The Real Deal Miami

Miami’s resi market isn’t busting, but tough times are ahead: Integra Realty Resources

Tightening development pipeline could be saving grace for Miami

June 07, 2016 04:30PM
By Sean Stewart-Muniz

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Night view of Brickell from the Brickell Key Bridge (Credit: EdoDodo)

Night view of Brickell from the Brickell Key Bridge (Credit: EdoDodo)

Lately, one question has permeated the minds of many in Miami’s real estate community: Is another bust on its way?

The answer is much more complicated than a simple “yes” or “no,” but as market analyst Anthony Graziano explained at a Tuesday morning discussion panel, you need not pack your bags and run for the hills — Miami is still going strong despite a significant sales slowdown in recent months.

Graziano is the senior managing director of research firm Integra Realty Resources, which has partnered with brokerage ONE Sotheby’s International Realty to put out a quarterly residential market report for the past two to three years.

At their Tuesday talk in the Brickell City Centre sales gallery, Graziano gave a candid summary of Miami’s residential market — both luxury and in general.

“2016 is going to feel like a one-legged marathon,” he said to a room of about 80 brokers.

Sales are down, listing inventory is up and sellers are still reaching for “aspirational” prices, which in turn is putting pressure on the market. For agents on the ground, all that means listings are likely to stay on the market for a little longer. “The question is ‘Are sellers going to get serious in 2016?’” he said.

Condo sales in particular were hurting because of a new wave of resales, though Graziano was quick to point out that trends for existing inventory don’t necessary translate for new development, and that newly built product typically outperforms what’s already on the market.

One key factor that does translate over is competition. Of the new condo buildings opening amid Miami’s recent building boom, Graziano said 20 percent to 40 percent are going right back up for sale, while an additional 20 to 40 percent are on the market for rentals.

Not only will pre-construction condos have to contend for buyers amid all this existing product, but unit owners who turn to renting will go up against the roughly 4,500 rental apartments now under construction in the downtown area.

“The bankers are getting really nervous,” he said, referencing developers’ difficulty seeking financing for their projects. “It’s going to be very hard to get a project out of the ground.”

Though the figures paint a gloomy picture, Graziano and his fellow speaker Fernando de Nunez y Lugones of ONE Sotheby’s made sure to point that a short-term sales slowdown doesn’t mean Miami’s residential market is crashing.

De Nunez gave a macro-economic perspective: for the luxury sector, ultra-high-net-worth buyers are complicated people who have asset portfolios they have to take into account before making a major purchase like a home.

If you look at the recent downturns in stock markets, commodities like oil and foreign currencies, their declines coincide perfectly with Miami’s residential sales slowdown, he said.

As for condos, fewer units in the pipeline means Miami has more time to digest the thousands of units now under construction.

“We are in a transition period now due to global economic conditions that cannot last forever,” Graziano said.

After Graziano and de Nunez wrapped their presentation, Stephen Owens, president of Swire Properties, which hosted the event, took the stage to give his take on the market’s condition.

Owens, who’s been through seven real estate cycles through his development career in Miami, said that this isn’t the first time Latin American currencies have devalued against the dollar.

“At the end of the day, there are other markets out there,” he said. “It’s still a very good value here.”

He also challenged recent media reports like the notorious Wall Street Journal article that connected a huge condo pipeline to a “looming” market bust in Miami.

“Us developers will announce anything,” Owens joked. “The difference is between what we announce and what we [actually] build.”

On top of that, he said the market slowdown is actually a good thing for Miami.

“This pause in the market is the most healthy thing that could’ve happened to us,” he said. “It’s a more healthy market than I’ve seen in Miami in a long time.”