Miami Has a Four-Year Backlog of Overbuilt Luxury Condos

[pj3000]

Miami Has a Four-Year Backlog of Overbuilt Luxury Condos Amid Affordable-Housing Crisis

MARCH 30, 2018 | 9:00AM



http://www.miaminewtimes.com/news/mi...risis-10218908

By nearly every metric, Miami-Dade County is one of the most difficult places to live if you don't make a ton of money. The county's median income is a staggeringly low $44,000, compared to the $80,000 median income in a comparably expensive city such as Seattle. That means Miamians wind up spending a higher percentage of their incomes on rent than residents of any other city in America.

What have Miami-area officials done to help the working poor? They've encouraged developers to overbuild so many luxury condos for millionaires that it will now take years to sell them all, according to new research from local real-estate analyst Peter Zalewski.

Zalewski's CraneSpotters.com reported at the end of February that it will take 49 months (just over four years) to sell all the luxury condos developers have built across town. As of February 27, there were 2,767 luxury-grade condos up for sale across the county — despite the fact that ultrawealthy buyers bought only 684 of those units (57 per month) in 2017. A luxury condo in this instance costs a minimum of $1 million. (There were, in total, 14,452 condo units for sale across the county as of a month ago — an oversupply of about 16 months.)

The problem is especially bad in some of Miami-Dade's fanciest zip codes. Earlier this month, Zalewski noted that Miami Beach, Bal Harbour, and Sunny Isles Beach each have a four-year backlog. Downtown Miami has a whopping 6.5-year backlog.

The analyst notes that those numbers will likely seem low in a few years because there are still a gigantic number of condo towers still under construction across Miami-Dade.

"It is worth noting this report only tracks those South Florida condos that are formally listed for sale," Zalewski wrote two days ago. "The report does not factor in the nearly 47,450 new condo units currently in the development pipeline east of Interstate 95 in the tri-county South Florida region." (The Real Deal South Florida first reported on the county-wide data.)

[Pedestrian]

So who's buying this product? Haven't all the rich Venezuelans already left (with their money before it disappeared) for Miami or somewhere?

[pj3000]

The hunt for dirty money in Miami real estate is working — and will continue, feds say

http://www.miamiherald.com/news/busi...206232819.html

Development in downtown Miami has boomed since the housing crash thanks to a flood of money from foreign investors. Not all of it is clean, prompting heightened scrutiny from the federal government.

Updated March 21, 2018 06:52 PM

The federal government says its hunt for dirty money in luxury real estate in South Florida and other high-priced housing markets is working — and the temporary initiative is being extended yet again.

Since 2016, the U.S. Treasury Department has mandated that secretive shell companies buying luxury homes with cash in certain areas disclose their true owners to the government.

The anti-money-laundering initiative began in Manhattan and Miami-Dade County — to the protests of South Florida politicians — and has gradually been expanded to other areas in Florida, New York, California, Texas and Hawaii. Drug dealers, corrupt officials, money launderers and other criminals often buy expensive real estate to legitimize dirty cash. They use shell companies — which don’t have to disclose their owners — in order to keep their identities hidden, frustrating law enforcement agents and sometimes stopping investigations dead in their tracks.

Anti-corruption advocates have called for the disclosure rules to be made permanent. The flood of foreign money — most of it clean — pouring into markets like South Florida is partially blamed for rising home prices.

[The Best Forumer]

Sounds like they can raise the prices....

[pj3000]

Originally Posted by The Best Forumer

Sounds like they can raise the prices....

Didn't quite get the "overbuilt" part of the article title, did you?

[Pedestrian]

Originally Posted by pj3000

Didn't quite get the "overbuilt" part of the article title, did you?

If the already-built condos will take 4 years (49 months) to sell at the current rate of sales, that's "overbuilt". You can be sure the developers don't want to hold onto the product for that long, at least not empty. That's a substantial negative cash flow (for interest on cionstruction loans as well as property taxes and so forth). In these kinds of markets, they frequently start renting out units in condo buildings.

