New Fannie Mae Guidelines Turn Off the Lights on the Florida Condo Market
In December, Fannie Mae established new lending requirements for condo developments located in Florida which went into effect January 15, 2009.
Some of the updated lending requirements are as follows:
- Up from 51 percent, FNMA will now require that at least 70 percent of the total units in a condominium project must be conveyed or be under a bona fide contract for purchase to principal residence or second home purchasers.
- New and established condominium projects may have no more than 15 percent of the total units in a project be 30 days or more past due on the payment of their condominium/association fees.
- New and established condominium projects with more than 20 units will be required to have fidelity bond/fidelity insurance. It was formerly only required of new condominium projects.
- Borrowers must obtain a “walls-in” insurance policy unless the condo development’s master policy provides the same interior unit coverage.
- No more than 20 percent of the project’s total square footage can be used for non-residential use.
- No more than 10 percent of the total units in a condominium project may be owned by a single entity (the same individual, investment group, partnership or corporation).
The new guidelines are a train wreck to an already crippled Miami condo market but a godsend to vulture funds. Step aside and let the bulk buyers clean up the mess. They will effectively push the reset button and create a floor to a condo market that would otherwise take much longer to reach. The guidelines set by FNMA will have a negative impact on established condos as well. Prices there will take longer to fall into place relative to the pricing established by future bulk sales. Foreclosures will climb in established condo developments until an equilibrium of supply and demand is reached. However, as one person commented in a discussion about this topic, the market will likely first overshoot to the bottom. With very restrictive financing policies, true demand will not be represented as those with cash will comprise the large majority of the buyers. Keep in mind that bulk buyers will either need to hold over the long run or resell the condos to cash buyers themselves due to the rule that no more than 10 percent of the condos can be owned by a single entity.
To get an idea of which new condo developments in Miami will be affected, read my latest condo closing rates published in December.
Ten Museum Park HOA Fees Increase About 36%
Earlier this afternoon, I confirmed with the management office of Ten Museum Park that a significant increase in the monthly homeowners association fee was approved towards the end of December. The new monthly HOA fee, which is now in effect, increased from approximately 55 cents per square foot to approximately 75 cents per square foot. This represents about a 36% increase in monthly dues for condos owners of Ten Museum Park. This is something that potential buyers need to be aware of since I found only one or two listings in the MLS that stated the correct monthly HOA fee.
With the exception of Jade, Solaris at Brickell Bay and Emerald at Brickell, which have each been burdened with a high number of foreclosures, I can’t think of another major condo development in Miami built within the past decade that has such a high HOA fee. Ten Museum Park is a boutique condo development with only 200 units, which may be where the problem lies. Most of the new condo developments in Miami have over 400 units and can divide their monthly expenses among more condo owners. While the overall monthly expenses for larger condo developments may be greater, my assumption is that the costs for condo expenses such as staff salaries, building insurance and maintenance of the condo building and amenities is proportionally much smaller.
Miami & Miami Beach Condo Trends – January 2009
I decided to once again publish the condo inventory and months of supply figures for Miami, Miami Beach and Miami-Dade County as a whole. You’ll notice, however, a few changes to this update. One, you’ll now find viewable spreadsheets. This will make it easier to view the figures without needing to squint your eyes. Click on the View Full Spreadsheet link below each to view it in its entirety. Two, I’ve added pie charts to provide a quick picture as to which price range the condo inventory and closed sales reside. For some reason, however, Google Docs did not allow me to add percentage labels. Three, I calculated the months and years of supply figures using an average of six months worth of closed condo sales.
Below, you will find the Miami-Dade County condo inventory and supply figures for January 2008:
The following statistics encompass only those condos located throughout Miami (not other areas of Dade County such as Miami Beach, Aventura, Sunny Isles Beach, etc.):
The following statistics encompass only those condos located throughout Miami Beach:
I hadn’t previously used a 6 month average to calculate the months and years of supply figures so it’s pretty meaningless to compare this month’s update to previous ones. However, here is the last update published in October 2008 if you’d like to compare the raw numbers.
