Dec 28 2006
Florida Condo Markets Plummet
You may recall over the past few years our posting about CondoFlip.com, a Florida website where, I can only surmise, users were supposed to get rich flipping Miami area condos. If ever there was a sign of a bubble, it was this day-trading equivalent that reminded us of the dot com buzz.
As we predicted, the floor has dropped out of what was never sustainable to begin with. The first predictor was Condflip’s own site this past May, when they introduced panic pricing buttons. Nine months later, here we are: It is just another example of how hot credit-bubble (inflated) money brings out the worst speculative behavior by transferring purchasing power from producers and stewards to hasty spenders and inexperienced speculators:
From “Florida’s overbuilt condo market starts to fizzle”:
“This market was too good to be true,” said Lewis Goodkin, a Miami economist and real estate analyst. “But it was a market fueled by speculators, so it wasn’t a true market.”
City officials say 15 condo projects, representing nearly 1,900 units, have been officially pulled from the waning market. But analysts say the numbers are much higher when you consider the rest of Florida’s overbuilt condo market.
Statewide sales of existing condos dropped 31 percent in October from the same month last year, according to the Florida Association of Realtors. Median prices fell 2 percent. In Fort Lauderdale, sales dropped 21 percent in October.
Miami was considered one of the most speculative markets in the years-long U.S. residential real-estate boom. Analysts said up to 80 percent of sales at some condo projects were to speculators who intended to quickly resell, or “flip,” the units.
The question with all speculation is always, how much was done with borrowed money? In the case of home real estate these days, in 2005 26% of all mortgages were for investment properties and another 14% for vacation properties. These second, non essential homes — many financed with the expectation of increasing prices — may have only begun to flood the market nationwide, lead of course by the frothiest of markets.