By the way, I can't imagine what it must be like being a resident owner in one of these buildings and having as your neighbors not only short-term renters (until the developer decides he can sell the units) but also "drug dealers, corrupt officials, money launderers and other criminals" or whoever those owners decide to let use the units they own. HOA meetings must be "difficult".

[Pavlov's Dog]

Sounds like when the business cycles turns bad again there will be a lot of cheap luxury condos in Miami. Now would not be the time to buy unless you have to.

[Sun Belt]

This is good news. Buy when there is blood in the streets.

-- Wait for the carnage to occur [buy] followed by the non-stop doom and gloom articles [hold] wait for the rebound [sell] and double up.

[Yuri]

There are many people in Brazil buying suburban houses in Orlando area. It's all over the place: as second houses or investiment. I imagine is much cheaper than Downtown Miami. I fail to see the appeal but to each his own.

[jd3189]

Hopefully this is somewhat of a good thing. The condos will become cheaper over time since there's a large amount of them. They also add to the built density in certain areas so maybe they can establish the basis of some TODs. Miami needs to start being more of a middle class city instead of the wealth playground/ third world town some see it as. Plus, more middle housing like small apartments and quadplexes should be built. Perfect time for that 21 zoning code to be more effective.

[Pedestrian]

Originally Posted by yuriandrade

There are many people in Brazil buying suburban houses in Orlando area. It's all over the place: as second houses or investiment. I imagine is much cheaper than Downtown Miami. I fail to see the appeal but to each his own.

Orlando is one of the few metros in Florida where the economy is not especially dependent on tourism and retirement. Orlando does have the theme parks but those are concentrated south of the city proper and have limited effect on the northern, northeastern and eastern suburbs or the downtown. It is also apparently a major draw for Puerto Ricans fleeing the island in the wake of last year's hurricane season. So it should be booming right now from both the overall good economy and the Puerto Rican influx.

Also, Central Florida may finally have used up much of the land available for development. That used to hold prices down--builders could always buy raw land and keep up with demand. But driving around the area now, one doesn't see a lot of raw land left (plus the traffic is getting awful).

So maybe it's Orlando's time.

I lived there in the 1970s and made good money on my house (2700 sq ft; $49000-->$72000 in 4 years) but even then the area was a lot cheaper than higher priced areas (I used the house proceeds for my SF condo: 950 sq ft, $215,000 at the time).

[pj3000]

Originally Posted by Pedestrian

If the already-built condos will take 4 years (49 months) to sell at the current rate of sales, that's "overbuilt".

Yeah... well, that's the very topic of the article.

So when someone says "sounds like they can raise the prices"... then it seems as if they're not quite getting the point.

Originally Posted by Sun Belt

This is good news. Buy when there is blood in the streets.

-- Wait for the carnage to occur [buy] followed by the non-stop doom and gloom articles [hold] wait for the rebound [sell] and double up.

That's a skewed definition of "good news".

This type of practice in a real estate-driven "economy" is just what causes a lot of Miami's problems. No substance, no city.

Originally Posted by jd3189

Hopefully this is somewhat of a good thing. The condos will become cheaper over time since there's a large amount of them. They also add to the built density in certain areas so maybe they can establish the basis of some TODs. Miami needs to start being more of a middle class city instead of the wealth playground/ third world town some see it as. Plus, more middle housing like small apartments and quadplexes should be built. Perfect time for that 21 zoning code to be more effective.

50+ story condo towers built atop massive parking pedestals as "investment" properties do very little to add to density in terms of creating vibrant urban spaces. They are suburbs in the sky. Human-scaled development is what makes city neighborhoods attractive to activity.

[DePaul Bunyan]

Originally Posted by jd3189

Hopefully this is somewhat of a good thing. The condos will become cheaper over time since there's a large amount of them. They also add to the built density in certain areas so maybe they can establish the basis of some TODs. Miami needs to start being more of a middle class city instead of the wealth playground/ third world town some see it as. Plus, more middle housing like small apartments and quadplexes should be built. Perfect time for that 21 zoning code to be more effective.

Housing is the least of Miami's problems for the middle class. There are no middle class jobs. Miami is an expensive, cosmopolitan city, on par with Chicago or any of the cities on either coast. Yet it has poor public transit, terrible schools, and the jobs just aren't there.

