Boom-era condominium inventories are slowly declining in South Florida.
According to a new story on National Mortgage News by Lew Sichelman, South Florida has unloaded 90 percent of its 49,000 boom-era condominiums, leaving 4,700 unsold units for the market to work out – notwithstanding, of course, some outliers.
Peter Zalewski, a principal at the consulting firm CondoVultures, said 2013 could be the magic year for South Florida condominiums.
“South Florida’s oversupply of new condo product created during the recent boom is on pace to be sold out by 2013,” Zalewski said.
In the third quarter, 700 condos were sold, Zalewski reported, and year-to-date, 2,600 units have been sold, mainly to international buyers taking advantage of prime exchange rates.
As promising at the 4,700 statistic is, though, there are thousands of additional condominium units that exist outside conventional inventories that Sichelman points out. For example, there are the 8,000+ units currently owned by investment groups who are waiting for prices to recover. Also, 20 new condo projects have been proposed for South Florida recently, and two of those have started construction. In total, the projects would add an additional 4,000 condo units to the area.
Of course, recent condo construction pales in comparison to the boom years, a period when 148 projects with 34,000 units were constructed in Miami-Dade County, 68 projects with 10,000 units in Broward County and 28 projects with 4,500 units in Palm Beach County.
“In the four decades prior to the boom, developers put up nearly 700 condominium projects with 76,500 units in the same seven coastal markets in South Florida,” Sichelman reported.
Some analysts, Zalewski included, fear that even with existing inventories, Florida condo units are poised for another bubble, such is the demand from international investors. Recently, Zalewski contributed an op-ed to the Miami Herald, where he made five suggestions on how to avert another condo boom and bust.
One idea dealt with “preconstruction sales,” meaning that when developers publicize their properties to create buzz with prospective buyers, they must have all of their sales information audited by a third-party.
“The auditor-like entity should be required to sign off on the sales statistics much like what is done with financial reports by publicly traded companies,” Zalewski wrote. “Developers should no longer be permitted to announce transaction velocity in vague terms that cannot be verified upon request.”
Another idea would make closing fees a mandatory expense for buyers that is itemized.
“A breakdown of how these fees — which range from 1.5 percent to 2 percent of the purchase price — are allocated would work to ensure that condo buyers receive the utmost professional service for the expense,” Zalewski wrote.