Flashback to 1983
Yesterday I was given the link to an interesting news article that was published in The New York Times on March 21, 1983 entitled, “Auctioneer’s Gavel Finally Moves Luxury Condominiums in Miami”. You can find that story below or by clicking the link above:
Three hundred people spent a sunny afternoon today in the shade of a big white tent listening to the patter of an auctioneer hawking luxury condominiums, many of which were sold at discounts of 30 to 45 cents on the dollar.
As the market for luxury condominiums remains soft, more developers are taking this route to dispose of their inventory to cut their losses.
About 60 units were sold for $125,000 to $190,000 in the first day of a four-day auction at Biscayne Cove, a luxury high-rise complex overlooking blue waters, nestled among other luxury dwellings in North Miami Beach.
“We decided to auction off and give the people a bargain,” said Morton Littlemen, a representative of the developers. “We want to give the people a condominium they can afford to own.”
One two-bedroom penthouse that was originally offered for $248,000 was sold for a high bid of $150,000. Condominium prices in the two-building complex range from $100,000 to $334,000.
Biscayne Cove is the fifth such auction that Martin Higgenbotham, an auctioneer, has handled in the last year for the developers, subsidiaries of Cadillac Fairview Corporation and Southeast Florida Properties. It is, Mr. Higgenbotham said, the largest single condominium auction in Florida: 225 units on the block at a value of $46 million. It is more than the total of 152 units sold at the other four complexes in Miami Beach and Hallandale.
The condominium auction business has been “heavy,” Mr. Higgenbotham said. In the last 12 months his company has sold about 1,000 condominiums at auction. Previously it handled 250 units in an average year.
The decision to auction the properties was not taken lightly, according to Lewis Goodkin, a real estate consultant whose firm conducted a marketing study for Biscayne Cove and recommended the auction for fast results. “The purpose is, let’s get out of this stuff and let’s get out of it fast,” he said. Normal advertising and deep discounting is “like a prolonged agony.”
Mr. Goodkin’s study concluded that, even under good conditions, it would take three years for the market to absorb existing inventory and that it did not pay for developers to hold onto the property. “We have in Miami today the most overbuilt luxury condominium market in the country,” Mr. Goodkin said.
He foresaw more auctions of this magnitude. “When the last recession hit us, we had a lot more inventory, but the inventory was more affordable,” he said. “A tremendous number of the public could respond. It could be absorbed. Today, our big invetory is in the luxury ranges where the market is not deep and you don’t have the response from the South American markets because their economy is weak or low.”
While the glut is most severe in Miami, it is not exclusive to this area, Mr. Goodkin said.
Is this the fate of the luxury condo units that will come to market in the next 12-24 months in Miami? 20,000! That is the number that has been thrown around for the number of new condo units that will close in 2007 and 2008. It is difficult to imagine that a supply of that magnitude can be absorbed in such a short period of time. It will be interesting to see what percentage of people walk away from deposits rather than close. If a significant portion walk then developers will likely be forced to take immediate action which could recall memories of 1983.