Cash is King in the Miami Condo Market!

February 13, 2008 by Lucas Lechuga

Cash is King in the Miami Condo Market

Two local business papers, Daily Business Review and South Florida Business Journal, published articles yesterday morning discussing the fact that some lenders have blacklisted certain condo developments in Miami.

However, a few condo developments have it worse than others in Miami. The Daily Business Review article revealed that sellers in condo buildings riddled with foreclosures find that it is nearly impossible for potential buyers to obtain financing. The article uses Vue at Brickell to illustrate the point and states that “the project is widely avoided in the lending industry”. The same holds true for other condo developments in Miami that have experienced a high number of foreclosures. The doors are now closed! Well, unless, of course, you are paying in full with the almighty greenback.

BankUnited seems to have blacklisted the entire Miami condo market with over 160 condo developments on its list that are located in Miami. I’m not even exaggerating. I went through the list and tried to find one well known condo building in Miami that wasn’t on the list. The list included everything from condo developments built in the 1980s to condo buildings that haven’t even broken ground yet, and some that probably never will. The only building that I could think of that isn’t on the list is Grovenor House. Anybody else find one? Here is the BankUnited blacklist.

Declining market value and high investor concentration are the top two reasons cited by BankUnited for various condo developments being on their list. However, the other reasons provided are actually much more interesting. How about the pending litigation concerning structural issues at The Mark on Brickell and The Palace? I’ve known about the structural issues at The Mark on Brickell for months but I hadn’t heard anything about The Palace.

The Washington Mutual blacklist was far less interesting and the Popular Mortgage blacklist had the usual suspects such as Vue at Brickell, The Club at Brickell Bay, Jade at Brickell Bay, Solaris at Brickell Bay and Emerald at Brickell.

As a contrarian investor, one might say that the best time to buy real estate is in a market where everyone is saying “Mercy! I give up”. Looks like a few banks are finally throwing in the towel on the Miami condo market.  Once they all follow suit, then that’s when the real bargains in Miami will begin to enfold.

Leave a Reply

118 Comments on "Cash is King in the Miami Condo Market!"


Sort by:   newest | oldest | most voted
Anonymous
JasonN
8 years 7 months ago
Time will tell. However, I think that we may be in for about a decade of declining property values in Miami. I can just imagine everyone thinking I am crazy, but look if you look at the bust that follwed the 70’s and 80’s US housing booms you will see it took a long time for home prices to begin to rebound. The build up for our current boom is extremely substantial and should take longer to deflate. With that said, I like the rental listings that either I just noticed or you recently added to your blog. It is… Read more »
Anonymous
Wild Bill
8 years 7 months ago

Lenders have always had restrictions on loaning money to buildings with high investor/rental units. Once lenders enforce their existing rules market will be dead for a very long time.
Good luck with the condominiums board trying to maintain a building with cash strapped people who know they cannot even sell their units.

Anonymous
Laurent
8 years 7 months ago
So Lucas, at that point people actually want to close but are being prevented by stupid bank action who put restrictions across the board shouldnt they start working and reviewing and shouldnt developers slash their prices to their investors in order to avoid lawsuits and banks being loaded up with unsold condos… whats the reasoning for this wait and see situation of banks developers and government who still dont slash taxes? the only actual people who want to go forward are the 30% real investors who are held hostage in the situation… Lucas, as of today what message do you… Read more »
Anonymous
IB
8 years 7 months ago

I have been wondering how the offers have been holding up so well in some of these buildings compared to what I expected. This is the nail in the coffin. Things will get incredibly ugly fast from here.

Anonymous
DV
8 years 7 months ago

If you go through BankUniteds list you will find many buildings that are not condos at all but rather are Office buildings (Met2, 1450 Brickell) or Rental buidings (One Broadway). I wonder if BankUnited blacklisted those buildings because of high investor/owner ratios or too many foreclosures lol.

Anonymous
Brad
8 years 7 months ago

Sure, cash is king, but if banks won’t lend due the uncertainty of actual value, how can an all-cash buyer estimate the actual value and in turn demand a comparable sales price? Who knows what some of these condos are actually worth today or what they will be worth in 5 years.

Foreclosures + % Investors vs % Primary Owners + Bankrupt Associations + Construction Issues + Oversupply = Total Uncertainty, thus reluctance to lend $

Anonymous
alec
8 years 7 months ago

i wondered as well why One Broadway was on the BU list….maybe b/c the base of the building is empty for commercial leases?

