Is South Florida’s condo cycle at pivotal point?
History will eventually determine if South Florida was at a pivotal point of another condo boom-and-bust cycle in March 2014, when the 200th new tower was announced east of I-95 in Miami-Dade, Broward and Palm Beach counties.
Despite surpassing this threshold of newly announced South Florida condo towers since the 2003 boom-and-bust cycle, the tri-county region appears to be on somewhat stable footing for the immediate future based on the results of a newly completed CraneSpotters.com Developer Pricing Survey.
Even as condo developers attempt to cash in on strong buyer demand by announcing a series of new towers to be built in coastal South Florida, less than 28 percent of the proposed units are currently under construction or recently completed while the other 72 percent of announced condos are still in the planning or presale phase, according to the survey.
(For disclosure purposes, my firm CraneSpotters.com spent nearly two months surveying the presale offices of practically every proposed condo tower slated to be developed east of I-95 in South Florida.)
The preconstruction condo market is difficult to track with complete accuracy, as developers can alter their projects, floor plans, declarations of condominium and pricing on short notice.
It is usually only after a condo tower has been constructed – and unit sales are publicly recorded – that definitive results can be obtained.
Short of waiting three years for this process to conclude, CraneSpotters.com conducted the survey of developer representatives from January through March 7. All of the information collected by researchers was entered into the real-time database that ultimately generated the final results.
The survey results show in the three years since the first new condo project launched presales in May 2011, developers have announced plans to build at least 202 towers with more than 28,350 units east of I-95 in Miami-Dade, Broward and Palm Beach counties.
To date, developers have completed five towers with less than 450 units and are currently constructing an additional 58 buildings with nearly 7,350 units. These two categories represent a grand total of less than 7,800 new condos for South Florida, according to the survey.
Given the lack of condo construction financing available for new South Florida towers, most of the projects are currently being built with buyer deposits. This funding method means developers and buyers – and not financial institutions – are generally the only parties at risk if a new project fails or the local real estate market stalls.
Contributing to a consensus of bullishness by industry professionals, the region’s condo resale market is currently scrambling to find additional unit inventory.
South Florida has less than 24,500 units available for purchase as of March 24 in the tri-county region, leading to rising prices, according to the Southeast Florida MLXchange.
At the 2013 sales pace of nearly 4,400 monthly condo transactions, South Florida has less than six months of available inventory.
Generally, a healthy real estate market has six months of resale inventory. Inventory levels below that represent a seller’s market, while greater inventory represents a buyer’s market.
For comparison, nearly 61,000 condos were on the resale market in South Florida some five years ago when the U.S. economy was on the verge of financial collapse in November 2008.
A combination of reduced condo inventory, strong demand, rising prices and low interest rates makes for a South Florida environment conducive to new development.
The question going forward is, how many of the 20,600 units currently in the planning or presale phase will ultimately be constructed – and under what conditions – in South Florida?
Peter Zalewski is real estate columnist for The Real Deal who founded Condo Vultures LLC, a consultancy and publishing company, as well as Condo Vultures Realty LLC and CVR Realty brokerages and the Condo Ratings Agency, an analytics firm. The Condo Ratings Agency operates CraneSpotters.com, a preconstruction condo projects website, in conjunction with the Miami Association of Realtors.