Buyers have closed on slightly more than half of the new condominium units built and delivered in Greater Downtown Miami since 2003, according to a new report from Condo Vultures® LLC.
Extensive research comparing Miami-Dade County records with the Condo Vultures® Official Condo Buyers Guide To Miami™ has concluded that warranty deeds have been recorded for 10,665 new units out of a total inventory of 20,045 condos delivered between Jan. 1, 2003 and the June 30, 2008, according to the report.
With credit tight and buyers concerned about not knowing the bottom, closings of new condo units have tapered off in 2008. From January through June 30, only 26 percent of the total units delivered or scheduled to be completed this year have closed.
The 2008 ratio is likely to increase in the months ahead as additional units in semi-finished projects are cleared to close by the Miami Building Department. The entire closing process for a building typically takes about six months to complete and occurs for a block of consecutive floors starting at the bottom, and moving up in a tower.
The current 2008 closing ratio is down drastically from 2007 when 66 percent of the total inventory was closed.
During the three previous years when speculation was widespread, buyers closed at a ratio of 99 percent in 2006, 97 percent in 2005, and 100 percent in 2004, according to the report.
“With 88 percent of the new condo inventory in Greater Downtown Miami now or about to come online in the upcoming weeks, we were surprised to learn that a bit more than half of the buyers of units have stepped forward and actually closed on their preconstruction contracts,” said Peter Zalewski, a principal with the Bal Harbour, Fla.-based consultancy Condo Vultures® that produced the report.
“Developers have repeatedly predicted that only about 20 percent to 40 percent of their preconstruction contract holders would walk away from 20 percent deposits. Looking at the closed sales to date, there may be some truth to their 40 percent walkaway projection.”
The 20,045 new units that have been delivered thus far in Greater Downtown Miami are located in 78 condo buildings (including one townhouse project) situated within a 60-block stretch from the Rickenbacker Causeway north to the Julia Tuttle Causeway, and Interstate 95 east to Biscayne Bay. This is the primary area where Miami's condo boom occurred.
The 20,045 new units already online represent 88 percent of the total 22,737 new units proposed and built in Greater Downtown Miami since 2003. The 78 new condo buildings already delivered account for 92 percent of the 85 total projects planned, approved and proceeding, according to the Official Condo Buyers Guide.
Developers are scheduled to deliver six buildings with 2,197 units in 2009, and one building with 495 units in 2010.
For comparison sake, during Miami’s first condo boom stretching from 1978 and 1983 there were 17 towers constructed with 2,112 units and 3 million gross livable square feet. This boom is projected to account for more than 24 million gross livable square feet, according to the Official Condo Buyers Guide.
With the number of residential construction cranes dwindling from 40 at the peak to only three today, developers and lenders are rapidly being forced to figure out ways to sell or maintain units that have been forsaken by preconstruction contract buyers who tended to be speculators.
To address the problem, some developers are offering deep discounts off of retail pricing while others are pitching attractive incentives, such as contributions toward closing costs and the buildout of units that are generally delivered with concrete floors and primer on the walls.
Other developers are quietly negotiating with bulk buyers in hopes of selling enough of the walkaway inventory at a blended price so that the construction loan can be repaid.
Once the construction lenders are satisfied, developers regain control of their projects and can ultimately decide what to do with the excess inventory, whether it be to rent out the product themselves for the next few years or sell it piecemeal to investors.
Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don't forget to sign up for our weekly Market Intelligence Report.
Copyright © 2008, Condo Vultures® LLC
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