Anonymous
Evolved Capitalist
8 years 7 months ago

Are there any south beach projects on this black list?

Anonymous
8 years 7 months ago
Hello, As I say in the article for the Daily Business Review, I am a stong believer that this is all for the best. I believe this is the time to buy there are greta deals int he market place now and the rates for qualified buyers are in the mid 5%’s which is a great deal all around. I believe the people that are really having a hard time doing business or attaining a loan are people that shoudl not be in the market place to begin with, they are part of the reason we are in this mess.… Read more »
Anonymous
Buyer Tom
8 years 7 months ago

It is a buyer’s market today, will be in December and will be throughout 2009, possibly throught 2010. No need to rush buying, the bottom is still a ways away. After all ML predicted a 15% and 10% price declines in 2008 and 2009 respectively.

Anonymous
Julian
8 years 7 months ago

My g-d. Is someone who spells decent as ‘descent’ really lending money? Maybe I should go into the business of selling apostrophes too. I think we should be told…

To Evolved Capitalist – Apogee was on one list, I think because MEI, Paradiso, etc are not closing yet, it’s probably too early to tell… (or too early to publish)

Anonymous
8 years 7 months ago

The prices for the properties should drop some more but Im not so sure about the mortgage rates. The mortgage industry as hard as it is to believe with all the new plans being implemented to stop the foreclosiures and the drops from the fed dont expect that to drop much more and eventually they will begin to go back up . There is no rush to buy now but it is a great option in my opinion.

Anonymous
moretroops
8 years 7 months ago

If you buy a condo now you deserve your fait. This is falling market, in precipitous decline, and Miami condos are the absolute worst of it. I can’t imagine why anyone would want to grab this falling knife — particularly with rents so ridiculously low. When a mtg broker or realtwhore tells you “nows a great time to buy,” slap his face. He’s lying now just as he was lying then.

Anonymous
Laurent
8 years 7 months ago

how do you expect thta foreigners who have businesses and a credit in us and that are ready to put more than 30% down do not find other alternative than get ARM or floating rate loans whereas us banks where they hold their account should propose them fixed rate 30 y at around 5.5 % …foreign programs give a 2% premium to those fixed rate..

Anonymous
8 years 7 months ago
Laurent, It truly depends on what banks you are working with, but i can tell you for a fact a foreign national in this market as of today could secure a 30 yr fixed at 6.5 % or even better depending on a couple of factors which as an investment is not a bad rate at all even as a US citizen those rates for an investment property in my opinion are good enough. In regards to moretroops comments, everyone is entitled to an opinion, some opinion are obviously more educated than others but at the end of the day… Read more »
Anonymous
Bancunited President, "Knot" Reeli
8 years 7 months ago

We instructed all of our employees this list was a trade secret and was not to be released, esp. to those pesky reporters and bloggers; now Hollo is going to sue us. Pls disregard the list, shred any hard copies, and destroy hard drives containing digital copies.

To make things fair, pls upload the lists maintained by other banks

At least we still have our racial, religious, and national origin-based lists. “Too many ____” (fill in the blank)

Anonymous
cyrus
8 years 7 months ago
Michel Fayad, today’s loans will only go to those who don’t really need to borrow. but since you are in the mortgage business, i’m sure the same reasons you are using today to buy properties are the same reasons to buy things in 2005. your business depends on transactions – so to hear that you think it’s a great time to buy and that there are good deals out there, doesn’t really mean much to a real buyer. you’re not exactly an unbiased advisor. in an illiquid market where bids have basically disappeared … its not quite wise to talk… Read more »
Anonymous
8 years 7 months ago
Cyrus, Like I said before I believe people who are able to get loans now are the people that should be getting them and it is totally my educated opinion. It might not be an unbiased opinion to you or any other “real buyers” as you put it and that is more than ok with me. There are more than enough people on both sides of the spectrum when in comes to this issue who have nothing to do with the local market as the following link will show. http://articles.moneycentral.msn.com/Banking/HomeFinancing/PrimeTimeToRefinanceMortgage.aspx Furthermore nowhere am I saying that people should buy as… Read more »
Anonymous
BFG
8 years 7 months ago
“When a mtg broker or realtwhore tells you “nows a great time to buy,” slap his face. He’s lying now just as he was lying then.” A swift kick to the balls would be a more appropriate response. The bottom in this market won’t occur until the excess inventory is cleared out, banks regain confidence in the market, and the economy improves. I don’t see that happening this year. The 2008 real estate market will make 2007 look like a great year. The realtors that are saying “now is a great time to buy” are the same ones who were… Read more »
Anonymous
Buyer Tom
8 years 7 months ago

BFG – Totally agree…..it will be years, not months before prices rise instead of fall or hold steady.

