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Any Colombian Condo. Vultures out there??

Condo vultures flock to Florida
Sharp price drops have lured bargain hunters from around the world, but experts warn prices could drop even further.

By Jeff D. Opdyke, The Wall Street Journal

Miami has a new vice: bottom-fishing for condo bargains.

Home buyers from around the U.S. and abroad are descending on Florida to buy condominiums that have suffered sharp price drops amid the housing glut, subprime-mortgage crisis and credit crunch. Some are searching for investment properties, confident that home prices eventually will rebound. Others are hunting for vacation or retirement homes. Yet pitfalls abound, and experts warn that prices could dip even further.

In hard-hit Miami-Dade County, condos originally costing as much as $1.4 million at the peak of the market now sell in some cases for $840,000, a 40% drop. Farther north, a coming auction at Solaire at the Plaza, a new condo tower in downtown Orlando, has set a minimum selling price of $170,000 on 24 one-bedroom units once priced as high as $296,000.

Such price drops have people like Bruce and Suzanne Bowen of San Juan, Puerto Rico, stalking deals. The Bowens have visited Miami three times since November to scout for properties, and recently bought a two-bedroom, 1,200-square-foot unit on a high floor with water views in Miami's fashionable Brickell district. The Bowens made their move after prices in the building fell to $290 a square foot from nearly $400 in September. Now, the couple is looking for a second condo.

"We've been coming here for 10 or 12 years, and I know how much cheaper it is today," says Bruce Bowen, a 46-year-old banker. "I may miss the bottom by 10% or so, but five years from now, that will be irrelevant. The underlying fundamentals are still very strong here."

Florida is a microcosm of what's happening across the country. As the price of condos -- which tend to be popular among investors, retirees and second-home owners -- takes a dive in many once-hot markets, buyers are emerging to grab properties on the cheap. They're finding plenty to choose from.

In Atlanta, unsold condos outnumber sales for the past 12 months by a ratio of more than 4-to-1, according to Haddow & Co., an Atlanta real-estate consulting firm. Typically, supply is about 1.2 times demand. In Las Vegas, more than 16,000 condo units are under construction and nearly 18,000 more are proposed, according to SalesTraq, which tracks new-home construction. Those projects were launched during the boom but are coming to market during the bust, and investors who originally put down money to hold a unit "are now trying to get out from under those deals with the developer," says John Restrepo, a Las Vegas real-estate consultant. "Many are walking away from their deposits." San Diego, meanwhile, is attracting Arizonans buying condos for as much as 50% off the high prices set in 2004 and 2005.

Because of Florida's perennial popularity among real-estate investors and vacation- and retirement-home buyers -- and as young families have migrated there from other states -- many areas were flooded with new projects in recent years. Now, amid the downturn, Florida condo sales are sharply down, off an average of 27% in 2007 from the year before, says Sean Snaith, an economist at Orlando's University of Central Florida.

Perhaps nowhere is the carnage -- as well as the opportunities and risks of condo bottom-fishing -- more evident than in Miami-Dade County, where about 25,000 condos are currently for sale, according to Multiple Listing Service statistics. That number could well surge: Cranes needle the city's skyline, and though several projects have been mothballed, new condo towers in various stages of completion rise everywhere. By most estimates, 12,000 to 15,000 more condo units will become available over the next 18 to 24 months. Given that about 10,000 condos are sold in a typical year in the area, the supply overhang means prices may fall further.

That doesn't mean that bargains litter the beach or that prices are as low as some buyers hope. Alicia Cervera Lamadrid, chief executive of Miami real-estate firm Related Cervera Realty Services, says too many buyers call nowadays "expecting to pay 50 cents on the dollar, and they're not going to find that." For the most part, prices are back to about 2003 levels, meaning they're down 10% to 40%, depending on building and location.

Of course, buyers shouldn't be seduced by big price drops alone. While buying in perennially popular areas can make sense, chasing deals in other areas may not be so wise. During the heyday, builders ventured well outside of Miami's core into what are effectively frontier markets. Midtown Miami, for instance, a condo development located a few miles north of downtown in an industrial neighborhood with little scenic appeal, is lightly occupied. Such properties "will take a decade or longer to come back," says Peter Zalewski, who runs Condo Vultures, a real-estate investment consulting firm in Bal Harbour, Fla. The developer of Midtown Miami didn't return calls seeking comment.

