Miami Condo Glut Spins Out of Control

Miami Condo Glut Spins Out of Control

Thursday, April 17, 2008 4:54 p.m. EDT

Entire neighborhoods in the Midwest sit empty. Multimillion dollar homes in California are burning to the ground as frustrated owners torch them for insurance.

And in Miami, where unfinished buildings still dot the skyline, it will be tens of thousands of empty towers. The condo glut stretches now to five years of inventory.

The national backlog of empty homes is less than 10 months — long by historic standards, but not years and years of inventory as in Miami.

There are more than 24,000 units for sale, says researcher Jack McCabe and the Florida Association of Realtors.

Another 19,000 are on the way, and only 1,000 to 2,000 a year get absorbed by the market, says McCabe.
You would think prices would have come down, and they have, falling 10 percent in 2007 to a range between $171,000 and $263,500, McCabe told industry publication The Builder.

But many are priced for rock stars and jet-setters (and advertised heavily in luxury magazines), while Miami remains the poorest big city in the United States.

Miami has a median household income of just $24,301, according to the U.S. census, right on the federal poverty line for a family of five.

"Thousands of these units are priced at $1 million and above," says McCabe. "They are in much higher price ranges than the existing stock for-sale on the multiple listing service."

McCabe sees cancellations and potentially litigation as buyers back out on deals they have already signed, hoping to avoid a swift price drop ahead.

For investors, though, Miami should be a field day, he says.

"For vulture buyers, this may be the best time since the RTC [Resolution Trust Corp.] days," McCabe says.

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