The Miami real estate market, emblematic of the boom, is now partially symbolic of what is happening in the downturn. Affluent consumers seeking second home alternatives should reference a May 6th article in the New York Times. Some of the highlights that give some insight on the bloodbath going on in the new condo market are as follows:

• Prices on condos in South Florida have come off 5-6% off year ago levels – a bitter pill to swallow for investors who were used to annual appreciation on the order of 25% per year.
• Some analysts estimate that 70% of sales before the late 2005 peak were to speculative investors. Now some projects have as much as 20% of buyers who want their deposits back. Even once hot buildings that have opened such as Blue and One Miami have 20% or more of their units back on the market.
• Now that prices have come off substantially and there is a continued glut of units coming available over the next several years, investors in pre-construction condo units are trying desperately to break contracts, sometimes sacrificing large deposits of hundreds of thousands of dollars.

In order to get out of their contract, buyers have to prove the developers materially changed the project in a way that is adverse to the buyer. And while many buyers would like soaring property insurance rates to qualify, a new state law says they don’t. Consequently many are turning to developer in-house resale programs or simply walking away from deposits instead of closing.

Some consumers seeking a second or third home might find a stronger market in fractional ownership private residence clubs or destination clubs. Helium Report offers a free, independent Guide to Destination Clubs with more details.

If national media like the Times is reporting on this condo story, the sellers must be in a full lather. Sounds like things may get somewhat worse for them before they get better with another 20,000 new units coming online by next year in Miami-Dade county alone. But of course, one man’s trash is another’s treasure. There reckon to be lots of selection at pre-boom prices for, ahem, opportunistic buyers (read: vulture investors) in the near term.

Photo from the Conrad Miami