Other condo towers, meanwhile, were built after several major hurricanes ripped through the region in recent years. That pushed construction costs sharply higher, as demand for building materials and labor spiked, and has resulted in gaping price disparities among different developments.

The result is apparent in four towers on Biscayne Boulevard. Though the views, location and materials are all similar, two buildings -- Marina Blue and Ten Museum Park -- began construction before the hurricanes, and units there are priced today at roughly $400 a square foot. The other two -- 900 Biscayne Bay and the Marquis -- began going up after the hurricanes and are priced in the $600-per-square-foot range.

Home Affordability Calculator Yearly gross income $
Monthly debt payments $
Cash avail. for purchase $

Another potential hazard for buyers: foreclosures. In some buildings, foreclosures represent as many as half the units, according to Florida's Office of the Condominium Ombudsman. A high foreclosure rate means special assessments likely will be imposed on owners of remaining units at some point to help pay for common maintenance costs. That can unexpectedly raise the cost of ownership.

Moreover, foreclosed properties in South Florida tend to be priced near the mortgage amount. Given the run-up in prices before the shakeout, that means foreclosure buyers could pay inflated prices at the auction block. A better approach: Wait for banks to reclaim property that doesn't sell at auction. Local real-estate agents say you're more likely to be able to negotiate a better bargain then.

None of this is stopping buyers from flocking to the area. Zalewski and Jenny Huertas, the husband-and-wife team running Condo Vultures, are inundated these days with out-of-town buyers coming from as far away as California, Colombia and Germany. On a recent Friday, they showed seven units to Jeffrey and Deborah Boyer, a Harrisburg, Pa., couple who've made three trips to Miami in recent months to "cherry-pick the market," Jeffrey Boyer says.

The Boyers, both 54, want a one- or two-bedroom unit with a boat slip priced between $300,000 and $500,000. "This place might sit here for a few years before we're ready to really use it," he says. "But we're ready to buy now, if we can find the right place, because prices have come down so much."

By nine inch nails on Apr 8, 2008, 08:34 in Renting, selling & meetups.

nine inch nails says on Apr 8, 2008, 08:48:

Gonna wait it out another year then the banks will be begging to take their losses at 25% on the dollar or less. Let them continue to eat their debt. No remorse for them at all. More than a little greed goad them and the fancy dapper dressed pretty boyz and girlz on Wall Street. Their so called "Financial Engineering" is now in ruin.

Justification:

The real wild card here as mentioned up in the post are any hidden assessements from missed homeowners fees from vacated/foreclosed units. Normally approx. $.40/SF monthly fee but double that for 50% vacant units and looking at almost $900/mo. already on an 1100 sf unit just to pay the upkeep. Plus if there was any storm damage even more special assessments.

So even on a new unit say at 60% discount from highest sales price of $600,000 and without storm damage:

$900/mo HOA
$1400/mo mortgage
$600/mo.-$700/mo. taxes

Kinda see why they can't sell them for top dollar?? Even if the bank gave it to you for free without mortgage still have minimum $1500 nut to bust every month. That's like a small fortune in Colombia no?

"Bank owned" (www.foreclosurebyowner.com)

tejasmarcos says on Apr 8, 2008, 08:50:

ouch. there was a guy who was putting together a 1 billion dollar buyout fund to scoop as much of that collateral up as possible. can't remember his name....

god is in your head

darkangel305 says on Apr 8, 2008, 09:01:

damn i still cant afford a apartemt in hialeah :0(

miamimike says on Apr 8, 2008, 09:09:

