The Miami condo market looks to be heading down an ugly road, appearing “to be in the early stages of a distressed preconstruction condo market,” according to StatFunding Founder Andrew Stearns in his November update, saying the next two years “will likely further see the distress continue and increase.”
Inventory is soaring as underwater sales continue while developers have pumped the brakes on several planned South Florida developments. Stearns noted in September the signs of a distressed market.
Over the last six months, 43 percent of new pre-construction condos sold for a loss (20 of 47), per the report, which represents over six times the amount of sales for a loss (3 sales) in the six months prior.
With over 10,000 units already in the construction pipeline and set to be completed within the next two years, if the sales rates continue there will be over a 468-month supply of resale units.
“The overall Miami condo market also appears to be in trouble,” Stearns writes. “Over the last three years, inventory has increased from about 8,000 units to over 14,000 units, and transaction volume is down about 30 percent year over year.
“In May 2016, we released our first Pre-construction Condo Market Update. At that time we noted the obvious pressure building in the market, which resulted in condo flippers selling units for a loss and sellers listing their condo with prices that would result in losses for the seller. The data indicated that the trend would likely continue with the massive amount of inventory coming to market in a short period of time. Unfortunately, our prediction was correct.”
These numbers would suggest we may be in the early stages of a distressed pre-construction condo market. Expect prices to continue to adjust downward.