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Wow. This will surely put a hamper on sales.
Lucas – the HOA fees at One Bal Harbor were 90 cents per square foot when I was looking at this project in late 2007. Who knows what they are now. That meant that the HOA fees and taxes on a typical 2/2.5 condo were over $50,000.00 / year, a major factor in my deciding not to purchase (a good move, as it turns out).
Seriously, how can people afford or justify this? Okay maybe gym fees would avg. $100 a month for 2, maintenance costs for a pool (if you owned one), and insurance costs… but who really cares about valet parking and some of the other amenities? I would love to buy a condo, but I can’t justify the HOA fees, and this borders on obnoxious!
This is why I am deathly afraid of Miami condos… even one lands an awesome price on a unit you can still drown in HOA fees…
Not to mention special assessments. Right now, the condo. system – the market itself – is broken in Miami. And it wont be fixed until prices fall another 30% and normal people with real jobs can afford to buy. Until then we’ll see this story repeat time and again. The system is broken.
Another reason to buy a house…this kind of fee increase is insane.
A big part of it is complete mismanagement! The mgt. companies are robbing people blind with gross inefficiency and general incompetence. They have less than zero skin in the game. They don’t have any real training and if they lose contract, no big deal they go on to next suckers. It is disgusting that board members are simply to busy or it is beneath them to closely oversee boards actions. If people on board are that busy, go get your ego blast elsewhere and let somebody who really wants to do some good and has time take charge. . .. whether retiree, homemaker, etc. They routinely boost maintenance and assessments without looking in to cutting costs and ultimately put more people over top to walk away or foreclosure and then guess what–vicious cycle kicks in and maintenance increases even more. HELLOOOOOOOOOOOO–wake up and pull your heads out of you KNOW Where! You’re messing with many people’s lives!
What about the units that went unsold in this project? Do you think the management is forcing the owners in the building to cover those costs? How exactly does that work?
Lucas, do you know who the management company is? So proactive condo owners can make it a point not to have this company as manager of their building..
Just like a dividend yielding stock that cuts the dividend overnight. Expect huge stock price declines.
Government has so many rules today its almost impossible to operate a condo without the dreadful management companies. One would think the management company should be able to save the condo with their contacts with insurance companies and service companies but its Miami so its probably cost plus fee to management. A condo in Hallandale had a $200.000 estimate to paint the building but the owners were assessed $800,000 after the 80 y/o boards members all got their cut.
Any building which allows rentals will have to have a management company to deal with all extra burdens that go with rentals.
These already high HOA fees don’t include full reserves. The actual fees are higher with full reserves. At this point Miami condominiums are at the end of their ponzi scheme lifeline. You still have a few suckers supporting the system.
Wild Bill your right.. I believe there will be a big change coming with new management comapanies forming and Associations hiring thier own teams to self manage.
We need managers who work for the best interest of the owners and not their Management compainies best interest.
If a building is managed in a proactive fashion, like any other business cost should not increase by double digits yearly. The bottom line is key to health and value of that business or property. Homeowners Associations are getting screwed by South Florida Management Companies.
I believe the near future will hold downsizing of amenities in existing buildings and eliminating all together for future new development. In the last six years developers were selling lifestyles in their developments. HUGE gyms, spinning rooms, theaters, art gallery, on and on. Living on credit is GONE, living a lifestyle you can’t afford is GONE. Buying for shelter is back again.
I believe the fees went up due to the spa opening shortly. I visited the building a week ago and they were running the alarms and smoke test for the spa. However 73 cents a foot is very high. The buildings need to start making everything a la carte. Ditch the bulk cable, valet services. Let the owners and tenants pay their own way.
what is the deal with the spa at ten museum? do you get use for free, for discount or full price? other than for the developers sales pitch, what benefit does an end user get?
what would happen if you just didn’t pay the HOA fees? i know they can usually put a lien on the apt, but if you don’t need to sell it, what can they do?
An increase would be justifyable if the building was completed and delivered based upon all the promises that were sold by the real estate people, not to ention the reality that the Spa..the lavish spa that has not been completed even a year after it had been promised by developer is only a fraction of what it was supposed to be….oh the list goes on and on…Water wall??? outdoor cabanas?? Michael Capponi lounge…Common people get a clue you get nothing, Nada Zip….and what about the commercial spaces since there are no tennants how withh those fees be assessed?? For more you’ll have to wait for my next post…
Let them eat cake.
The Smart Money
VR
for starters, foreclose on your ass.
“You know, I never feel comfortable on these sort of things. Victims? Don’t be melodramatic. Look down there. Tell me. Would you really feel any pity if one of those dots stopped moving forever? If I offered you twenty thousand pounds for every dot that stopped, would you really, old man, tell me to keep my money, or would you calculate how many dots you could afford to spare? Free of income tax, old man. Free of income tax – the only way you can save money nowadays. “
What is happening at Ten Museum Park just doesn’t seem right. Makes me realize how important an efficiently run HOA really is. I would not be a happy camper if I owned there. I’m sure a lot of the renters can expect a raise in rent when they renew as well.
Question to all south Floridians out there. I have the option to continue to work in Miami OR start working in our downtown Fort Lauderdale office. While both cities are unique and offer a different lifestyle, I’m wondering what others think about living in downtown Fort Lauderdale.
Also, what real estate has more promise, downtown Miami or downtown Ft Laud? The Miami market seems saturated and there is so much inventory. I can’t see how downtown Miami real estate can provide a decent return anytime in the near future. This is why I’m very hestitant to buy this year or even next. Is downtown Fort Lauderdale as overbuilt and empty as Miami? I cannot seem to find a decent blog related to FortLaud. Lucas, what are your thoughts as well?
“I can’t see how downtown Miami real estate can provide a decent return anytime in the near future. ”
–
“I don’t think there will be a return journey, Mr. Frodo.”
Since AJ has property in NYC, could you please provide some insight as to the HOA cost in buildings up north? more or less per sq ft than Miami?
what are these voter things on each post
What’s the highest HOA fee’s can go is there a cap?
