris Hauser
        Apr 4, 2017 at 9:35 pm

        i’d like to hire the fellows who can build at 40/ft

        and the verdict is: more sellers than buyers.

        • Your Good Friend
          Apr 4, 2017 at 10:14 pm

          Anyone that knows what they’re doing can and do.

          Record number of housing units, record low demand.

  10. LeClerc
    Apr 6, 2017 at 1:16 pm

    What happens to all these condo buildings when frequent climate-related flooding happens?

    At what point does flood risk make them uninsurable?

    • madras
      Apr 6, 2017 at 2:13 pm

      Like shopping malls, they will make excellent places for paint ball arcades and to shoot horror films.

  11. MC
    Apr 6, 2017 at 2:30 pm

    This is really great information. As someone in NYC that didn’t have the cash in 2011, I’m now sitting on a couple hundred grand and it appears this cycle in Miami will be worse than the last one, which makes it opportune (finally!) for buyers like myself. With crumbling infrastructure, brutally high taxes, and housing costs so high in NYC, I’ve long felt Miami is a good place to park money if the price is right. If I can pick up a newer condo, 2bdrm/2bath 1200-1400sf for $250k (which certainly seems realistic), I’m probably going to pounce. Whether others agree or not, the point is that there is a clear support level for Miami real estate. I’ve heard the same from others in my industry (that they would absolutely absorb some of this real estate in Miami) It just needs to drop 40% or so.

    • Your Good Friend
      Apr 6, 2017 at 8:49 pm

      You’ll lose your a$$ at that price. Most people do when it comes to housing but hey…. it’s your borrowed money.

    • Your Good Friend
      Apr 6, 2017 at 8:50 pm

      You’ll lose your azz at that price. Most people do when it comes to housing but hey…. it’s your borrowed money.

  12. Scott
    Apr 6, 2017 at 3:24 pm

    That’s what happens when you have a massive influx of dirty money from rogue Latino country’s and Russia. Miami is a dump, people are jerks, impolite scum bags, infrastructure buildout non existant because of the crooked banana republic politicians. Happy to see all those foreign “investors” having to pay their 2% real estate tax and $1500/month CAM sucking wind.

  13. Willy2
    Apr 6, 2017 at 5:07 pm

    – No, it actually doesn’t surprise me too much.
    – When 1st time home/condo buyers drop out of the market then prices will continue to go higher (for a while). It’s a result of the change in the “sales mix”. Then there’s more demand for high(er) priced real estate relative (!!!) to cheaper priced real estate. Because 1st time home/condo buyers rarely buy the most expensive real estate. And then – in spite of falling demand – the average price keeps rising (for a while).

    – But “organized real estate” uses those positive numbers to put a positive spin to the real estate story.

    – This change in sales mix is a clear sign the market is “cooling down” and headed for more “trouble”.

    Source:
    Mr. Ross Kay, canadian real estate agent (regularly interviewed by
    http://www.howestreet.com/

    • Your Good Friend
      Apr 6, 2017 at 8:51 pm

      A long winded way of saying……… Housing prices are falling.

Comments are closed.