Miami faces its second property crash of the past 10 years as condo developers start canceling building projects, cut prices and offer incentives to potential buyers, according to a report in The Wall Street Journal
The number of Miami Beach condominium transactions fell about 20 percent in the fourth quarter from a year earlier, while inventory surged by nearly a third, according to data from appraisal firm Miller Samuel Inc. cited by the newspaper. The median sales price slipped 6.6 percent, the data show.
“The condo market has peaked,” Neisen Kasdin, a real-estate development lawyer at Akerman LLP in Miami, told the WSJ. “Sales velocity has slowed down considerably.”
A stronger U.S. dollar, spurred by investor anticipation of rate hikes by the Federal Reserve, is making real estate investments more expensive for foreign buyers seeking a slice of Miami property. Stock-market volatility, collapsing oil prices and economic slowing also weigh on buyer sentiment.
Brazilians and Argentinians who see Miami as the gateway city to the U.S. have seen their purchasing power cut in half by the surging dollar. New Yorkers and Chinese are still looking for second homes in Miami, but that’s unlikely to replace South American demand.
Miami’s largest condo developer, Related Group, said its 60-story Auberge development is seeking $600 a square foot, compared with $850 attainable a couple of years ago, the WSJ reported. The unit has sold 70 units of the 350 available.
The pipeline of active projects has dropped by 42 percent, according to a report from Integra Realty Resources
cited by the WSJ. About 1,200 condo units in Miami were built last year, down from the peak of 10,000 units in 2008, while more than 7,300 units are being built. An Integra official cited by the WSJ responded to the story with a clarification
Developers are responding to the declining demand by asking for bigger down payments or waiting until 80 percent of a project is sold before starting construction.
Still, most propert analysts don’t see signs that Miami is in another housing bubble.
Only four out of 70 housing experts surveyed by online real estate company Zillow said that Miami is in a bubble, the Miami Herald reported
. Nineteen respondents said a bubble could form in the next three to five years.
The after-effects of the last bubble are still being felt, especially for anyone who paid top price at the peak. Miami home values are about 70 percent of their all-time high in 2006, according to S&P Case-Shiller Home Price Indices data.
Miami is also one of the least affordable markets in the U.S. because wages aren’t keeping up with demand, the newspaper reported
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