The $400K Price Point for 2 Bedroom Condos Has Been Breached
December 6, 2007 by Lucas Lechuga
Neo Vertika currently has 11 two bedroom condos that are priced for under $400,000, Isola has 2, Courvoisier Courts has 3, One Miami has 7, Solaris at Brickell has 1, The Club at Brickell Bay (surprisingly only) has 2, The Mark on Brickell has 3 and Vue at Brickell has 11 (with 2 of the 11 two bedroom condos priced for under $300,000).
With the additional inventory, from the soon-to-be completed condo developments, I think the $400,000 price point for 2 bedroom condos in desirable condo buildings throughout Brickell and Brickell Key will become more commonplace in 2008.
Of course, the size and square footage of the condos needs to be taken into consideration. Most of these new condo developments are delivering 2 bedrooms that have 1,145-1,300 square feet. Anything larger will, of course, fetch higher prices. It should go without saying that 2 bedroom units at ultra-luxury condo buildings such as Jade, Four Seasons and Santa Maria are exempt from this discussion.
I'm actually looking forward to the opening of Plaza on Brickell in January. In my opinion, it offers the best value in Brickell. I think within 3-4 months after it opens we'll see aggressively priced 2 bedroom condos throughout Brickell approach the $350,000 mark.
I was at the Plaza on Brickell sales office last week with out-of-the-country clients and we were both shocked by the prices that were offered. The prices had come down considerably since September, when they last visited the sales center with me. One bedroom units now start at around $210,000 and two bedroom condos start at around $340,000. Investors have become more motivated to sell as their closing date approaches.
A few days after I visited the sales center with my clients they told me that "at these prices we would regret not making an offer". They are looking to hold for about 10 years. Where else in Brickell can you get such prices, much less in a brand new development? I think Plaza on Brickell will act as the buoy for the Brickell condo market.
This is why many investment groups have their eyes set on Plaza on Brickell. They all want to buy units in bulk at a deep discount to get positive cash flow. However, I don't think that this will happen at this development. I think prices offered, at the present time, are appealing enough to end-users. They, too, have their eyes on the Miami condo market because it is in their own backyard.
I know from reading your comments lately that you all are very opinionated. So I ask you, where do you think 2 bedroom units will ultimately be priced? More specifically, where do you think the top 10% best priced two bedroom condos in the well known Brickell developments will be priced by the end of 2008?
Are these worthing looking at from a rental income point of view? Or is the rental market soft as well? I live in Canada and have been watching your site for a while. The strong Canadian dollar coupled with these lower prices makes Miami worth looking at ( Not too mention winters are much warmer!! )
What do you think 2br units will rent for in the Plaza?
Lucas,
when is closing at Plaza?
Does it look nice, ammenities, pool?
Did you see it?
In general I believe 400k for 1200sqfeet brand new low floor 500k for above 20th floor
Old buildings(ie 5 years) will get softer i d say around 300k for low floor
I am not talking about bank foreclosure which could go 20-40% lower
The real question is how many forclosure will you have
Your list of desireable buildings leaves something to be desired. You also make no statements about the differences in pricing between waterfront buildings and non waterfront buildings. And within one building views and floor height make all the difference in the world. If I’m a buyer who usually shops at Neiman Marcus and Neimans’ has a sale, I’m very happy and it will incent me to buy more or to buy sooner. If the Gap has a sale at the same time, and even if offering clearance, I am certainly not going to change from Neiman’s to the Gap just… Read more »
I think that waterfront buildings and others will make all the difference.
Laurent: You talk of 300K+ like it was a cheap price, almost like a deal. Now I think, how many persons in this city where the median income is around 40K can afford such a mortgage (plus all the extra expenses like HOA, taxes, etc). From that small amount how many would consider moving from their current places (because they most probably own a place already) to those buildings and most probably have theirs taxes duplicated. I bet that the number is low, very low. Go to a site such like money.cnn.com and use a calculator like “how much house… Read more »
Laurent I think its goign to be the opposite I think older more established buildings are going to be more expensive than new buildings. New buildings have a lot of speculators, a lot of new inventory in the market and the fact is not everyone is going to move in and the condo association will not be able to run the building, thus making it worse and cheaper to buy
I just read a UBS research report that estimates a further 10% drop in home prices nationwide. Given that the Miami condo market is at the extreme of the repricing cycle, I would estimate a possible additional price drop of 20% before we see prices stabilize. The fly in the ointment is of course foreign buyers with strong currencies like Canada and Europe that might be tempted to buy in before that extreme a drop.
A couple of thoughts from someone who just went through the search process for 6 months before buying. First, if these condos are being offered in this market for 400K – they certainly can’t expect to get it. In my search, the point of an initial offer was to see whether i would get 15% or 20% off this number. So what are they selling for? I wouldn’t pay more than 320K right now. But to be honest, at some point the foreclosures will kick in and the prices could go to around $250 sq/ft. The important thing for a… Read more »
Matt, Good comments made! I have many of the same similar thoughts about investment in a Miami or South Beach condo. The property taxes and HOA are enough to stifle many buyers. HOA fees of $400 to 600 on a 1 bedroom unit and taxes of approx $8 to 1$10K yearly make the yearly cost of carrying such a unit quite overwhelming; especially if one is only able to use the unit on an irregluar basis (used as a vacation or 2nd property). The unit cannot be rented for anything close to breaking even either! In most situations, it is… Read more »
Merv – Rentals are very much in demand right now because not many people are buying. However, due to the high number of condos that will be coming onto the market within the next year or two, rental prices are predicted to go down 10-15% within the next year. Click on the following link to view a news story that aired on CBS4 about a month ago that provides great insight into the rental market in South Florida.
http://cbs4.com/video/[email protected]
Joe – I’ve seen the lobby at Plaza on Brickell but I haven’t seen the other common areas. It looks great! Like I said, I think Plaza offers the best value in Brickell. What are your plans for your unit? Are you going to rent it or sell it?
