January 29, 2006

High-rise speculators likely in for a fall (HP readers - predict how far)


For the ones that do get completed, for the buyers who don't walk away from their down payments and do close, what % drop in value do you think condos in Miami will see 12 months from now?

I'm guessing 20%

That's why I think most folks will just walk away if they haven't closed. 5% is nothing compared to 20%.

Market has peaked, causing problems for condo markets in Miami and West Palm, experts say.

If you're buying a single-family home or condominium, plan to live in it long term because the days of making fast cash in real estate are over, industry experts said Friday

In Miami-Dade, more than 71,500 units are built or planned, Miami real estate consultant Jack Winston said, adding that only 9,100 units were completed countywide in the past 10 years. He did not release figures for Broward or Palm Beach counties.

Some small banks will be in trouble because they've loaned money to condo developers who won't follow through on building plans as the market softens, analysts said Friday. They think falling land prices are inevitable during the next year.

Likewise, real estate speculators will take hits if supply continues to outpace demand, hurting their ability to resell or rent units. Already, agents are reporting price reductions in some condo resales. "Miami is ground zero for the housing bubble," Winston said. "It's going to be severe in Miami, and it's going to be problematic in West Palm. We've built too many units compared to the projections for real users."

19 comments:

Wes D said...

You're awfully optimistic - I expect a 50% decline at the minimum, and 75% in some locales.

I'll be in Miami this week for some business, I'll see if I can't get some pics for you.

Bake McBride said...

Moman,
I think you're right....Expect 20% this year and then watch the panic in Miami start gaining steam. Not only will these flippers want to get out of dodge....New inventory by the thousands will be hitting the market...I can not believe how ugly this is going to get.

It's a Catagory 5 hurricane heading right for Miami, and there is nothing the speculators will be able to do...

Anonymous said...

I live in the most prominent building in Miami Beach.

I rent.

Three months-ago, there was 5% of the building's units for sale. Now? There are 15%. Three months from now? Who knows.

I do know this: sales have come to a dead stop.

GenX said...

Moman Id have to agree that a 50 percent decline is imminent in the Condo Market here in Sunny South Florida. Its not the price of the condos that is the real market Killer its the unbelievable high taxes and insurance not to mention the maintenance on these condos. Prices are gonna have to Give. These flippers who bought thinking that they were gonna make a fortune when these buildings are completed (2-3 years is a long time to wait) where delusinal. Also the investors that closed and rented out their units for one year thinking they want to avoid the high capital gains rate and lose a few hundred a month renting it out until the year is up are gonna be shocked that big gain may well turn into a loss. They will wish they sold and paid the taxes on money for nothing. I think the realization is finally setting in and condo speculators are taking the needle out of their arms.

Anonymous said...

The tremendous supply will cause prices to drop off like crazy. Especially when there is no demand.

Anonymous said...

god bless those speculators. What a tough lesson.

veritas_faust said...

I live in Miami Beach, and yes I rent....

My prediction is 1/07 will be 35% less then 1/06, with some more price reduction through the year bottoming out in mid 2008. It should then be around 55% less then it is now.

Figure 10 or so more years to see prices rebound. Increase this by 15% if Miami takes a direct hit from a CAT 4 or 5 in the next two years.

Anonymous said...

National Inventory will EXPLODE in March, April, May, June as EVERYONE "tries" to get out.

Grinch34 said...

I have to agree with Moman, Bake, Veritas and the rest of the posts (sorry if I left your name off). Like I said on a previous post, the media does not want to panic people, so they will not tell you the complete story.

Anonymous said...

I read somewhere -- maybe here -- that an unintended consequence of the new bankruptcy law will be that people will wait until they are completely screwed before filing for bankruptcy to avoid becoming somebody's wage slave for a decade. 20% rather than 5% follows from that. Good call.

Anonymous said...

The new bankruptcy laws will also keep people out of the market for years longer than the old laws, making a rebound even less likely. Remember, the majority of people using bankruptcy to clean the slate were downsized or dealing with a catastrophic illness in the family, not bankruptcy abusers. I imagine that anyone upside down on a property would gladly offer it up when they are down and out.

BublTrubl said...

I live in the speculator pit that is Miami. I think there's definitely going to be a big drop in condo prices but I think it will take another 6 months to a year to happen.
Listings have more than doubled in the last few months and sales have come to a halt, but asking prices continue to rise at a crazy pace. A lot of these asking prices need to go 50% lower just to get back to where we were when the bubble burst last August. That will take a while.
Right now, judging prices, speculators here for the most part still think that the greater fool is still out there wanting to buy his rathole condo for double what he paid a year ago. That mentality won't change overnight as prices are 'sticky' on the way down. But it will change. I can't wait.

cg said...

In 2001 I put 30K down for a Miami Beach pre-construction 1 bd condo , another 30K when construction started. Total price was 303K. I closed about 9 months ago, it took 3 years to build. They are now selling for about 550 - 600K. I pity the fools paying this kind of money now. I was and am not a flipper but bought it for my vacation / retirement. Since it is a beach front unit the prices will probably be stable, but those new units in downtown Miami are going to be trouble. To me Miami means "beach" so paying so much for a downtown condo does not make sense. When thinking and talking about Miami, keep it seperate from Miami Beach. They are different animals. Anybody else agree that the beach front condo will be more stable than the run of the mill downtown condo?

confused said...

live in a condo conversion in North Bay Village, Miami Beach. I rent and have really felt bad not having bought over a year ago when prices were in the low 200. Now units are listed from the low 300 and up. After feeling very shocked one unit went to 319 with great view. I was too late bidding on the unit and now it is back on the marktet for even less... I guess there are still a lot of dreamers out there. lately I have felt like this was a kind of price gauching ...

answer-man said...

ps I'm having a little trouble sending comments so if I do it twice please excuse me and I apologize.

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