Sales and demand are plummeting, inventory is skyrocketing, price performance varies wildly by neighborhood, and the experts operating at the center of it all can’t agree on whether the market is in a bubble or good shape – this is the Miami condo market.
It was honestly more of the same from Douglas Elliman’s Q2 market report, released last week, but commentary on the subject is too easy and too enticing not to indulge.
So where do things stand?
On the lower end of the condo market (i.e. not luxury), things are pretty uniform – prices are up, sales and demand are down (certain markets withstanding).
In Miami proper, the median sale price for condos climbed 5.4 percent through the second quarter compared to the same period last year, while sales dropped 14 percent and days on market, a pretty solid indicator of demand, took a huge leap from 53 to 90 days. And it was much the same in Miami Beach – as the graph below indicates.
|Condo Market||YoY Pct. Change to Median Sales Price||YoY Pct Change to Sales||YoY Pct. Change to Days on Market|
On the luxury side, again it was falling sales, falling demand and an uptick in price – particularly in Miami Beach, which recorded a year-over-year median price gain of more than 20 percent.
|Luxury Condo Market||YoY Pct. Change to Median Sales Price||YoY Pct Change to Sales||YoY Pct. Change to Days on Market||YoY Pct. Change to Inventory|
Those are the facts. Everyone agrees. The disagreement comes in interpreting those facts.
Jack McCabe of McCabe Research and Consulting said in response to Douglas Elliman’s report that “South Florida is in a big bubble for high-end condos.”
However, in response to those same figures, Douglas Elliman CEO Jay Parker says something quite different: “We believe that the South Florida market has stabilized and probably will continue to cool, but this shift shouldn’t be concerning.” The “shift” he’s speaking of is the trend of fewer sales and slower price appreciation compared to the glut of inventory – a glut that continues to grow.
In his analysis, McCabe indicts the global recession as the culprit behind Miami’s predicament. It is his belief that the dynamics of the city’s market are such that the recession of foreign buyers from South Florida is causing a demand gap that can’t be filled locally, because locals don’t really buy much in Miami – especially luxury condos.
“Here in Miami, 70 percent of the sales are to foreign nationals, most of which pay in cash,” McCabe said. “Only 10 to 15 percent of homebuyers are Floridians.”
In an interview with Curbed, Jonathan Miller, president of real estate appraisal and consulting firm Miller Samuel, agreed with McCabe, saying that “(in Miami) we are seeing a lower intensity of demand from foreign investors,” which, he added, comprised “an estimated one third of the condo market sales.”
But again, Parker disagrees.
“To believe that the foreign market is gone is really not a fully baked concept,” he says. “The market is absolutely there, people are just cautious and the foreign investment interest has been curbed.”
Parker goes on to say that rather than foreign buyers leaving South Florida, they have instead changed.
“The European and British interest in the South Florida market is stronger than it has ever been, and will continue to grow.”
It is worth noting that the Miami Association of Realtors’ latest report on foreign homes searches through miamire.com showed what appeared to be falling interest from French and British buyers, as both countries dropped out of the top 10.
Still, while Parker admits the market has stumbled, he prefers looking at things with a wider lens to account for time and the nuance of how external factors play into Miami real estate.
“I look at the market progressively, because a shift to cohesiveness is what we should be striving for, not volatile price records,” he says. “I predict that as the foreign currency and the political issues even out, we are going to continue to see a shift of wealth from those markets to South Florida, where ultimately real estate remains favorable.”
Time will tell if he is right.