IRR – I think 2 bedroom units at Plaza will rent for around $1,900-$2,300, depending on the view and any work that has been done to the unit.
Lucas et al: Here’s my take as an investor, not an owner, and also as a tenant. A 1200 SF apartment on Brickell for $350,000? Cost of capital at 8% (a reasonably safe assumption if invested in stocks and bonds over ten years): $28k/yr. Maintenance, HOA, whatever @ 50c/SF/mo: $7.2k/yr. Property taxes at 2% (annual) $7k. Insurance (a wild stab) – at least 1.3k/year. Probably twice that, but I’ll use my bargain price. That adds up to $3625/mo in carrying costs before assessments, and anyone buying in these troubled and unoccupied buildings on Brickell can expect those – hell, anyone… Read more »
Lucas: I am from NYC will escape over weekends to get some sun in Miami. Will use as a second home. Maybe later on I will rent it. So many people panic about prices droping, i am long term. I really do not care it condo prices go down in next year. I am a long term, and plaza on Brickell is a greta building on a great location close to brickell village and it will do fine long term. Thanks for your reply Lucas. Love your blog and read it every day
Matt – I’m willing to be your state representative. Are you, or any others, willing to endorse me? Just kidding! I’m a huge baseball fan so, if I were a state representative, my primary objective would be to obtain a waterfront baseball stadium in Miami (a retractable dome stadium at the American Airlines Arena sounds logical to me). I would love to see home runs hit into Biscayne Bay from the stadium. Miami should be a major baseball city but it isn’t. I’m originally from Chicago and I’ve seen the Scrubbies play more times than I’ve seen the Marlins play.… Read more »
I’m also a big football fan but I don’t think the Miami Dolphins deserve a waterfront home. You can place them at the Homestead Miami Speedway. Bring on a real team like the Chicago Bears to this city. They may not be playing well this year but they brought themselves to Miami last year during the Super Bowl.
As an owner of a 2/2 on Brickell Key, I am very interested in seeing where this goes. Honestly, I think we need to come up with some type of classification for condominiums. Clearly, we have high-end, mid-end, and low-end condos. Second, I would think we could have direct waterfront, near-waterfront, and no-waterfront. I guess we could create a matrix to determine where prices should be. I think ~$400 a sq foot for direct water front for a mid-end building is correct. There are VERY FEW direct waterfront buildings, in fact, almost all of the new construction is near and… Read more »
Lucas, When will you finally get it. 400K for a 2 bedroom condo is not a steal, its a rip-off. 300K is a ripoff. 200K is a ripoff. These condo’s will be sub 200K units in 3 years. I would bet my left testicle on it. 1300 sq foot condo… lol… In most of america right now that kind of real estate goes for 130,000 dollars. I will give you the benefit of the doubt and say that Miami, with the water, weather, and weed will go for 180-190K tops. a 50K premium above the standard 100 dollars a sq… Read more »
Formula to prove I know what I am talking about. Here is the Golden Rule of the Housing Bubble and Crash. … What you can Rent a unit for monthly, is what the Monthly PITI should be if you owned the unit. Ex…. You can only rent the unit for 1800 a month? Then the mortgage, taxes, association fee, and insurance should be 1800 a month. Does that make you giggle? Well stop giggling because that is what is in store for Miami and that is how far the crash is going to go before it stops. Lets assume that… Read more »
Chris, I’m sure you are aware that the tax laws allow you to deduct your mortgage interest (virtually 100% of your payment for the first five years) and your property taxes. It makes a big difference between buying and renting at the same price. In addition to tax deductions, buyers typically pay a premium over renters, in order to make the place their own (get rid of trashy carpet, choose paint & finishes). However, I agree with you on your most important concept: there has to be a sensible relationship between rents and buying prices. Right now, Miami does not… Read more »
I own a townhouse in Coconut Grove and paid about 30K in mortage interest + property tax in 2006. I saved a grand total of $4K in taxes due to my mortgage interest/property tax. I always though that I was saving a HUGE amount in taxes and was very disappointed to see how little it saves me in taxes. I am single and dont have any kids, so I have zero tax deductions except for the mortgage interest/prop tax. Business is good and I will be able to pay off my house in a couple of years (about 7 years… Read more »
NEO/Epoch builders of Wind really did it bad this time. If you are under contract in the Neo Wind building, be aware that the units that were advertised as 3 bedrooms 2 baths are actually 2/2 and the units that were advertised as 2 beds 2 baths are really 1/2. Check your documents, they are delivering the plans to the city as 1/2 and 2/2 . Not 2/2 or 3/2 Try selling your unit a few years from now when you purchased a 3/2 and you can only sell it as a 2/2 or you purchased a 2/2 and you… Read more »