I think the cap is set at infinity + 2. In all seriousness, there isn’t a cap. Property values will suffer as HOA fees increase. It’s up to the condo board or management company to control expenses.
Most of the luxury condo buildings in South Beach have HOA fees of around $1.00 per square foot. Much of that has to do, however, with the higher cost of insuring a condo building located on the beach.
Lucas
using that logic why would insurance on a brickell building right on the bay be any less then a sobe building? same concept, right? or for that matter, same flood zone?
i’m not surprised by this raise…in due time, all the new building on the mainland will be 60 cents or higher. TMP is an alright building…expect to see some major foreclosure action in the 2/2s with this increase. you’re mnt and taxes alone are coming close to what you can actually rent the place for going forward in this market.
Gables:
My HOA in Soho, NYC is $.40.
It’s called “common charges” in NYC and, true, we have no valet or spa or gym. Thank God.
I would imagine HOA fees in NYC are much lower on average than in Miami. No pool or fancy landscaping to maintain, no valet, much lower insurance, etc, etc.
Unfortunaltey, it’s a BS sca..yess..there water bill, trash, common areas, insurance, electric commmon areas, maint, security, tc..but that doesnt add up when you’re fees are so high.
My taxes and HOA is more than my mortgage!!
I say al this needs to change the laws were written back then and need to be changed. All this BS valet, xtra staff needs to be cut. slashed. That’s it!
It’s not worth it to me and I don’t use any of these amenities rarley. I could hire my own personal asssistant for the amount of HOA fees I pay.
I think the ufortunate things is that homeowners don’t have time or don’t want to deal with the probs of an entire building . Usally, board metings go unattend cause o flack of intrest cause no one wants to deal with it. So it’s outsourced to the mng companies who rip us all off and then we entrust them to handle.
It comes down to making the tough chooices do we need valet, etc.. do we need a cleaner every day instead of evry other day, etc..
U gotta cut…eveyhting is going down in stored 30% – 50% gas is down, etc..yet HOA fees are higher. all contracts need to be renegotiated. Cause if they don’t want to lower prices then some other co will do it and prob better. Maybee u dont go 4 the cheapest bidder but the low to mid vendor.
Either way there needs to be HOA change policies.
I just Googled the subject and earned, to my surprise, that common charges average $1.22/sf for non-doorman buildings, $1.44/sf for doorman buildings and go up to $3/sf for super luxury buildings. One article said the days of $1/sf common charges are as long ago as the nickel candy bar.
Hi Gables,
I live in a 700sq ft 1-bedroom near Union Square in New York…it’s a luxury building with full staff, doorman, roof terrace, gym ,etc. The HOA is $1.25 per sq ft.
Also meant to say that in NY many buildings are co-ops and the HOA includes your property taxes…the $1.25 I quoted does included those taxes.
Just an Observer:
But if you’re referring to co-ops in NY (as opposed to condos), the HOA (“monthly maintenance charge”) also includes each owner’s share of the debt service on the underlying mortgage (on the building – as opposed to the mortgage on the unit/shares of the co-op) as well as its share of the property taxes on the building as a result of which we’re really not talking apples to apples with Miami’s HOA (which includes neither property taxes nor debt service on an underlying mortgage).
Hi Samson,
Yes, exactly…that was my point in making clear that the $1.25 per sq ft I pay in NY (and that includes taxes for my co-op) is quite different from the typical condo HOA that would exist in Miami.
Developers often set HOA fees extremely low. Low fees lure buyers, and more people qualify for mortgages.
Once its handed over to the owners, they new management discovers the fees were way too low. There was no budget for reserves. The developer was paying for landscaping and personnel out his own budget. etc. etc.
So then HOA is forced to raise fees and look like the bad guy. Developer will just say previous budget was an estimate and will be long gone.
Happens all the time.
Its hard to run a luxury high-rise building for $0.55 cents. After awhile, it will look like the ghetto and have no money in the bank.
I wonder if they voted in reserves or not…..would seem really bad if they voted out reserves……. Nice to be a renter.
I would guess that the most “probable” reason for the big increase is that there are not
enough of the 200 units occupied and paying the fee. That’s the risk with these new
buildings with lots of foreclosures/empty units.
My full service building in London (Resident controlled by a Board who own flats in a 2004 building but we have an external manager whom we control very tightly) runs at 32p per sq ft per month. We don’t really view things in the price per sq ft per month – but that’s what it works out at.
We have 24 hr concierge, lifts (elevators) etc. There is no pool or spa.
I cannot fathom how badly run, and how over the top the services provided are, to rack up the costs I read here. Does anyone have any concept of what a ridiculous notion that even the majority of nice buildings designed for residential living should have some of the amenities discussed here.
These are not 5 star hotels and the sooner people kick the habit of thinking that it is ‘normal’ or ‘expected’ to live in residential accommodation that resembles a hotel, and NOT EXPECT to pay silly HOA charges, the better.
Incidentally, between taxes and HOA, the entire basis of a rebound in residential real estate in South Florida is impossible in my view. I laugh at a debate where rentals barely cover expenses, never mind mortgage/cost of capital. Ridiculous.
On the question of property tax assessments, what is the tax appeal process like in Dade County? In the case of new buyer paying a much lower price, and who can present his closing documents to the assessor, does the County respond with a timely new assessment?
Also I am reading your terminology about o1, 02 sight lines. What does this mean?
As an outside observer perhaps interested in this market, there just doesn’t appear to be enough distressed foreclosure sales or serious short sales to effectively clear the market.
You need real people living in these units even if it is only half a year, not empty speculator holdings and see through buildings. Apparently speculators are still making fast bleed payments on empty units?
Next question, how many new units are being finished in 2009 in the downtown, Miami Beach area. Is anybody actually still breaking ground?
