Condo News For Year End 2007

A brief summary of condo news for year end 2007.

There is no doubt that the state of Florida's condominium market is fluctuating. There have been predictions of a bursting bubble, tumbling prices and project failures.

Significant decreases of sales velocity and new project starts confirm that a sustained market adjustment has arrived.

The factors fueling the condominium boom of the last several years may be explainable.

Condo News Year end 2007 - Viewpoints on What has Occurred in the Florida Condominium Marketplace

-- Sustained historically low interest rates.

-- Safety investments for foreign investors from South America, Europe and Asia.

-- Increased demand and speculation are among the leading factors that drove the engine of Florida condominium development and its “affordable” alternative, conversions of rental housing to condominiums.

-- Some of the foreign investment actually took the form of currency plays based upon weakened values of the U.S. dollar.

-- A segment of the market was based upon pure speculation, commonly known as “flipping,” created feverish demand for condominium units and new projects and quickly satisfied lenders’ pre-sale underwriting requirements.

-- When it became apparent that this speculative feeding frenzy was based upon buyers who were intent on speculating in pre-construction condominiums, lenders required their condominium developer borrowers to place constraints on such activity.

-- This took the form of numerous contract provisions ranging from prohibitions of contract assignments to buy-backs, rights of first offer and refusal and sharing of profits in the event of flipping. But the speculative damage, if any, had already occurred.

Stories abound of contracts flipped eight times prior to certificate of occupancy, some with seller-developer approval and others without such approvals.

The exact impact of this level of flipping on the rapid appreciation of prices is unknown and may never be accurately quantified.

Nonetheless, it served to once again prove that pricing is not always the determinant of fair market value.

What has cooled the feeding frenzy?

-- The possibility of increasing interest rates, especially affecting those artificially low initial rate teaser mortgages and the impact of adjustable and variable rate mortgage products, affected some buyers.

-- A stronger dollar dampened the use of the currency play.

-- In most cases, simple market saturation by oversupply occurred.

The oversupply is particularly experienced in urban markets such as downtown Miami, Fort Lauderdale, West Palm Beach and other urban infill areas as opposed to resort condominiums and beachfront projects. Although, as a whole, it is felt all over Florida.

Florida Sales Report – 3rd Quarter 2007
Existing Condominiums

1. *Statewide figure includes data from the Naples Board of Realtors.
2. *Data is only from the Marco Island Association of Realtors.
3. Data from the Ocala-Marion County Association of Realtors was not available.
4. Data from the Hernando County Association of Realtors now included in the totals from 2006 and 2007.

Editor's note: Sales numbers represent totals of Realtors' closed transactions from local Realtor boards/associations
within the MSAs.

Condo Stats Ending January 2008
Pier Park Shopping
Condo News - back to top of the page
Back To Condominium Planet Home Page
Other site real estate blog