I posted a similar post last week saying even if they gave these High End condos away for free, the average wage earner couldn't afford to live there due to taxes, Monthly maintenence fees and Insurance. You didn't mention Insurance in your above OP but that must be included if you have a mortage here in Florida. The Insurance cost on a new high end High Rise Condo will be minimally $5000 yearly so add another $400 to $500 monthly to your figures. The only insurance the Bldg is required to carry is Fire and Flood-you need to carry windstorm, liability, theft and contents(fire, wind, water damage) The Condo Building's exterior Insurance does not cover the inside of your Condo. That is the reason you need your own private insurance.Its a common misconception the Insurance is included in your maintenece and that is only partially true, but only for the exterior known as the "Common elements/property. If you pay cash for your unit you do not need insurance but then you are vulnerable on a very Pricey Condo so if some disaster befalls you, you have to pay yourself, self insure so to speak. Also, in the case of this Puerto rican couple, since it is an Investment Property, they will not get the $25,000 Florida homestead exemption we florida owners(live in the unit) get as our condo is claimed as our Primary residence-investment properties do not qualify. Also they do not get the SOH(save our homes benefit where taxes are capped at 3% annually for owners in which these unts are claimed as primary residence). By loss of these 2 benefits, that could easily add another several hundred or thousand $$$ to the annual tax bill. Hidden fees they don't advertise and only stick in the "fine print". Condo Vultures is located 3 miles due east of my condo in bal harbor. Bob Dole(ex Senator) has a Condo(seabreeze) there as do numerous other Politicians and News People. Bal harbor is extremely pricey and a very desirable Zip Code to live in...if you have deep pockets

Remember the average wage in Miami is around $29K and Miami has the dubious distinction as the "largest Poorest Big City in the USA" At least they did in 2007 maybe they dropped to Number 2 or 3 position now,,,

Our enemies are innovative and resourceful, and so are we. They never stop thinking about new ways to harm our country and our people, and neither do we." GW Bush

tejasmarcos says on Apr 8, 2008, 09:10:

Remember the average wage in Miami is around $29K

- wow. did not know that....

god is in your head

miamimike says on Apr 8, 2008, 09:16:

Teja-I waas a little off on my Numbers:

Census highlights Miami poverty, lower Palm Beach wagesSouth Florida Business Journal - by Brian Bandell
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Miami is the least affordable place to live in the country, median household income has declined in Palm Beach County, but Broward residents are making more money than before.

Those are some of the highlights - or lowlights - for South Florida in the American Community Survey conducted in 2004 by the U.S. Census. The survey of about 3 million households covered all metropolitan areas with more than 250,000 residents.

The median household income in the United States remained nearly flat in 2004 at $44,684.

In South Florida, only Broward County exceeded the national average, as its median household income increased to $44,799 from $43,692 in 2003.

Palm Beach County's median household income dipped below the national average to $43,540 last year, after being above average, at $47,194, in 2003.

*****Miami-Dade County improved its median household income to $37,025 last year from $36,850 in 2003.*****

Miami ranks high for poverty
The poverty rate for Miami-Dade was 17 percent, a decline from 18.4 percent in 2003, but still high enough for a No. 34 rank among counties surveyed.

The national poverty rate increased to 13.1 percent in 2004, from 12.7 percent in 2003.

Locally, poverty was more of a problem within Miami-Dade's best-known city.

*****The city of Miami ranked last out of 70 cities with a $24,031 median annual income. With 28.3 percent of its residents living in poverty - defined as less than $9,570 per individual or $19,500 for a family of four - the city had the third-highest poverty rate in the nation******

Our enemies are innovative and resourceful, and so are we. They never stop thinking about new ways to harm our country and our people, and neither do we." GW Bush

tasco66 says on Apr 8, 2008, 10:54:

Florida Snowbirds Question Fairness of Property Tax:

http://www.realestatejournal.com/buysell/taxesandinsurance/20060523-mo...

Veni, vidi, vici

Saltador says on Apr 8, 2008, 11:15:

And this has what to do with Colombia?
Sorry, I missed the connection....?

Mononoke28 says on Apr 8, 2008, 11:36:

The OP was just wondering if anyone from Colombia was planning on buying property in Florida now that it's in the dumps.

Diana

Mr. Hollywood says on Apr 8, 2008, 11:37:

I'm sure that given the weakness of the dollar and the weakening of the FL real estate market there will be a lot of affluent Colombians doing some buying there.