When I first started looking into Miami listings recently, I would have expected many more serious sellers. Instead it looks like fantasy, manna from heaven land. Sellers hope to find that one dumb buyer nonsense, or pray that some how this market turns overnight. Leads to my final question, before I waste more time investigating Miami: will the other sellers (non-REO) with inflated price listings accept cash low ball bids 20-30% lower?
Sup guys,
enjoying my 85 degree wx on the beach. Not into major posting while I’m on vacation. Just skimmed through a lot of previous posts.
gables,
I pay 0.52 for SOBE
0.42 for downtown
1.22 for NYC co-op (includes taxes) with Pool, gym, doorman, concierge etc.
0.02 cents/sf for my overseas beach properties!(no insurance included)
Miami buildings are like luxury hotels. They are higher to maintain and insure than NYC apts. That’s life. Just look for well managed buildings to buy. I completely agree with Mr. Waverly, throw the management companies out and self manage and save almost half the costs. This is not for every building but only with residents who are like smart and willing to save a buck.
75c sq/ft is ridiculous, I mean absolutely ridiculous. The owners of these buildings that have these high HOA fees should really get together and figure out a way to cut costs and to get a new mgmt company. I know of some really high end buildings in the hallandale/hollywood area that have full service, exceptional amenities and they are paying 62c sq/ft. And this year the HOA went down, its all in the mgmt company. There is no logical reason that a run down building like TMP is charging that.
Lucas,
would you please try to get the details on HOA fees. My understanding is that due to the spa opening they will allow the building to operate as a condo hotel which means that if someone comes for a week to take the number of spa treatments they will live in the building in furnished units and obviously charged almost like hotel fees. At least that was an idea from the very begining when the building was ready to open.
If they generate enough interest from the spa goes from other cities it might change the whole cash flow picture.
Most Miami high rise buildings average 60-70% occupancy, with many units used for second homes.
Look at the lights in most of these building, the higher the level of luxury the fewer the lights.
If these buildings were running at 100% full time occupancy how high would the monthly fees run?
Management Companies are scamming Association with added staff (and the premium paid on each employee).
A good self managed building, actually paying the Manager more with bonuses could probably trim 15-20% from the bottom line.
Mr Waverly said: “Look at the lights in most of these building, the higher the level of luxury the fewer the lights.”
– So true….so true.
75c is not cheap but it could be alot worse compared to some other buildings. The Bentley Bay on south beach has HOA at $1.039 per square foot.
The Emerald at Brickell has HOA at $1.15 per square foot.
74¢ @ The Mark
Includes valet. Most apts. have 1 space plus one right to “free” valet.
Easiest guideline to judge if a building is well maintained is to check the elevator inspection sticker inside the cab. If it’s expired or missing the management and board are not doing their job. If it’s way past expiration the building might have a existing violation that has not been fixed. This will be in my book, Dummies Guide to Buying a Miami Condo.
Chapter Six: Low maintenance fees don’t mean anything. Especially is somebody brags about it on a blog. The building with the lowest fees most often has no reserve budget.
Reserve budget was fully used up @ T M in 05-07.
Regular reserves were accumulated in 08 and are built into 09 fees.
Stephan – So this increase is in operations expenses only??? Either reserves went up 36% too so operating expenses went up 36% too OR reserves went up less than 36% so operating expenses went up more than 36% or vice versa. Anyone know the specifics?
I added North Bay Village.
Thanks Lucas, the blog keeps getting better and better!
If memory serves, you need to have 50 units or less to self manage.
Sorry.
You are stuck with a management company, probably one with 5 year contract.
Lucas get your facts right .75 is cheap compared to alot of other buildings!
BS,
Cheap? Besides the buildings that I mentioned, which other buildings in Miami have an HOA fee that is higher than 75 cents per square foot? Santa Maria, which was built in 1997 and is one of the most luxurious condo developments in Miami, has an HOA fee of around 65 cents per square foot. That’s because it’s a very well managed building. 75 cents is not cheap compared to the majority of other condo developments in Miami.
I think that the Mark on Brickell is almost at 75 cents as well. And I’m certain there are more.
These are insane HOA fees though. Totally disproportionate for most condo development that are not *ultra” luxury like Santa Maria.
HOA fees are totally insane, that’s my point I guess. Disproportion of fees vs. value of services.
Lucas,
Would you ever be able to sell real estate in other states besides Florida?
For example.
I currently live in a 890 Sq foot 1/1 condo built in 20o3. My mortgage payment with interest and principal is $470 a month at 6.5% property taxes are about $150 a month, and my condo association fee is 85 dollars a month.
In short… for $680 dollars a month I cover my mortgage, association fee’s, and taxes on an 890 sq foot condo that rents for $700 a month.
If I was to refinance at 4.75% interest my total monthly cost would drop to about $630 a month.
I guess what I am trying to portray to your readers is that if you really want to invest in real estate why not do it in other states where housing is more reasonable…
…I am hoping maybe you can add a page to your website that will allow you to list real estate deals in other states. I would list my condo with you for sure when I want to sell if you were able to do this.
Can Realtors not sell houses in other states?
Stephan
Reserve budget was fully used up @ T M in 05-07?
reserves can’t legally be used for operating expenses
a new building would have no reason to use reserves, something is wrong with that
The Capponi Lounge is now open….Please exercise caution while driving in the garage. The lounge is located directly in front of the last parking space on the ground floor. Please enjoy the acrylic chairs, cheetah skin chairs and beautiful people during happy our. Valet has been informed not to intrude at anytime upon the residents and partake of any alchohol beverages during working hours. The lounge is exclusively for residents and invited guests. Please call security if you locate anyone who you feel is not behaving proper or is not wearing proper attire. Attire is South Beach cool. Men who wear pink on Tuesdays’ are entitled to two for one mojito night. Please note the cascading blue lights on the concrete back wall is intentional and is part of the hip south beach look. I am sure you will agree Michael Cappoini has increased property values.
Click on the link below for the all night party events page to drop by and thank Michael Cappoini for doing such a fine job!
http://michaelcapponi.com/html/events.htm
Highly doubtful most buildings in Miami are following the proper rules
Section 718
In addition to annual operating expenses, the budget shall include
reserve accounts for capital expenditures and deferred maintenance.