2 Bedroom Foreclosure at Latitude on the River – $266,000
Within the past three months, I’ve seen a handful of short-sale condos at Latitude on the River become available on the MLS. Earlier today, however, I came across the first bank-owned foreclosure condo in the building to appear.
The foreclosure condo is a 2 bedroom/2.5 bath with 1,212 square feet of interior and a 196 square foot balcony. The condo comes “decorator-ready” with concrete floors, as delivered by the developer, and is located on the southwest corner of the 20th floor. The list price is $266,000, or $219 per square foot. The most recent Brickell Condo Index published in November 2008 revealed that the average list price of condos available at Latitude on the River was $366 per square foot. There had not been any closed sales in the building at the time within the prior six months and there haven’t been any since. Lack of closed sales clearly means that prices of available condos at Latitude on the River haven’t yet fallen to a level that will attract buyers. It’ll be interesting to see if the 2 bedroom foreclosure condo at Latitude on the River will spark the interest of buyers.
View the pictures and listing information for the 2 bedroom condo foreclosure at Latitude on the River.
Marina Blue Bulk Sale – A Closer Look
As many of you have already heard, a 60-unit bulk sale recently occurred at Marina Blue. Two local newspapers published articles about the deal earlier this week.
An investment group, under the name Welcome Bay LLC, paid slightly over $13M for the 60 condos. The transaction was recorded on December 24, 2008.
The 60 condos included in the Marina Blue bulk sale sold for an average price of $200 per square foot. Below, you will find the bulk condo sale separated as per the 60 recorded deeds. As many of you have discussed in a previous post about the Marina Blue bulk condo sale, it is important for everyone to realize that these are not retail prices. An individual cannot and will not be able to purchase condos at Marina Blue at these prices. The 60 condos below were part of package deal with prices that were distributed accordingly to arrive at the $200 per square foot average.
Correction: I just found out that there was an error in recording the deeds with the county. Each unit was sold for exactly $200 per square foot.
- Unit 411 – $169,000 – 845 SF – $200/SF
- Unit 610 – $169,000 – 845 SF – $200/SF
- Unit 703 – $196,400 – 982 SF – $200/SF
- Unit 810 – $169,000 – 845 SF – $200/SF
- Unit 911 – $169,000 – 845 SF – $200/SF
- Unit 1111 – $169,000 – 845 SF – $200/SF
- Unit 1511 – $169,000 – 845 SF – $200/SF
- Unit 1703 – $188,600 – 943 SF – $200/SF
- Unit 1801 – $263,000 – 1,315 SF – $200/SF
- Unit 1802 – $168,600 – 843 SF – $200/SF
- Unit 1812 – $263,600 – 1,318 SF – $200/SF
- Unit 1901 – $263,000 – 1,315 SF – $200/SF
- Unit 1906 – $189,600 – 948 SF – $200/SF
- Unit 2007 – $166,600 – 833 SF – $200/SF
- Unit 2009 – $264,600 – 1,323 SF – $200/SF
- Unit 2012 – $263,600 – 1,318 SF – $200/SF
- Unit 2104 – $241,600 – 1,208 SF – $200/SF
- Unit 2106 – $189,600 – 948 SF – $200/SF
- Unit 2202 – $168,600 – 843 SF – $200/SF
- Unit 2204 – $241,600 – 1,208 SF – $200/SF
- Unit 2312 – $263,600 – 1,318 SF – $200/SF
- Unit 2404 – $241,600 – 1,208 SF – $200/SF
- Unit 2503 – $188,600 – 943 SF – $200/SF
- Unit 2512 – $263,600 – 1,318 SF – $200/SF
- Unit 2709 – $264,600 – 1,323 SF – $200/SF
- Unit 2805 – $239,600 – 1,198 SF – $200/SF
- Unit 2903 – $188,600 – 943 SF – $200/SF
- Unit 3002 – $168,600 – 843 SF – $200/SF
- Unit 3201 – $263,000 – 1,315 SF – $200/SF
- Unit 3202 – $168,600 – 843 SF – $200/SF
- Unit 3304 – $241,600 – 1,208 SF – $200/SF
- Unit 3306 – $189,600 – 948 SF – $200/SF
- Unit 3401 – $263,000 – 1,315 SF – $200/SF
