If you want to know if the South Florida housing market is doing okay, a Magic 8 Ball might give you as clear an answer as a panel of local industry experts.
“Without a doubt,” you’ll see one minute. “As I see it, yes.”
“Reply hazy, try again,” comes next. Then: “Don’t count on it.”
It gets worse. “Outlook not so good,” the next shake reads. “My sources say no.”
The market has possibly never been this confusing, as economic, social and regulatory trends intersect and clash here in unexpected ways. New development behaves differently than old stock; listings at high price points exist in an alternate universe to lower-end resales. And everyone is trying to intuit whether there’s still enough demand to keep building.
“It is almost as if we have two cycles playing out concurrently and on different trajectories,” Ana Bozovic, market analyst and broker-owner of Analytics Miami, said.
The numbers illustrate her point.
As of mid-June, there were 25,051 condo units on the market in the tri-county region, but 87 percent were 30 years or older, according to data from ISG World. Foreign buyers, who for years helped prop up the condo market, accounted for more than half of all home purchases in Florida in 2010 but now represent just 3 percent of home sales. At the same time, buyers in the upper echelons keep setting records: Developer Vlad Doronin sold his home for $120 million, and Jeff Bezos’ neighbor sold a waterfront lot in guarded community Indian Creek for $105 million.
Meanwhile, while the estimated taxable value for real estate in Miami-Dade County rose 8.5 percent, to nearly $512 billion, that increase shielded weak points from view: Condo values fell slightly — less than 1 percent — and the rate of estimated value growth was slower than in previous years.
How the strands resolve and what happens next will be determined by whether demand revives and for what sort of supply. People do keep moving to Florida — after the results of the New York City primary election in June, developers began contemplating a new flow of arrivals — and builders will likely continue with plans for projects those folks want to buy. But if that sounds optimistic, it shouldn’t: Sales of new, luxury condos can mask the trouble likely to continue at the older, lower-priced ones.
“The general market is cooling when it comes to volume, while prime luxury, and especially prime single-family homes, is still ascending,” Bozovic said.
Unwanted listings
Most remember what Champlain Towers South looked like just hours after the collapse on June 24, 2021. For months, news broadcasts showed images and video of the partially crumpled building, reminiscent of images of a war-torn country and caused by shoddy construction and design flaws as well as substandard maintenance.
Ninety eight people, ranging in age from a year old to 92, were dead.
The average oceanfront condominium towers that fill South Florida’s coastline still look much like Champlain did the day before the tragedy, with its wavy black steel railings that dotted the beige 1980s building and a pool deck on top of the parking garage.
And these kinds of buildings aren’t selling.
“The condo market is extremely challenging in South Florida right now,” said residential broker Erin Sykes. “The data is showing a 6 percent month-over-month reduction in condo sales, but in reality, nothing is moving.”
“It’s tough to sell in large quantities and in rapid velocity. When these projects end up taking double the amount of time in presales, it starts to add up and starts to end up in capital calls.”
That’s in part because it’s difficult for buyers to secure mortgages for condos in buildings that don’t have sufficient financial reserves or are in need of repairs. After Champlain, lawmakers added regulations requiring condo and townhouse buildings to inspect buildings and reserve money for repairs. The requirements have put buildings under financial strain, and the number of South Florida condo buildings on a Fannie Mae blacklist has more than doubled in the past two years.
Not all older buildings are bad investments, but the perception that they are is affecting deals. Buyers and sellers are also affected by other macroeconomic factors, including high mortgage rates and overpriced homes.
Sykes, who runs her Side-backed brokerage Sykes Properties, recently reduced the price on a condo she listed at the Regency of Palm Beach, a 60-year-old waterfront building at 2760 South Ocean Boulevard. The 1,358-square-foot two-bedroom, two-bathroom condo first hit the market in 2023 for $849,000. Now, it’s asking $649,000, after a $70,000 price cut. (The latest price breaks down to less than $500 per square foot.)
The building is in good condition, Sykes said. A special assessment was paid off, and concrete restoration on the building is nearly complete. She is encouraging her clients to do “dramatic price reductions.”
“We get a lot of showings, but it’s just a bunch of looky-loos,” she said.
Upward mobility
It’s a different story at new luxury condos. Construction cranes fill the skyline to build them, and brokers are closing deals.
“Miami is still in a very rosy place,” Scott Wadler, a managing director in Berkadia’s Miami office, said — especially compared to New York. On a recent trip to the city, he got swoons when he said where he was from. “These yentas asked where I live. I said Miami and they all lit up,” he said.
In this part of the Miami housing universe, the higher the price of the unit, the better it seems to sell, said Spencer Morris, Allen Morris Company president. He’s seeing strong buyer activity for the higher-priced units at his two luxury condo projects in presales right now, a 19-unit development planned in Coconut Grove and the 58-unit Ponce Park, planned in Coral Gables.
“The premium and the superpremium [buyer] is still in the market,” he said.
In typical times, Morris said, the lower-priced units would go first.
“The market is kind of on its head,” he added.
Residential brokers who specialize in new developments agreed that there was a recent uptick in buyer interest in June, typically the start of the slow season.
Darin Tansey of Douglas Elliman said he locked in five contracts at the Ritz-Carlton Residences, Miami Beach, in June, for units ranging from $3 to $6 million.