These accounts shall include, but are not limited to, roof
replacement, building painting, and pavement resurfacing, regardless of the amount of deferred maintenance expense or replacement cost, and for any other item for which the deferred maintenance expense or replacement cost exceeds $10,000. The amount to be reserved shall be computed by means of a formula which is based upon estimated remaining useful life and estimated replacement cost or deferred maintenance expense of each reserve item. The association may adjust replacement reserve assessments annually to take into account any changes in estimates or extension of the useful life of a reserve item caused by deferred maintenance. This subsection does not apply to an adopted budget in which the members of an association have determined, by a majority vote at a duly called meeting of the association, to provide no reserves or less reserves than required by this subsection.
However, prior to turnover of control of an association by a developer to unit owners other than a developer pursuant to s. 718.301, the developer may vote to waive the reserves or reduce the funding of reserves for the first 2 fiscal years of the association’s operation, beginning with the fiscal year in which the initial declaration is recorded, after which time reserves may be waived or reduced only upon the vote of a majority of all nondeveloper voting interests voting in person or by limited proxy at a duly called meeting of the association. If a meeting of the unit owners has been called to determine whether to waive or reduce the funding of reserves, and no such result is achieved or a quorum is not attained, the reserves as included in the budget shall go into effect. After the turnover, the developer may vote its voting interest to waive or reduce the funding of reserves.
Lucas thanks for adding North Bay Village. Did your silence to my question on the newer buildings on the border of Aventura mean you won’t be adding them?
Could be this due to the Spa opening? I though that residents only have access to the Spa amenities and have to pay for services? I can’t see how this could be the cause of such an increase. Too bad because I really like the building, however at .75, a 1 bedroom 900 sqft unit has HOA of $675. Way too much for what you actually use, especially for someone buying a second home. This will price many people out of Miami condos. Emerald at Brickell is another building with outrageous HOA. Like the building but feel the HOA fees are out of control.
By the way, this is a great topic that you don’t come across very often. Thanks for getting valuable info out!
Add to that the fact the TMP is valet only. The owners are pretty much stuck. They do not have the luxury of cutting valet like many other buildings have done to control costs. Parking was so poorly designed in this building that “valet only” is the only way to fit all the cars in the garage. It’s a logistical mess to say the least.
TMP…Too Many Problems
Lucas…you’re limiting your location. how about icon on the beach? bentley bay? all relatively new building where the HOA is absurd. same goes for the new brickell projects. the simple fact is, many of the new mega buildings that are no longer developer controlled, wherever located, have big HOA fees. where’s neo vertika these days? how about parclofts? an absolutely no frills building in the damn ghetto charging .50 sq ft give or take? please. the HOA problem is across the board.
and btw, no one mentioned it, but i’m certain from my contacts that the MB bulk sale was below cost for the developer. i remember someone on here (maybe it was Samir?) mentioning that this stuff would never sell below cost. just another prediction gone awry.
In my opinion, if the owners vote out reserves it would mean either the reserves are fully funded OR the owners are cheap and want to exit from owning in the building before the big expenses come due and is an indication of investors. Most probably the later. Not a good sign, in fact, it may be the mark of doom if a newer building votes “no reserves”. Anyone else have an opinion on this???
I meant what happens if you continue paying your mortgage but don’t pay your building (HOA) fees? Or let’s say you pay for an apartment outright with no mortgage – what can they do if you don’t pay the building fees?
VR – The HOA will file a lien against your unit if you don’t pay, the HOA can then foreclose on that lien just like a mortgage holder can. Good luck not paying….HOA’s are filing liens faster then ever now.
Big problem in today’s market is that these condos are worth less than the loans and equity loans that were taken out on them. If the HOA forecloses the lien they will not be able to sell the unit and make anything back once the bank is paid off. That’s why these buildings are screwed.
My property records searches usually confirm that people in Miami who own multiple properties are at risk of defaulting on all payments. They played the equity ponzi scheme and will be bringing most of these buildings to near ruin.
Shelley,
I don’t have any plans to add buildings in Broward County.
Wild Bill – Who is first in line under Florida law? Don’t HOA’s stand first? I don’t know the specifics regarding Florida law……. jcrimes do you know? Thanks.
Miami-Dade Tax Assessor’s Office> Bank> HOA
gov’t and mortgagees can always foreclose. if it’s your homestead, the ass’n can lien you up but i can’t recall if theyre allowed to foreclose. i think you have to pay out once you sell. still, with pre and post judgment interest, that amount can ballon. not your homestead, then the ass’n can theoretically foreclose on your interest and take s/t senior liens, which would typically be the mortgagee bank. that’s not really practicable though.
http://money.cnn.com/2009/01/21/real_estate/ghost_inventory/index.htm?postversion=2009012315
Renter Tom:
Another game I’ve seen played regarding HOA/common charges is where the developer/owner opens the project with artificially low monthly charges which instead of being increased to cover actual expenses are merely supplemented by special assessments from time to time when money runs out for expenses. In this way, the units command higher prices since they appear (to prospective buyers) to have lower condo charges (than the competition) when in fact they do not. The typical condo purchaser does not ask (nor is told) how often the building has had special assessments and in what amounts. A sophisticatedprudent buyer will demand this information as part of the due diligence process.
jcrimes, I remember over a year ago commenting that prices would drop below construction cost as the developer keeps the deposit as a way to avoid selling at at “loss”. plenty of the bears here agreed, but the bulls did scoff that prices would never even reach construction cost levels. these bulk sales will allow the foreclosures to sell well below cost and continue to drive down the prices. 2009 will be a vicious cycle down until a household income of $75k can afford a 2B-which is in the neighborhood of $200k. less desirable units in new buildings will sell for less, maybe $150k. and if we have a bad hurricane season, the end of year numbers will be far worse.