- Unit 3404 – $241,600 – 1,208 SF – $200/SF
- Unit 3405 – $239,600 – 1,198 SF – $200/SF
- Unit 3407 – $166,600 – 833 SF – $200/SF
- Unit 3412 – $263,600 – 1,318 SF – $200/SF
- Unit 3509 – $264,600 – 1,323 SF – $200/SF
- Unit 3704 – $241,600 – 1,208 SF – $200/SF
- Unit 3804 – $241,600 – 1,208 SF – $200/SF
- Unit 3901 – $263,000 – 1,315 SF – $200/SF
- Unit 3905 – $264,400 – 1,322 SF – $200/SF
- Unit 3909 – $264,600 – 1,323 SF – $200/SF
- Unit 4002 – $168,600 – 843 SF – $200/SF
- Unit 4105 – $239,600 – 1,198 SF – $200/SF
- Unit 4107 – $166,600 – 833 SF – $200/SF
- Unit 4204 – $241,600 – 1,208 SF – $200/SF
- Unit 4212 – $263,600 – 1,318 SF – $200/SF
- Unit 4303 – $188,600 – 943 SF – $200/SF
- Unit 4305 – $239,600 – 1,198 SF – $200/SF
- Unit 4307 – $166,600 – 833 SF – $200/SF
- Unit 4407 – $166,600 – 833 SF – $200/SF
- Unit 4409 – $264,600 – 1,323 SF – $200/SF
- Unit 4504 – $241,600 – 1,208 SF – $200/SF
- Unit 4506 – $189,600 – 948 SF – $200/SF
- Unit 4601 – $263,000 – 1,315 SF – $200/SF
- Unit 4705 – $239,600 – 1,198 SF – $200/SF
- Unit 4807 – $166,600 – 833 SF – $200/SF
- Unit 5006 – $189,600 – 948 SF – $200/SF
- Unit 5106 – $189,600 – 948 SF – $200/SF
Brickell on the River South Closeout Sale
I received an email earlier this week about a developer closeout sale at Brickell on the River South. Prices of units include flooring and paint. The sale will open to the public January 14, 2009.
The ad states that they have “a limited amount of one bedrooms from $180,000 and two bedrooms from $213,000”.
New Miami Condos – Closing Rates for December 2008
It’s been almost three months since my last Miami condo closing rate update. The last one was published on September 22, 2008. Unfortunately, there has not been a lot of progress in closings for most of the condo developments below since that time.
Below, you will find the date that each condo development began closings followed by the number of closed units in each condo development:
Latitude on the River had three new closings since the last update, Onyx on the Bay had three new closed condos and 50 Biscayne had two. Ten Museum Park and Loft Downtown 2 were both unchanged since the last update.
Quantum on the Bay and Plaza on Brickell each had an impressive number of closings, since the last update, considering how long ago closings began. Quantum on the Bay had 28 new condo closings while Plaza on Brickell was able to close 46.
On Friday, the Miami Herald reported that the developer of 1060 Brickell is looking to sell around 60 percent of its condos in bulk. Closings at 1060 Brickell recently reached the 40 percent mark meaning that this represents the developer’s remaining inventory.
900 Biscayne Bay and Ivy have now each reached the 40 percent mark. I’m actually quite surprised that not one of the condo developments in this last group has been able to hit the 50 percent mark. Enough time has certainly gone by. To rev up sales, 500 Brickell recently held a 4-day promotion offering a free Mini Cooper with any condo purchase from the developer’s inventory.
The next update will include Icon Brickell, Everglades on the Bay (now known as Vizcayne) and Infinity at Brickell which recently began closings.
Disclaimer: The above closing rate information was derived from public County records. There can be a 2-3 week delay from the time that a closing occurs and the time that the closing is recorded.
Top 5 Miami Distressed Condo Sales Closed in November 2008
I found a total of 17 distressed condo sales that closed in the month of November in the MLS located in Brickell, Brickell Key, Downtown Miami and the Arts District. The following are, in my opinion, the five best deals that took place along with one worth mentioning.