Anonymous
RMP
8 years 7 months ago

Prices will not rise until the last of the new construction is completed and closed. There are years of condos on Miami, Miami Beach and Ft Lauderdale

Anonymous
Cyrus
8 years 7 months ago

like i state previously, the right time will be following 3 months of decline in inventory. unless you need a house to live in now, it won’t make any sense until then….especially when rent costs 1/2 of carrying costs to own. again, if emotions are taken out of the equation, this is simple formula to follow…just some friendly advice to all.

Anonymous
8 years 7 months ago

Lucas,

If you look at Bank United really closely you will see that they are overeager to blacklist all Dade buildings. Take Brickell Key for example – 9 out of 11 buildings are on list (only Isola and St. Louis are not in list); compare that to Popular mortgage which has 0 in list & WaMu which has 6 buildings in eligible :
Brickell Key One
Brickell Key Two
Carbonell
Courts Brickell Key
Courvoisier Courts
Isola

So if the article is fully based on BU data – I think there is still hope to get mortgage in most buildings

Anonymous
8 years 7 months ago
You know the one thing that makes me excited about this market? Qualified buyers are the ones looking and making the purchases. If you don’t have a decent down payment or not paying with cash get out of the way. Deals are there for the taking. If you have cash, want to buy in bulk or buy for a principal residence then line up. As far as some banks blacklisting some buildings – that means opportunities for many other banks ready to lend to qualified buyers. Sure if your unit won’t appraise – forget about it. But most will as… Read more »
Anonymous
ana
8 years 7 months ago

wow,
i have been doing business in south florida for 8 years and it does not surprise me.
hey did buffet invest in the condos in miami?
sorry, a little sarcasim.
but i still love un cordadito.
by the way, this is one of the best blogs i have come across.

Anonymous
Julian
8 years 7 months ago
“But most will as long as you didn’t purchase a flip”. There in lies in the problem, because most of Miami and Miami Beach is exactly that. BTW, let’s just compare to London, where people are talking down the market (and it has slowed) QUOTE Allsop Residential Auction, day 1… no room for tumbleweed Despite the scare stories circulating at the back end of last year, of residential auction houses deserted but for a couple of spectators and a handful of derelicts who’ve come in out the cold, the auctioneers kicking the tumbleweed… day one of the Allsop Residential Auction… Read more »
Anonymous
8 years 7 months ago
The really really big problem that will sink this bubble is that MOST condo buyers were flippers. Professional flippers and people who purchased condos not be cause they thought it made sense versus renting but rather because they KNEW they would make a profit after costs. Now think about it, how many people in Miami from 2001 to early 2007 paid for a condo? Easy Answer:0 Zero you ask? How can you say 0 when thousands and thousands of condos were “bought”. Condos were not “bought”. Contracts were signed and the contract signers got the benefit of making money due… Read more »
Anonymous
Buyer Tome
8 years 7 months ago
I gotta agree with you JL. The flipping is now flopped and many flippers will be flatlining soon. What makes it hard for someone who wants to buy is what is the “real” value of a property? I can afford the current prices, but just like a stock, I’m not going to pay $140 when the price should be $100 and helplessly watch it decline after buying it at $140. It would be better for everyone if sellers would price their condos at what the prices should be…but there seems to be a resistance to do so. I’m quite certain… Read more »
Anonymous
Buyer Tom
8 years 7 months ago

…..and not helpful to buyers either.

Anonymous
Laurent
8 years 7 months ago

true and true…first fools are developers who don’t go with the flow..then

Anonymous
Laurent
8 years 7 months ago

true and true…first fools are developers who don’t go with the flow..then sellers who need to sell quickly, banks who are trying to charge 2 or 3% PREMIUM on a mortgage..and finally buyers who dont buy when the best offer is shown..but those have the actual right and duty the wait and see where the mass is trading…if most trade at 350 $ a sqfoot that where they should trade but if most trade at 250$ wait it out until you are offered that price.

