'Distressed' condos disappearing
By Marilyn Bowden
Brickell's inventory of distressed condos is dissipating rapidly, sending prices higher and generating some new construction. While newer units are more popular, brokers say, the best of the older buildings are still holding their value.
"Distressed properties are disappearing," said Ron Shuffield, president of Esslinger Wooten Maxwell Realtors, also known as EWM.
At the end of June, he said, 737 condos were on the resale market in zip codes 33129 and 33131, which comprise the Brickell residential market. Only 54, or 7%, are listed as foreclosures or short sales. Eighteen months ago, in January 2011, 241condos, or 21% of the 1,142 total resale offerings in the area, were listed as distressed.
The pace of sales has picked up, too, Mr. Shuffield said. "Now, we're averaging 102 sales per month, 21% of which are of distressed properties. In January '11, 54% of the 76 sales per month were short sales or foreclosures."
This amounts to a 34% increase in sales pace over the past year and a half, he said, bringing the supply ratio down from 15 months to seven. A supply of six to nine months is considered a balanced market.
Two factors are driving the pace of sales: dwindling supply and rising prices, said Philip Spiegelman, founder and chair of International Sales Group, or ISG.
"Many domestic buyers who depended in part on mortgages for financing have been sitting on the fence," he said, "but now there is some liquidity, and there is enough buzz that the last group of fence-sitters are jumping in."
Much of this activity is in new buildings, according to ISG's recent Downtown Miami Development Analysis, which charts sales in developer units in condos finished in Brickell between 2006 and '08.
Of the 7,619 new units in 27 buildings, ISG found, 7,131, or 94%, have been sold. Four of those buildings are currently offering remaining inventory as rentals: One Plaza West Brickell (all 188 units), Brickell View West (61 remaining units of 88), Habitat One (all 25 units) and Latitude on the River (40 remaining units of 452).
"Miami is a new city," said Ivan Hernandez, a principal of SoBe Luxury Homes, a division of Douglas Elliman Florida, "and new construction sells very well here.
"The latest and greatest sell out. As the market evolves, certain buildings hold their own, but some of the others may suffer a reduction in value."
Brickell's grandes dames such as Santa Maria, Bristol Tower and the Four Seasons, built up to 15 years ago, are able to compete with the price of new construction, he said, which is now going at $450-$500 a square foot.
"When you get back to 20- to 30-year-old buildings," Mr. Hernandez said, "it drops to $300-$350 a foot. What you get in those buildings is larger units but lower ceilings and non-hurricane-impact windows."
Overall, Mr. Shuffield said, the average resale price of a condo in Brickell in June '11 was $263 a foot; in June '12, it had risen 33% to $349.
International buyers — particularly those from Brazil, Argentina and Venezuela — have dominated the market, said Craig Studnicky, ISG's co-founder and president, "but we are starting to see a resurgence from the Northeast US, particularly New York.
"We think there are two reasons for this. The New York market has rebounded very nicely, and liquidity has returned to the mortgage market. Now, some buyers can get 70%-80% financing.
"Culturally, people in this country buy with mortgages, whereas Latin Americans pay cash or have small mortgages."
Lower inventory has prompted a few construction starts, Mr. Hernandez said, "though today there are only five cranes of new construction in Miami, whereas at the height of the market there were 70. New condo buildings are requiring a large part of the purchase price before delivery of the unit, so we will not run into the problems of a few years ago."
Newgard Development Group's 374-unit BrickellHouse (1451 Brickell Ave.) recently broke ground with a reported 90% of its units presold. ISG, Mr. Spiegelman said, has introduced two new projects from Related. Construction on MyBrickell ( 30 SE Sixth St., 192 units) is up to the fifth floor, he said; 1100 Millecento (1100 S Miami Ave., 382 units) is currently converting reservations to contracts and will probably start construction at year's end.
"People are paying 80% of the purchase price under construction," Mr. Spiegelman said, "so developers with strong track records who are well-capitalized will successfully capture market share. The inexperienced will be challenged because they will not have an easy time finding financing."
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