Saltador says on Apr 8, 2008, 11:53:

*doh*

darkangel305 says on Apr 8, 2008, 13:12:

Avianca magazine

i was surprised that it had real estate ads for luxury apartemnts in greater miami , brickel
im pretty sure many Colombians have vacations home in sunny south florida

Frank Rizzo says on Apr 8, 2008, 15:46:

San Diego penthouse....selling for $2 million at 24 months ago.....they are "trying" to get buyers for $750k now....

Here we go...!!

sloopskipper says on Apr 8, 2008, 17:21:

Yeah, but taxes and insurance are killers.

sloopskipper says on Apr 8, 2008, 17:26:

What are real estate taxes like in Colombia?

poco says on Apr 8, 2008, 17:55:

Quote: What are real estate taxes like in Colombia?

The house where I live is taxed 258,000 pesos per year. The taxes were higher than necessary/fair. Protesting resulted in a lowering of the taxes for 2008 to 225,000 pesos per year. That's estrato 2 and not in the city.

Just when things were fair and just the city is talking of raising the home to estrato to 3. Very discouraging,, higher utilities and taxes in the future.

Kind of sucks but if everyone else is raised to estrado 3 then what's a person to do? I'd suppose the bright side is there aren't any gringos within 50 miles.

This exchange rate is just killing me :>)

"Violence is the first refuge of the incompetent" - Isaac Asimov

nueva york bombero says on Apr 8, 2008, 18:23:

Wait but we're talking a difference of at $16 USD?
Do I have this right ??

RUV says on Apr 8, 2008, 18:26:

Poco,

What does the city base the move from a estrato 2 to a 3?

What are the benifits of moving to a estrato 3? Does not look like much.

nine inch nails says on Apr 8, 2008, 19:35:

"San Diego penthouse....selling for $2 million at 24 months ago.....they are "trying" to get buyers for $750k now....

Here we go...!!"

OMG! That's crazy but I believe it.

"Bank owned" (www.foreclosurebyowner.com)

nine inch nails says on Apr 8, 2008, 19:41:

I believe with large condo buildings in FL but not single family homes, zero lot lines or townhomes the monthly maintenance fee includes also the wind insurance as they insure the building as a whole. However even if included so what?? Like MMike mentioned even if they gave them away for free who in Miami could afford all the other costs?

Keep in mind too that not all the high rise condos are in prime locations. Purchasers complained in an article in the Miami Herald not to long ago that they didn't know walking outside their bldgs. they would have all these panhandlers begging for money. It's because they didn't do their due diligence and bought many of these condos. sight unseen without even leaving their homes. Amazing!

"Bank owned" (www.foreclosurebyowner.com)

sloopskipper says on Apr 9, 2008, 06:08:

poco says on Tuesday April 8th, 2008 17:55:

Quote: What are real estate taxes like in Colombia?

"The house where I live is taxed 258,000 pesos per year. The taxes were higher than necessary/fair. Protesting resulted in a lowering of the taxes for 2008 to 225,000 pesos per year. That's estrato 2 and not in the city.

Just when things were fair and just the city is talking of raising the home to estrato to 3. Very discouraging,, higher utilities and taxes in the future."

Poco, do you have any feeling for how much the taxes might increase if estrato would be raised to estrato 3, and an idea of the assessed value?

Cali2005 says on May 1, 2008, 14:51:

Mortgage brokers were riding high for a few years just like stock brokers when the internet hit its peak in the late 90s! Back then millions lost their retirement nest eggs, and now people are loosing their houses or they are forced to keep working another 10 years, and put off that retirement.

Now the prices are getting back to where they should be.

Property taxes are still way to high in the USA! Add insurance costs its ridiculous!

Viva Medellin

nueva york bombero says on May 1, 2008, 14:56:

What, did you dig in Peter's chest of old posts to find this Cali??? lol

Cali2005 says on May 1, 2008, 15:43:

yeeeeeeeeeeeeeeeeahhhhhhhhhhhhhhhhhh thats it

lol

Viva Medellin