Anonymous
8 years 7 months ago

Buyer Tome – when & where would you decide to buy a condo while making sure it would be a good investment

Anonymous
Buyer Tom
8 years 7 months ago

Margus – (Tome was a typo should have been Tom) I had a condo in mind, know what the right price should be, but seller not ready for that price yet even though after 2 months no one is offering more….. Oh well.

Anonymous
8 years 7 months ago
I think there is a false assumption that flipping was rampant. Some buildings did not even allow resales so they would deter this from happening. Met, Avenue, etc. Some didn’t launch a resale program until very late like now. So you have many investors that got in very early and bought at very attractive prices on waterfront buildings. A few here and there obviously overpaid but some also bought to use as primary residence and I would expect them to close so they don’t just throw away a 20% deposit. The fact of the matter is if you are a… Read more »
Anonymous
Un-Related
8 years 7 months ago

Quoting Samir Patel: “The fact of the matter is if you are a buyer today it is possible to buy at pre-construction pricing in some buildings from original buyers who never flipped the units.”

Perhaps you could find buyers for some units at a soon-to-be-opened Related project, in which the sellers would be willing to take a NET LOSS of 50% of their deposits??

I am not RE agent or broker nor are these listed with RCRS.

If serious, post an e-mail address and I will respond at my earliest convenience.

Anonymous
cyrus
8 years 7 months ago
samir, how long have you been in this business? no offense but i’m not sure what you are talking about….in the past 3-4 years, ‘flippers’ made up probably 80+ of these sales! they’d come in and buy 30-100 units in one shot…who was buying these you think? not to mention the shoe salespersons who were flipping multi units (at least trying to…). maybe if you weren’t a realtor, you could see things a bit clearer, and i really mean NO offense by this – i would say most buildings that have and are going up in the past couple of… Read more »
Anonymous
Julian
8 years 7 months ago

Samir – the ‘no flip’ rules were a 2005 invention. And largely irrelevant because by 2004/2005 investors were prepared to close and re-sell as their flipping tool as the market kept going up.

Cyrus is right – I would say, even in the beachfront buildings, the majority were contracts based on appreciation and re-sale.

Since that’s a bust, people are walking away from 20% deposits! Of course they are. $1m condo, 20% deposit. Probably underwater by 10-20% in price and then holding costs, 1.75% developer closing fee, extras like floors etc. Only an idiot would close.