I have officially become bearish on Miami area condo prices. Before I was just realistic with capitulation in the 4th Q of 2008. Now I see it as worse… There is nothing out there, even in the Trillions proposed by Odumbo, that will save condo speculators. Moreover, rents and price appreciation are hopelessly on the negative for most Miami condos – at least those built during the bubble. Rents don’t cover carrying costs, prices are going down, HOA fees are substantial and rising in newly constructed buildings, rising unemployment and substantial under employment in white collar high paying FIRE jobs, mortgage blacklisting of many condo buildings, 40%+ down payments if at all, mortgages require great credit (the people with great credit have great credit since they realize what a poor investment looks like), and the sheer growing supply of condos with foreclosures out pacing new sales….. We are approaching a very ugly and substantial slide in prices…… My half price rental will soon not be half price as condo prices come down. I just don’t see a silver lining for condo speculators who have closed or intend on closing. This is really bad.
Yes, very bad, but very good for those with cash patiently sitting, watching on the sidelines, ready to pounce…in the summer of 2010 when denial crumbles to reality.
It is ugly everywhere but in Miami it will take much longer than in some other places to recover due to extreme oversupply.
******* WOW ******* WOW ******* WOW ******* WOW ******* WOW ******* WOW ******* WOW ******* A must read…… No wonder I was feeling bearish…..and that was BEFORE I read this article. Time to break out the razor blades for speculators now.
New rules raise the bar for condo mortgages in Florida
In a move that will make it even more difficult to qualify for a condo loan, Fannie Mae is putting a host of new conditions on mortgages for condominiums in Florida.
Those new guidelines came out last week. Someone posted the new rules a few times in the comments area sometime last week. Just another reason why more bulk sales are necessary for this market.
Somebody who can’t get a mortgage based on Fannie Mae’s new conditions for a mortgage in Florida should sue this corrupt, arrogant, effectively bankrupt organization for singling out Florida for its harsh new strictures. Pompous asses. Really, some nerve, coming from a useless now nationalized government agency which would be out of business were it not for the government sucking money from the public (which now can’t qualify for mortgages) to prop up this dead, useless horse.
Obviously Fannie has a responsibility to make good, quality loans with the high probability to be paid back. But these rules are actually absurd. What they are saying is we will not invest in south miami condos unless all of the cash buyers on the sidelines get in the game first. This approach would have been fine during the bubble growth as a way to avoid speculators. But pulling capital away from the playing field is absurd.
According to these rules, even if you get a deal at half off current prices, which would be a positive economic deal even with HOA, taxes and special assessments, Fannie will not let you buy. So the RE downward spiral will only end at cash prices-and how many folks have $100k available for RE purchase in today’s world? they are creating a disaster, and will force most developers into landlord status or bulk sales.
still working on how to properly act towards this situation in order to make and/or not lose money and still own a home. SFH have become much more attractive to me than condos over the past week.
I bought a unit at Cosmopolitan SB 7 months ago. HOA is well meaning but likes to spend. Continental is managing the property for 36.0o per door per month and I think this is an ok price. My problem … 2007 Special Assessment, 2008 Special Assessment and as each month passes more debt. The 2008 Assessment of 300K was spent well before the money was collected… it was for bad debt. We are paying .70 a foot but if you add the two years of assessments for 2007-8 the fee has been .78 Can someone call on the heavens and have the BOD come to their senses… I’ve already bitched at high pitch a couple times and just quit the budget committee because of the foolishness. The BOD has also broken a few bylaws… they dipped into rent deposits for operating money because they couldn’t pay the light bill and now they are getting a loan over 100K to purchase valet parking spaces that should require a member vote. These are just civil penalties in Florida? O … the valet… 33.00 per month per door and we have to pay to use the service… Lucas… can you look into this and run this front page like and add to the Ten Museum piece? How about an article on the legal responsibilities of BOD’s. Thanks Jerry Harper, Miami/Baton Rouge
PS… my brother has acondos at Perdido Key, which I think is still in the state of Florida, West … he pays 900.00 per month maintenance for 3000 square feet living and another 1000 square feet of balcony…. I suppose the wealthy would rather have people leave them alone…. like valet and concierge. His unit is Ocean front, no concierge, etc but and the developer is long gone. He bought two of the units a few months back for 900K each. Jerry H
Gables/Samson
Not sure why Fannie’s new rules are that problematic. The company is bust…it’s asking the simple question of why throw good money after bad for troubled buildings?
If anything, affordability is still the name of the game. These rules only seem draconian because we all know that no one is buying at today’s prices so in effect, Fannie is saying we won’t be the lender of first resort. Prices come back to reality, money comes off the sidelines and loans get made. First at the private level (with buildings and ass’ns becoming) and then through Fannie lending.
If you believe Fannie has some social obligation to fund the American Dream, well, I think that obligation went by the wayside once they were bailed out. Going forward, the Fannie of the future will be nothing like the past.
add “healthy” after “becoming”
This recent Fannie Mae action is what is needed to finally create a bottom in this bubble.
Bulk sales at markedly reduced prices will absorb the inventory and from that level more buildings will meet the mortgage requirements.
From there, the market will stabilize and over the next several years prices will equilibrate by normal market forces.
As a cash buyer (although with 4.5% 30 year fixed rate mortgages I’d borrow as much as possible since that is CHEAP money, at 7% I’d pay all cash), I think the Fannie requirements will make me WAIT longer to buy. Why? Because I know the buyer pool for these condos just shrank tremendously which will result in more of an over correction on the downside in prices…so what looks like a good deal won’t be the bottom. It will take all of 2009 and probably most of 2010 for the owners on the edge to default and get out……so I will have to wait to see what hands people hold for each unit in a building….and the moratorium on foreclosures simply makes it much much worse…. The government interventions are going to drag out this process forever and I will just have to wait longer on the sidelines. A socialist, activist fed govt will do more harm then good and will delay/prevent the market from clearing. There was no bailout in tech stocks and with housing the govt should get out of the way too…….