- Vue at Brickell – unit 1413 – 1 bedroom/1 bath (737 square feet) – This unit sold for $90,000, or $122 per square foot, on November 18, 2008. Foreclosure
- Brickell on the River North – unit 2703 – 1 bedroom/1 bath (775 square feet) – This unit sold for $172,750, or $223 per square foot, on November 19, 2008. Foreclosure
- Brickell on the River – unit 3714 – 2 bedroom/2 bath (1,058 square feet) – This unit sold for $255,000, or $241 per square foot, on November 10, 2008. Foreclosure
- Skyline on Brickell – unit 1107 – 2 bedroom/2 bath (1,367 square feet) – This unit sold for $349,000, or $255 per square foot, on November 17, 2008. Foreclosure
- The Club at Brickell Bay – unit 3524 – 3 bedroom/2 bath (1,232 square feet) – This unit sold for $249,000, or $202 per square foot, on November 4, 2008. Foreclosure
Runner-up: Blue Condo – unit 2504 – 2 bedroom/2.5 bath (1,158 square feet) – This unit sold for $305,000, or $263 per square foot, on November 25, 2008. Foreclosure
Another Look at Corus Bank
This has been a post that has been on my mind for over two weeks.
Before reading any further, please read the post I published on September 10, 2007 entitled, “Corus Bank – One of the Many Publicly Owned Real Estate-Related Companies to See Trouble Ahead“. There are two things that amaze me most about that post. One, the growth in the number of comments left by visitors astonishes me. That was one of the most informative posts that I’ve ever written yet it only received 6 comments. Now, I write about a CVS opening at the base of Everglades on the Bay and there’s over 130 comments. I guess, as they say “If you build it, they will come”. Two, I’m amazed by just how dead on target my words turned out to be.
As the post mentions, Corus Bank had, and still has, significant exposure in the Miami condo market. The day that the September 2007 post was published, Corus Bank’s stock price closed at $12.50. Currently, the stock price is hovering around the $1 mark and has dipped as low as 82 cents per share recently. A few weeks ago, Corus Bank announced that they would be deferring interest payments on their debt and had also applied for funds under the U.S. Treasury’s Troubled Asset Relief Program (TARP).
Corus Bank was successful in having its construction loan for Quantum on the Bay and Marina Blue paid in full in 2008. I believe they also had equal success with Continuum North Tower. How will Corus Bank fare in future months, however, with the condo developments that either recently began closings or have yet to begin? The following are some of the condo developments in South Florida in which Corus Bank still has an outstanding construction loan along with the original loan amount:
- Artecity – $60,300,000
- Caribbean Miami Beach – $124,700,000
- Infinity at Brickell – $140,300,000
- Ivy at Riverfront – $130,400,000
- Jade Ocean – $288,115,000
- Mint at Riverfront – $191,800,000
- Onyx on the Bay – $44,100,000
- Paramount Bay – $216,000,000
Of the condo developments listed above, Onyx on the Bay is the only one in which Corus Bank has recovered most of its loan amount judging by the closing figures I published in September 2008. They may be very close to being paid in full on it, if they they haven’t been already.
Closings for condos at Jade Ocean, Paramount Bay and Mint at Riverfront have yet to begin. I’ve heard that closings for condos at Infinity at Brickell began a few weeks ago. These four condo developments alone represent slightly over $800M in outstanding loans. All four condo developments were priced relatively late in the game and could prove to be disastrous for an already troubled Corus Bank.
On top of this, it was announced a little over a week ago that the developer of Tao, a 396-unit condo development in Sunrise, Florida, handed the property over to Corus Bank with work unfinished and closings yet to begin. The construction loan extended by Corus Bank to the developer of Tao was in the amount of $126,250,000. Additionally, Corus Bank purchased the mezzanine loan on Tao in the amount of $32.3M, which included principal plus outstanding interest.
It appears that Corus Bank could be wobbling on its last leg. If it were to go bankrupt, the Miami condo market could see a number of bulk sales occur in 2009. Even if it were to be granted federal funds from the Troubled Asset Relief Program, how long could that money delay the inevitable?