Anonymous
8 years 7 months ago
Wonder if Tibor Hollo is going to sue BankUnited? Maybe BankUnited’s blacklist is so long bc it has a world of its own troubles. And other banks may be more willing to lend. But if one bank blacklists a building, why would a loan officer at any other bank lend against it? He could feel extra stupid if it defaults shortly after. JL has it nailed. The old buying audience is dead. The buying audience during the next stage will be totally different and take a long time to build. During that time, the Miami condo market will go basically… Read more »
Anonymous
8 years 7 months ago
By the way, there’s a famous stock analyst who’s been shorting Florida banks mercilessly. Tto great profit, including BankUnited – see stock chart of BKUNA. He’s says the ultimate conclusion of all this is the following “domino effect”. No one will be able to sell a condo in a blacklisted building, including the developer, bc of the lack of financing. Then the developers will not be able to pay off the development loans (I’m not saying they’ll “go bankrupt”). Then banks will take over the projects in lieu of loan repayment. Then the banks will dump the units but probably… Read more »
Anonymous
8 years 7 months ago
cyrus, Do you expect a full 80% of people to walk away from 20% deposits? Many new buildings have been open now for over 6 months. How many bulk deals at 50 cents or 60 cents on the dollar have you heard of. Sure maybe thats a difficult one to keep track of. I know of 1 developer who received a few defaults back and actually raised the price of the premium units. As far as flipping – cyrus if you meant 80%, I think that is a grossly exagerated number. Sure some people tried to take advantage of the… Read more »
Anonymous
Julian
8 years 7 months ago
Smoking the good stuff again, eh? First, the developers will largely be on their knees, with little new appetite for NEW credit to fund new ventures. Second, building costs were linked to home prices. Samir, there are HUNDREDS, HUNDREDS of units in brand new buildings on the beach with SE views varying between $500k and $2m. HUNDREDS. And we’ve established you aren’t selling them to locals because they can’t afford it. And no one using it 6x a year is going to pay 2.5% property tax anymore. I think you vastly underestimate the investor impact with no desire to close… Read more »
Anonymous
gables
8 years 7 months ago
Seems to me a correction will have to be made to bring income in line with mortgages. Realistic people have begun to recognize that in todays environment of uncertainty, overleveraged housing is too much of a risk to take on. I for one would love to buy a house, but the prices must come down. A better than average income of say $70k cannot easily afford housing greater than $300k. My feeling is until 2B condos drop to below the $350k threshold the holding pattern will stay. The prices will not drop below $250k on a 2B, this would be… Read more »
Anonymous
Danny
8 years 7 months ago
Samir – I must say your outlook is a bit more rosy than presently warranted. Greed drove the prices up and fear … when it finally arrives … will drive the prices down. We saw the greed but we haven’t yet seen the full fear. Wait until hurricane season which should be just about the time when the fear of housing will fully be realized…not caused by the weather but by the full realization of the sinking housing market, property taxes, and other holding costs and the FEAR that there is nothing you can do about it. It is that… Read more »
Anonymous
8 years 7 months ago
“Do you expect a full 80% of people to walk away from 20% deposits? Many new buildings have been open now for over 6 months. How many bulk deals at 50 cents or 60 cents on the dollar have you heard of.” Because this is a real estate blog, it may seem with the daily RE conversations that we’ve been in a local condo downturn forever, but actually, we’re probably a little less than 1 year into this downturn in the Miami Mid to High-end condo market… a condo market that has been fueled by unprecedented levels of overbuilding, fraud… Read more »
Anonymous
jcrimes
8 years 7 months ago
JL hit the sweet spot – the last few years (1) people weren’t buying residential real estate for all the traditional reasons, i.e., rather than a long term investment that doubled up as their residence, for many it was viewed as a short term, liquid investment and (2) banks weren’t lending money according to their traditional policies, i.e., 20% down etc. what’s the effect (i always look at it from the securitization world )? every underlying assumption that went into pricing and assessing risk has turned out to be ridiculously wrong. i mean it’s mind boggling how “off” the so-called… Read more »
Anonymous
Mr Waverly
8 years 7 months ago
JCrimes and JL you guys are so right on. I wrote this last night and forgot to hit to send “Fact of the matter” is that some projects did not allow flips and started resales late because the Developers wanted to be sure they sold off their inventory first. Developers did not use “NO FLIPPING or NO RESALES” as a deterrent for flippers, they used it as part of the sales pitch to give the buyer confidence they were buying into a project with end users. Developers welcomed every warm body that was able to sign on the bottom line… Read more »
Anonymous
Cyrus
8 years 7 months ago

samir,

blaming this blog for freaking out buyers? or having ‘investors’ walking away from their deposit? …come on now…quite ridiculous.

Anonymous
RS, New York
8 years 7 months ago

jcrimes, JL & Mr. Waverly: great posts.

In my opinion, not only do real estate prices have to fall significantly, but so do property taxes and HOA in order to attract serious/sophisticated buyers.

Why should I purchase Miami real estate (condo) when I can rent the same for 1/2 to 1/3 the cost of owning it? Obviously I’d rather rent and use the capital to purchase downtrodden stocks of high quality REITs (with generous dividends) such as Vornado, and Apartment Investment Trust, or even closed end Real Estate ETFs that are trading at a significant discount to their NAV.

Anonymous
Buyer Tom
8 years 7 months ago
Here is an example of a NEW building directly on the beach: Turnberry Ocean Colony – South (16051 Collins – Sunny Isles), which apparently must not allow rentals, it has 52 properties for sale with ranging in price from $1.369,000 to $5,400,000. Without adding them up…that is in the $1 BILLION to $2 BILLION range for sale in that building alone! There are only around 130 residences in each of the two buildings. Sure looks like that is going to be a really bad situation….. One wonders about the new Trump Towers coming online over the next 2 years. At… Read more »
Anonymous
Buyer Tom
8 years 7 months ago

Oh and the HOA fee is in the $2,000 – $3,000 per month. Not bad eh? $24K-$36K per year just in HOA fees (sarcasm).

wpDiscuz

For Real Estate
Related Needs And Inquiries

please complete the form below

  • This field is for validation purposes and should be left unchanged.