Miami Herald also states:
“New guidelines for Fannie Mae loans
Fannie Mae has issued new guidelines that Florida condos and condo conversions, and, in some cases, old condos, must meet before it will fund loans:
• At least 70 percent of the units in new condos must be presold.
• No more than 10 percent of units can be owned by a single entity.
• No more than 15 percent of units in all condos can be more than 30 days past due on association fees.
• No more than 20 percent of a condo can be devoted to commercial use.
• All condos, new and old, must have fidelity insurance, which protects association funds from fraud.
• The seller is not allowed to help with down payments or offer other perks, like deductions of association fees, unless they are disclosed.
• Condos must have hazard insurance.
• When investors buy in established projects, at least 51 percent of units must be owner-occupied.”
– Not sure from this MH blurb “• No more than 20 percent of a condo can be devoted to commercial use.” what that means…..could mean that no more than 20% of condos could be rented??????? Certainly they aren’t referring to using them for porno shoots, no? LOL If it is a no more than 20% rental rule, then OUCH. Anyone know the specifics of this?
So fannie mae changes the rules after the horse is allready out of the barn and actually helps create the circumstances for an eventual slide into the abyss regarding Florida and especially Miami condo prices. Along with an economy that is deflating you will eventually end up with so much fear that buyers will freeze and be unable to pull the trigger when prices collapse below 200 per sq feet.
Jerry Harper,
How much were the assessments each year at Cosmopolitan? I actually rent there…good to know my deposit is paying the light bill. Sounds like a Maddow Ponzi scheme. I’m really surprised the dues are that high. Probably because of the 24hr valet. I’m surprised a building this small would have one. I rarely see anyone use it, but its always staffed.
RDumbo, is reporting with amazement the same info that Brett reported on this blog a week ago. Also states that he’s now, finally officially bearish. This is big, huge, awe-inspiring news. When RD reports the news, he really goes to town.
RDumbo, the 20% commercial limit exists because Fannie Mae has different rules for mixed use properties. So condo developments that have hotel rooms or office space or retail space or any other commercial square (or cubic?) footage in excess of 20% of total will not qualify for Fannie Mae financing. Inclusive “or” in above statement.
Expect other, non-agency, mortgage lenders to follow suit.
jcrimes,
the restrictions created by fannie are a big problem. i do not believe that we should use fannie for a social agenda, but fannie sets the tone for the mortgage market. now they have effectively closed out all these buildings in which they were a creator of the mess. nothing like being the creator of the mess, and then saying this is too ugly for me, somebody else come clean it up.
buildings which do not meet the 70% sold, % owner, etc requirements have no way to overcome their situation in the current environment. i am a bear, looking for a bargain, but this is a very bad idea. as i stated, what this means is that even if i could bargain a 2B in emerald for $100k (not likely to happen), i still cannot get a loan for the property (if fannie does not support the loan most other banks will not either). $100k on a 2B emerald is really a non loss price point. yet the building cannot get a full time resident inside to improve its stats because fannie wants the chicken before the egg. the rigidity of those requirements are the problem. if a property is purchased undervalued, that should remove some of the risk associated with HOA, foreclosures, etc in a building.
Kramer (#90)
I completely agree. if the fannie move freezes the market further, this will just let more buildings slowly decay and continue to punish miami RE. a free condo in a decayed building is not a bargain, and this could be where we head if care is not taken. continuing to change the rules in the middle of the game is the perfect way to keep people on the sidelines.
Based on increasing losses in Florida, Fannie Mae is simply advancing its opinion that potential buyers should stay on the sidelines until
– condo prices reflect reality… the worst recession since the Great Depression
– developers stop playing games of deception with fantasy pre-construction sales numbers
– Homeowners’ Associations get their acts together and stop deferring maintenance, engaging in fraud and self-dealing, ignoring their fiduciary duty to their co-owners, and allowing co-owners and developers to ignore their financial responsibilities to the HOA.
Several of the allegedly new underwriting guidelines are not new. Hazard insurance, 10% single entity max, mixed use cap, etc. are either restatements of existing Fannie Mae guidelines or a return to previous (pre-boom) sanity or a rare example of the application of common sense.
FNMA is saying that they will not throw good taxpayer money after bad. No more crazy loans until a clearing price is reached.
So, if Fannie Mae does not want to “invest” in Florida condos, why should you?
No more than 30% to 40% of a condominium unit should be rented. These were the old rules. Apparently all the brilliant investors and bulk buyers aren’t that smart after all. Time to go back to rental restrictions, 20% down payments and 10% interest rates.
FNMA is doing the right thing. The bar was set too low and that is why the housing market is in deep s**t. There is going to be a lot of pain before the housing market corrects itself and the FNMA’s new policy is the step in the right direction. Some of these buildings have HOA’s that are insolvent and it is only a matter of time before they are insolvent.
It will be interesting to see how much the property tax revenues drop in 2009 for South FL. There is no state income tax, so not sure how FL will get the extra revenue to cover the gap in property tax collection. Increasing sales tax will require a vote and no one is going to vote for increasing taxes.
Our whole country is in a huge mess. There is no easy solution. 🙁
I have no problem with large down payments and realistic interest rates. IMHO these are good rules and drivers for an orderly marketplace. valid appraisals of a property should also be required and taken seriously. if this is done properly, the requirements on % closed condos, HOA deliquencies, etc will be taken care of by default based on risk, appraisal and interest rate. but do not blanket close out options on a building. let buyers take on this risk with low purchase price, down payment and strict penalties on foreclosure. but blacklisting entire buildings and neighborhoods is NOT free market capitalism. and fannie is essentially doing this. do you really think even bank of america, citi or JPmorgan will offer loans in places where fannie does not?
i am not against strict rules to protect against risk, but if you create rules that effectively put a building or area out of business, that wreaks of an ugly form of capitalism and free markets. markets only work efficiently when legitimate possibilities exist for sales to occur.