Still, today’s market conditions are quite different from the pandemic-fueled boom of 2021 and beyond, when a wave of Americans relocated to Florida hungry for real estate. Wealthy buyers came in droves, driving up pricing and propelling some developers to launch projects without so much as a brochure.
The frenzy leveled off, but developers had responded to the demand with an abundance of options.
Of this newer, higher-end stock, the least stable is the short-term rental condo segment, especially in Miami’s urban core. But deals are even getting done in that space, said Daniel de la Vega, president of One Sotheby’s International Realty.
“It’s the market that has felt the most effects of the economy, [but] we’re not shying away from good opportunities in that space,” de la Vega said.
But others shy away from blaming — or crediting — big picture trends.
“The good projects are going to move,” former Related Group executive Carlos Rosso, who now leads his own company, Rosso Development, said. “The bad projects are not going to move.”
Some of that movement may be from little-known discounts or what Tansey called an “increasing delta between list price and sale price.”
Many developers do note that almost everyone has to jump through hoops to get deals done with ultra-luxury buyers these days and that even if the public numbers indicate there’s demand, the work on the ground feels nothing like the boom times.
“Across the board, sales are slow,” Wadler said. “It’s tough to sell in large quantities and in rapid velocity. When these projects end up taking double the amount of time in presales, it starts to add up and starts to end up in capital calls.”
Outlook not so good?
The question for developers now — and they might as well ask it to the 8 Ball — is when, what and how much to build for the future.
At Allen Morris Company, Morris is waiting for more inventory to be absorbed in Brickell before launching a planned supertall there.
Likewise, Rosso, whose projects include the nearly completed Standard Residences Midtown Miami with Alex Vadia’s Vadia Midtown Development and a planned six-building complex on a 5-acre site in Midtown Miami, is trying to be patient. He is so far selling only the first building, Midtown Park Residences by Proper, with Vadia and Proper Hospitality.
“I’m in no rush to launch more than what I think the market can absorb,” Rosso said.
Still, when a developer is ready to go, lenders are willing to fund construction loans, they say.
“The debt markets are not as tumultuous as you would think,” Morris said, adding that lenders are “surprisingly liquid right now.”
But there are cracks. Brokers and developers are definitely watching for signs of trouble at a handful of projects in presales that are struggling to secure construction financing or refinance existing debt.
Such projects include Michael Shvo’s Raleigh redevelopment in Miami Beach and Dan Kodsi’s Legacy Hotel & Residences at Miami Worldcenter.
The Raleigh is a Rosewood-branded ultra-luxury condo and hotel project planned on the oceanfront. Sources say that Shvo missed the mark on presales and overpaid for the land.
Kodsi’s project, a short-term, rental-friendly, mixed-use tower under construction in downtown Miami, has been stalled for more than a year, in part due to a construction design issue.
In Edgewater, the planned Edition Residences, still in presales, has been stuck in limbo for more than a year due to a legal challenge brought by holdout condo owners of Biscayne 21, a waterfront condo building where Two Roads Development acquired the majority of units. Two Roads has been waiting for a Florida appeals court to decide whether it will grant a rehearing. Two Roads is on the hook to pay mounting interest on loans tied to a bulk buyout in 2022.
Another condo project, a luxury high-rise planned on Brickell Avenue, is selling at or in the range of its costs now, with the hope that sales for the remaining units will make up for the break-even. “That’s extremely dangerous,” one broker said.
Other condo projects, including a handful of planned towers in Brickell, are showing signs of distress as their search for construction financing takes years.
Financing, though available for the right developer, is still very expensive. The Jorge Pérezes, Jackie Soffers and David Martins of the world are getting their deals done. They’re also financing bulk condo purchases of older buildings, where they plan condo terminations and redevelopments. A number of commercial and residential brokers are working on these deals, which are notoriously difficult to secure.
“Capital is attracted to behemoth sponsors,” as Wadler put it.
Another sign of the times is a recent uptick in developers raising additional equity in the form of new named partners. A site that one developer may have purchased years ago is now a joint venture with two or three big names — all to get the deal done.
In April, for example, Terra’s David Martin partnered with Edgardo Defortuna’s Fortune International Group to pay a record $205 million for a Key Biscayne development site, where they plan a 56-unit ultra-luxury condo building.
Beyond demand
But the headwinds go beyond conjectures about the buyer pool.
Tariffs on construction materials and the uncertainty surrounding them are putting more pressure on the projects that have tighter margins: the commodity projects selling for less than $1,600 per square foot.
“The cost of construction has gone up so much,” Nelson Stabile of Integra Investments said. “Arguably, it has doubled, if not more than doubled, since prepandemic days, and that’s a lot for the market to absorb.” That puts pressure on projects in “B” or “C” locations, which are going to have a much harder time being completed or being profitable.
Any project that’s already under construction — well beyond the photo-op at groundbreaking — is probably in a better position.
Okan Group locked in the pricing for materials, including marble and other high-end finishes, for its Okan Tower Miami, a 70-story, mixed-use hotel and condo tower in downtown Miami, after relaunching sales in 2021, said Okan’s Ibrahim Fesli. Construction is now at the 29th story, and the building will be completed in 2028.
If the negative readings are right, how bad could things get?
Even those who worry don’t foresee a 2008-style pop: South Florida is still a market where all-cash payments dominate, even at lower price points.
“We cannot have a bubble in a high all-cash market,” said Bozovic of Analytics Miami, “[because] bubbles pop when the underlying assets can no longer support the debt, and we do not have this setup.”