Anecdote time:

I work in healthcare and have visited Miami a few times for vacation. I greatly enjoy it and have looked into living there. In the Chicago area my profession is going to start at $30/hr for a benefited position at most hospitals, up to high-40s for "registry" or "PRN." People just a few years out of school can make $40/hr easy, and there is plenty of overtime opportunity. I have a co-worker who between overtime and a second job makes average pediatrician money. And this is all without a four-year degree.

Last time I was in Miami I opened up Indeed to see what was out there just for shits and giggles. Found a few job postings. They wanted the usual 3-5 years of experience and applicants proficient in literally everything. For $20/hr. And they wanted fluency in Spanish and French Creole. I turned down $20/hr while I was still in school. The COL isn't even low enough in the panhandle to justify that kind of pay-cut.

$42k a year does not leave room for much anywhere in South Florida.

[Crawford]

Originally Posted by jd3189

Hopefully this is somewhat of a good thing. The condos will become cheaper over time since there's a large amount of them. They also add to the built density in certain areas so maybe they can establish the basis of some TODs. Miami needs to start being more of a middle class city instead of the wealth playground/ third world town some see it as.

Those massive condo towers in downtown Miami won't ever house typical middle class families. If they fail to sell, the developers will hold on to the units and rent then out temporarily.

Middle class families aren't going to live in giant 50-floor resort-style complexes built for wealthy South Americans looking to park their cash. They just aren't built for family living.

[pj3000]

Originally Posted by DePaul Bunyan

Housing is the least of Miami's problems for the middle class. There are no middle class jobs. Miami is an expensive, cosmopolitan city, on par with Chicago or any of the cities on either coast. Yet it has poor public transit, terrible schools, and the jobs just aren't there.

It's true that there are relatively few "middle class" jobs in comparison to other large US metro areas, but Miami is not a "cosmopolitan city, on par with Chicago or any of the cities on either coast".

Because of those lacks that you mention, among others, it is not cosmopolitan on par with other more established cities with strong economic and cultural histories.

It is a destination for cosmopolitan people, if you will, but a city that is largely built on tourism, real estate speculation/speculative construction, low-skill service industries, etc. just does not possess the depth to be considered cosmopolitan on the level with the Chicagos, NYCs, SFs, LAs, etc. of the country. Miami is young and growing, but not really growing (i.e., attracting educated newcomers) like other places are. It is improving in many important ways though. It'll get there, it just needs time.

[osmo]

Those condos would become more favourable for purchase" if the developers did not hold out on prices. Whatever number the yare being held out at just means less housing into the market pool overall. You must also wonder if there is a preference to rent in that luxury bracket. What set down fiscal roots in Miami when it is just a playground, not a city to raise a family?

[pj3000]

Originally Posted by osmo

Those condos would become more favourable for purchase" if the developers did not hold out on prices. Whatever number the yare being held out at just means less housing into the market pool overall. You must also wonder if there is a preference to rent in that luxury bracket. What set down fiscal roots in Miami when it is just a playground, not a city to raise a family?

Sure, if they were cheaper, more people could/would buy them.

But they're not. They're luxury properties. And developers aren't going to lesesen the value of their significant investment and sell them at a discount if they'll be able to get top dollar a few years down the road, while potentially renting them for top dollar in the interim.

Miami is not just a playground. Millions of people "raise a family" there. But the fact that it is also serves as a playground for the wealthy and for vacationers does make it more expensive/difficult for people in less fortunate economic situations to do so in the same way that is done in many other places.

[Kenmore]

gonna be underwater in a decade or two anyways

[UrbanImpact]

Originally Posted by Kenmore

gonna be underwater in a decade or two anyways

If Miami is underwater, then so is every major city on the Atlantic.

[pj3000]

Originally Posted by UrbanImpact

If Miami is underwater, then so is every major city on the Atlantic.

Not true. Very, very different situations.

Miami is less than 7' above current sea level. And it sits atop porous limestone bedrock. Salt water encroachment through that porous rock has already been raising the water table of inland areas. With just the predicted 15 inches of sea level rise over the next 25 years, tidal flooding will be a daily occurence.