“FNMA is saying that they will not throw good taxpayer money after bad. No more crazy loans until a clearing price is reached. ”
you cannot reach a clearing price if transactions cannot be made. housing always has and always will be a debt purchase. relying on cash buyers is a false market. dont get me wrong, i will take that situation because if prices continue to fall i may have a shot at a cash purchase. but the price will be way below fair value and that is also not an efficient market, even though i personally would benefit. at some point we do need the markets to operate freely up and down in order to reach equilibrium sooner rather than later.
Chris and Jerry, could you comment on the Cosmopolitan. What are your opinions of the building, amenities, overall condition, quality of life, etc? I love the area and always had an interest but never actually looked at units there. TIA!
I have to agree with everyone. There are a lot of new condo developments in Miami that weren’t able to reach the 70% closing mark. These developers will have to resort to selling their remaining inventory to bulk buyers. Prices for condos in established buildings will take longer to readjust. The new FNMA guidelines are horrible news for Realtors but they’re actually a blessing in disguise. The bottom will now arrive much sooner rather than later. Prices of even the best foreclosure deals on the market right now will likely need to drop another 20-25% to correspond with the bulk sale prices of new condos that we’ll see in the months ahead.
Lucas,
Agreed that the new FNMA rules will probably force the remaining developers to sell bulk, or finance sales themselves, in order to move product in the frozen market. but this will most certainly force prices to undershoot on the down side-not really an effective market. but wont this just increase the number of people underwater who just give up the unit to foreclosure rather than hope for a rebound? larger percentage of foreclosures in the building will keep people from obtaining mortgages. this is going to be a wicked cycle any way you look at it.
I hope you continue to provide info on HOA activities. these will be key to reaching a bottom and eventual upturn.
gables,
It probably will undershoot to the downside for a short while, especially due to the lack of financing. Cash buyers of individual units are only so limited. I think it’s inevitable for foreclosures to increase even more now than was previously predicted as a result of people being heavily underwater. As for a rebound, I think that’s a fruitless hope even before the new FNMA guidelines were revealed. Once the dust settles, the market will likely move sideways or at best go up 1%-5% during the first 3-5 years.
Probably has been posted already and not a surprise at this point. I wonder how the proposed Art Museum/Science Center in Bicentennial Park is coming along.
Deal collapse raises questions over Worldcenter
See the above link for the new Fannie Mae conditions on Florida condo mortgages.
Watch out.
It can only make matters worse.
“but do not blanket close out options on a building. let buyers take on this risk with low purchase price, down payment and strict penalties on foreclosure. but blacklisting entire buildings and neighborhoods is NOT free market capitalism.”
In a free market, buyers and sellers and lenders can take it or leave it. Buyers blacklist entire buildings… why should FNMA be any different?? It’s prudent to avoid risk in legally permissible ways. Avoiding deadbeat buildings and borrowers is just smart business.
Chris… my unit is 1010 square feet. 2007 Assessment 700.00(total 150K), I think 2008 1400.00(total 300K) I wasn’t around for the 07 assessment. The building association minutes are as super brief but they do disclose some of the horseshit… the Continental connect site posts pdfs of minutes … of the 300K, I think 75K was from rent deposits. Miami2009… it is a decent building… great location…affordable and value engineered which means some of the stuff is cheap… slow elevator, cheap doors, not completely soundproof but not bad. I paid 340.00 per foot and am happy. The 24 hr valet is now 16 hrs. I think the large 1 BR’s at 300K aren’t a bad deal. I have a high floor 1′ balcony two bedroom two bath, marble floors courtyard view. Bought it from Deutsch Bank in June 08. If fees topple .70 or we have another special assessment I’ll run for the BOD… along with another person or two that want to control costs. I’ll be glad to answer any other questions. Jerry
PS… BOD are nice folk but believe reducing cost reduces level of service, etc. I disagree. Jerry
Even RT is slow on this blog: “I have officially become bearish on Miami area condo prices. Before I was just realistic with capitulation in the 4th Q of 2008. Now I see it as worse”
You guys thought it was just rhetoric when I said $85 psqf
Then I tried to use PE ratios & a ROI.
Yet RT continues with his infantile attacks at his president.
Get over it guys, it’s 1997 prices here again, hurray and three cheers!!
Oh, I forgot, for the guy that mentioned some months ago that it was delusional, “next you’ll say that they will give them away for free.”
80s Brickell here we come! 🙂
–
1. Economic recession/depression
2. Massive overbuilding
3. 30 year cycle of expanding on cheap credit coming to an end.
4. Less we forget, massive correction of bubble prices due to increases never seen before
in US History.
5. High taxes/HOA fees resulting in deficits and special assessments.
write your own 6 through 10
RB,
I have no problem with buyers blacklisting a building. But lenders, particularly when government subsidized, should not play the same game. let buyers and sellers work out the good and bad buildings. if the lender does due diligence with the borrowers credit risk, appraisal, requires down payment and makes the borrower put skin in the game, there is much less risk involved. private lenders without bailout cash can do anything they want. but fannie is not that player. either sh!t or get off the can with the mortgage business. if a building lacks sufficient closings or has too many foreclosures, how do you think it will ever correct itself if funding for even conservative debt is not available for new buyers? you can increase down payment requirements to offset risk, but you should not blacklist these buildings, unless you are happy with a complete collapse of Miami condos.
we have 50,000 relatively new condos in the downtown area which could provide the critical mass for an urban resurgence in which the middle and upper class could participate. very few cities have this opportunity. and a government agency like fannie could really stall this type of resurgence. we could have several years of very low condo prices in Miami but wont be able to capitalize on bringing full time residents into the area. only wealthy part year residents with cash in hand. not good for long term small business prospects in those downtown areas.
For Cosmopolitan,
You mentioned one of my biggest irks about the building, Jerry. The elevators are ridiculously slow. I’ve lived in 50 story buildings which took less time to get out of. You constantly have to wait in the lobby/hallways and then get on the elevator ride which barely moves.
