Miami condo market consultant and investor Peter Zalewski offered a dose of reality to viewers of The Real Deal’s webinar series.
“Many of you have been talking up the market. The day of reckoning is coming,” he said during Wednesday’s episode of TRD Talks with Editor-in-Chief and CEO Stuart Elliott. “You’ve got a bunch of people looking to take down stuff, and they’re not going to be nice, and they’re not going to pay you what you think it’s worth.”
Zalewski, a principal at Condo Vultures, founder of CraneSpotters and former TRD columnist, predicts condo pricing will fall and undeveloped land will be worth virtually nothing.
During the last recession, developers sold their sites for 10 cents to 20 cents on the dollar. He joked that there are only so many Wynwood Yards or Wharfs (referring to The Wharf Miami) where property owners can bring in food trucks to generate income.
“If I could short, I’d short the shit out of Wynwood,” he said. The next hustle, he added, would be to invest in Allapattah, Little Haiti and Little Havana.
Also unlike the last recession, developers and agents should now be worried that foreign buyers won’t want to pull the trigger. “Under the current immigration climate, some people don’t feel welcome, therefore they’re on the sidelines,” he said.
There are about nine months of condo supply and nearly four months of rental supply in the areas that Zalewski tracks, typically east of I-95 in Miami-Dade County. He pointed to the state of the market before coronavirus and local governments shut down most businesses. “The trajectory wasn’t good. There was a short runway even before Covid hit,” he said.
Now, inventory could grow, as sellers, plagued by monthly association fees, look to cut their losses. Larger units will be harder to sell.
But unlike the last economic crash, most developers aren’t sitting on half-sold buildings, Zalewski noted, so those bulk deals for 50 percent or 60 percent of a building don’t exist. Instead, developers are negotiating with bulk buyers to sell smaller bunches of units.
Zalewski sees some bright spots in the market, and pointed specifically to units that can be rented out on a short-term basis. “I think if you can sell a condo to an individual … for roughly $200,000 a door, and you can Airbnb it, and you can make a return, I think you can sell that all day long.”
It all comes down to price, he said.
“At the end of the day, what people realize is the condo is a commodity. People buy based on a price per foot,” he said. “Once you get past the hoopla, the beautiful people, the free booze, and all this excitement about what’s going to happen, it’s effectively a commodity.”