Miami Condo Price trends vary substantially by Condo Community From a 17 percent increase to a 81 percent decrease

Jun 26, 2009

With recently published statistics showing price declines for condominiums in Miami Dade County near 50 percent, it is no surprise to see that many condominium buildings have lost substantial value.  But the extent of these price declines is anything but uniform. 

An analysis of closed sales in the first quarter of 2009 shows that some buildings actually showed sales price increases while others have plunged by as much as 81 percent from their peak year prices.  The ten worst performing condominium complexes all significantly outpaced market-wide price declines with declines of over 75 percent from the peak according to a recent report from CondoReports.com.

 

“The results of this study show just how differently buildings have held their pricing thus far.  On one hand you have ten buildings in strong submarkets that experienced only modest price declines--some actually increased in price.  And on the other, you have buildings that have had more than 75 percent drops in price in just a few years.  The market is truly differentiating between quality buildings and submarkets,” says Adam Cappel, President of CondoReports.com and author of the report.

 

The Losers

“The extent of the price declines in the worst performing buildings is astonishing.  For the top ten price declines to have all not only met the 75 percent threshold but to have also crossed it is staggering.  Especially considering that there is the potential for additional price declines in several of the complexes that made this list,” says Cappel.

 

Many characteristics are shared by the complexes that have made the Top Ten Worst Performing Condos list.  Several of the projects are located in southern Miami Dade County submarkets, which have suffered more than central and northern Dade County.  Five of the projects are recent conversions of older B/C grade apartment buildings.  But there is one theme that Mr. Cappel is focused on in particular.

 

The theme shared among the worst performing complexes is that these complexes had substantial sales activity in 2005 through 2007.  A majority of the unit owners in these complexes purchased during this time period when prices were at or near their peak and many of these purchasers were speculative investors. 

 

“Low owner occupancy and significant sales activity during peak pricing is a theme among complexes that have dropped in value the most.  Generally, in these complexes speculative investors that bought in at or near peak pricing are quick to stop making payment when they realize they are significantly underwater on their mortgage or, to a much lesser extent, second home buyers choose to stop making payments on their second homes if they hit financial difficulty,” says Cappel.

 

 

The Worst Performer Down 81 Percent

Keystone Towers, located in North Miami, was the building most affected by price declines posting an 81 percent price decline from peak pricing.  Prices in Keystone Towers peaked in 2007 with 20 units sold at an average of $334 per square foot – a common measure of real estate values.  Prices in the first quarter of this year were recorded at $62 per square foot.  From 2007 to the first quarter of 2009, prices in Keystone Towers have shed $272 per square foot. 

 

Essentially the price drop in Keystone Towers means that if you purchased a 1,000 square foot condo at average peak pricing for the building, you would have paid $334,000 for that unit.  On average, a similar unit would have sold in the first quarter of this year for $62,000, a loss of $272,000 – most of which has been or will be absorbed by lenders.

 

“Like Keystone Towers, older B or C grade buildings that were converted in the boom years have seen disproportionately large hits to value.  In today’s world, buyers are shying away from this type of product,” says Cappel.

 

The Winners

Il Villaggio, an ultra premium building located at the north end of Ocean Drive in South Beach, was the run away winner among the top performing condominium complexes.  In the first quarter of 2009, the average price per square foot of the four units that closed was $1,530, more than $200 per square foot higher than its previous average peak pricing. 

 

Of the nearly 2,000 buildings examined in the study, only four experienced price increases from their peak values and had the prerequisite 3 sales in the first quarter to be considered in the study.  These top performing buildings, for the most part, were higher end, high quality buildings located in strong submarkets.  There are a number of other complexes that held pricing similarly, but did not have the requisite 3 sales to be considered significant.

 

“The fact that a fraction of one percent of the buildings in the study experienced increased pricing is indicative of a market where prices have decreased nearly across the board with few exceptions.  The major difference, of course, is the degree of the price declines,” says Cappel.

 

 

Advice for Buyers

Given the results of the study, Cappel recommends that buyers research the building and submarkets they are interested in buying in. 

 

 “Buyer should be doing added due diligence in a market like today’s.  They need to be doing research on a submarket by submarket and building by building basis as prices behave differently in different buildings and submarkets.  It only takes looking at the results of this report to realize that these differences can be substantial,” he added.

 

To view free reports on these buildings or any of nearly 2,000 other buildings or 90 submarkets in Miami-Dade County, please visit www.CondoReports.com.