Another thing, the ugly large bar code stickers they want everyone to put on their nice cars. What happened to remotes or easy car scanners most buildings have? I’m not about to put a huge bumper sticker on the side of my car just to enter the building.
Other than those two things, the building is nice for what it is. Its all about location. I have a view facing government cut and Apogee so that is nice. Building is always clean and lots of staff.
Realist Bob – Obviously I was being sarcastic about just NOW becoming bearish…duh.
Muir – See post #114 – I was being sarcastic about becoming bearish….if you had read previous posts, you’d know I was being sarcastic. With regard to the baby prez, well, even Dan Quayle and George W. Bush got the oath right the first time without do overs…. Sadly we won’t be able to get ourselves out of this debt mess with more new debt, duh. My prediction, we will have the most financially wasteful and corrupt admin in US history…esp. when treasury sec doesn’t pay back taxes….come on. Where is the scrutiny….where are the deficit hawks now? where are the anti-fear mongers to prevent passage of a non-well thought out $1T spending bill? the hypocrisy list goes on and on and on. The country is screwed, period.
Anybody know whether any fine developer used CHINESE DRYWALL in any of these fine buildings???
Imagine the possibilities…..
“Imagine the possibilities…..”
Imagine the “special assessments”.
Imagine the litigation.
You all “know” somebody imported the infamous CHINESE DRYWALL. It is just a matter of time that a new building or conversion will have to be partially gutted to replace it…..
Tick, tick, tick…..
Quoth RDumbo: “I have officially become bearish on Miami area condo prices. Before I was just realistic with capitulation in the 4th Q of 2008. Now I see it as worse…”
If that’s sarcasm, RDumbo could be off his meds and needs more help than I thought earlier.
gables, even government sponsored lenders have the right (nay obligation) to refuse to lend against risky and declining asset classes of substandard quality. FHA, SBA and others have refused to make dumb loans collateralized by substandard asset classes; this is Lending 101 and is nothing new. In the past, other lenders have justifiably refused to lend against certain brands of automobiles.
RB,
if the asset is declining, but the loan value is below realistic assessed value and the borrower is credit worthy, then refusing to loan is not truly a good business decision. my point is blanket withdrawal from an asset class is not the best path out of the current economic crisis. i am not advocating going out and buying overpriced condos. but a frozen credit market currently exists and is a major contributor to the economic collapse we are seeing worldwide. options must be kept open to allow capitalism and the market to work. fannie may have just taken 10,000 units off the market. dont get me wrong, i want a bargain price. but you must realize this move could push us into a worst case condo scenario. the prudent move was to apply these restrictions five years ago before the bubble was in full swing. it is stupid to apply them now when prices are approaching pennies on the 2007 dollar.
«gables /Jan 24, 2009 at 7:29 am […] Fannie […] What they are saying is we will not invest in south miami condos unless all of the cash buyers on the sidelines get in the game first. This approach would have been fine during the bubble growth as a way to avoid speculators»
Well, Fanny is a government agency. What, did you expect them to get their timing correctly?
We are talking government here. Stupid, even malicious timing is par for the course.
Stephan, i agree with you. but what they will now do is compound there previous mistake with another one. governments are incompetent, but the public must somehow limit its destructive effect at some point or it will really hurt us all.
Lucas,
Sorry about the posts off topic.
Returning to HOA, you would provide a great service to your clients if you could compile strong records of the status and future expectations of the HOA in the buildings you market. Not necessarily open to this website, as the work effort would be difficult and confidential. But when i begin to look in earnest at Miami condos, I will expect my agent to have very good understanding of the HOA of the buildings of interest. This will avoid wasting everybody’s time. If you are able to provide this needed guidance so that I can minimize my efforts on each building (although still i must perform due diligence) you get my business. Somebody will need to provide buyers with legitimate confidence of the future costs one would expect of HOA fees, as this info will be as important as the location, bricks and mortar info of the past. This type of service allows the buyer to better “value” a unit and will be expected in the coming years.
I don’t understand the big deal about the new guidelines. Isn’t it a current requiremet that condos must be at least 75% owner occupied in order for most banks to lend. I know it was in 2003 when I was looking to buy a condo. I believe that is one why some HOA limit rentals.
By the way RD is a moron looser, isn’t it obvious!
I’m sure there are other blogs out there where he can go to spew his hate, oh wait, I’m sure he has alread found them. Too bad he can’t buy a life with all that money.
I live in this building (on the side that doesn’t overlook the ghetto). There are no ameneties to speak of. Nothing is a la carte, they don’t even greet you when you come in 1/2 of the time. The employees all have bad additudes and the building is poorly maintained. The front desk area always smells like old garbage because they don’t have garbage pick-ups often enough. The power on the pool deck has been shut off more than once for failure to pay. The spa is full price. The spa is a joke. Steam room, big woop. The pools are tiny and you get to smell sewage unless the wind is heading west at 20mph. We have to pay for our guests to park. $5 for 1-4 hrs $10 for 4-8hrs $15 overnight. we have to pay $150 a month per extra car we own. The valet doesn’t greet you with a smile. The elevators look aweful. The maintainence people spray scented cans up and down the hallways rather than using a vacuum. The side of the building is rented out as an ad. The power outlets are too far away from eachother so you need to either tear up the floor and put your own or run an extension chord up the middle of the room to use a lamp. The trash chute doesn’t work 1/2 of the time. People leave their trash in the hallways. The management is useless. For $1700 a month in maintainance. It’s not even close to being worth it…. glad I rented… unlike the morons that bought this place for a million dollars… haha…
J,
TMP is and always has been a joke. People say it is one of the best looking buildings. I disagree. Even if it is true to some folks who bought it only because of that reason and some high ceilings, they are realizing that the building sucks from inside out, literally and otherwise. Bad management, super high maintenance fees, Valet only parking… WTF? I can understand if someone got cought up and bought there in the go-go years. But anyone buying there after 2008 is a total fool.
I’m thinking of getting a unit in this building. Have things gotten better? how much of the HOA is going towards building up the reserve?