I mentioned last week in the July Brickell condo index that only 9 closed condo sales occurred from June 19, 2007 to July 18, 2007, in the 18 buildings that comprise the Brickell Condo Index. A question was left for me in the comments section of the post about whether I felt that the lack of sales activity was a reflection of an overpriced condo market in Miami. A great conversation enfolded and I wanted to expand on that conversation with a post that will hopefully find its way to condo sellers throughout Miami.
In a nutshell, yes, prices do need to come in significantly in order for buyers to be enticed to buy. There are a lot of “motivated” condo sellers right now who have their units listed with a Realtor who are having a very difficult time selling their condo. However, sellers need to realize that their situation will become progressively worse as time goes by and more condo units come onto the market throughout the overdeveloped areas of Miami that stretch from Brickell to the Arts District. Your condition can easily turn from “motivated” to “desperate” within a six month time period.
I will let the numbers do the talking. Within the next 7 months there will be five new condo developments that will be completed in Brickell. These five developments are: 500 Brickell (633 units), The Plaza on Brickell (1,000 units), 1060 Brickell (582 units), Brickell on the River South (322 units) and Latitude on the River (455 units). These five condo developments will bring 2,992 new condo units to the Brickell condo market within 7 months. 12 months after that, another four developments will be completed in Brickell. These developments are: Infinity (459 units), Axis (718 units), Icon Brickell (1,816 units) and Epic Miami (966 units). These four developments will add another 3,959 new condo units to the Brickell condo market. That is a total of 6,951 new condo units within 19 months from now.
Over 6,900 new condo units within the next 19 months in Brickell! If this sentence alone doesn’t make a seller see the light then maybe the following sentences will. The Brickell condo index is currently comprised of 18 condo buildings throughout Brickell which consists of a total of 5,348 condo units. This means that within 19 months we’ll see a 130% increase in the number of units that comprise the index. The total number of condo units represented in the Brickell condo index will increase from 5,348 condo units to 12,299 condo units within a 19 month period.
That is just within Brickell. Include the developments below that are within 4 miles north of the southern tip of Brickell and conditions become far worse. These developments should be completed within the same time period. A few of these buildings such as Onyx on the Bay, Platinum Condos, Midtown 2 and Ten Museum Park have already begun closings. The 23 buildings below will add another 9,119 new condo units residing within 4 miles of Brickell within the next 19 months.
This means that within the next 19 months there will a total of 16,070 new condo units that will come onto the market in the neighborhoods of Brickell, Brickell Key, Downtown Miami, Park West and the Performing Arts District. The bulk of the problems will be in Brickell, Downtown Miami, Park West and the Performing Arts District since Brickell Key will only add 123 units once Asia is built.
Let’s assume that 30% of the condo units in the five new developments that will be completed in Brickell within the next 7 months were purchased by speculators. That is a very conservative number. I have heard people suggest that this number could be as high as 70%. Let’s use 30% though to illustrate a point in a conservative manner. That means that of the 2,992 new condo units to come onto the market in Brickell, 898 of these will be listed for sale. As I mentioned at the beginning of this post, there were a total of 9 closed condo sales that occurred in Brickell from June 19, 2007 to July 18, 2007. This means that if market conditions remain the same, and this absorption rate continues, then it will take 100 months, or 8.33 years to absorb the new inventory in Brickell. This doesn’t take into account the existing inventory of 1,550 condo units on the market at this time in Brickell. It also only includes those units in Brickell that will be completed within the next 7 months, not the units scheduled for completion 12 months after. Nor does it take into account the negative impact that the units scheduled for completion in Brickell Key, Downtown Miami, Park West and the Performing Arts District will have on the condo inventory in Brickell.
My advice to condo owners who NEED to sell is to get out now! Today, Barbara Corcoran was on the Today Show and suggested that people who need to sell now should be priced 5% below the currently best priced property in the neighborhood. She was speaking about homes and the national real estate market, but I think that this advice is a great start for condo owners in Miami. To illustrate, last week, two days after our office held an Open House/Wine Tasting at The Imperial at Brickell, a pending contract resulted on one of the three bedroom units that were showcased. It was the best priced three bedroom in the building and was the nicest as well. By the way, for those of you who haven’t heard of Barbara Corcoran before, she is often referred to as “The Queen of Real Estate”. She is a Realtor in New York who has had tremendous success and has been asked to appear on many nationally televised segments for her invaluable insight.
Sellers may not like the idea of discounting the price of their condo to 95% of the best priced unit currently listed in the building. However, they will like the alternative scenario even less if they don’t. Keep in mind that once the new condo units come onto the market, you’ll end up lowering your price to that level anyways. But at that time, you will be priced in the middle of the pack rather than at the front.
If you are a truly motivated seller, who doesn’t have an exclusive listing agreement with another Miami Realtor, and want to sell your condo before the worst begins, then contact me today so we can devise a plan to get you out of this mess before condo inventories in Miami reach nightmare proportions.
Pictorial & Video Review of The Fantastic Four in Miami
Today was a beautiful sunny day in Miami so I decided to revisit my favorite skyline-gazing spot at the southwestern tip of Watson Island, along with my trusty digital camcorder. It is the perfect location to view the progression of what I have dubbed The Fantastic Four, made up of, from left to right, Marina Blue, 900 Biscayne Bay, Ten Museum Park and Marquis. It may appear as though there are five developments but the smallest of the buildings is located further off of Biscayne Boulevard to the west. Wikipedia refers to these four developments as the Biscayne Wall, but to me it is far shy of a wall when you compare it to fully built-out skylines in cities such as New York City and Chicago.
The name The Fantastic Four came to mind though as each of these four developments are fantastic ultra-luxury high-rise buildings revitalizing the Downtown Miami neighborhood now known as Park West. Park West was recently developed to be Miami’s equivalent to Manhattan’s Park Avenue. In years to come it will become known as Miami’s luxury neighborhood. It is located directly west of I-395, also known as the MacArthur Causeway, which leads straight into South Beach.Museum Park, formerly known as Bicentennial Park, which is the green piece of land directly east of the The Fantastic Four, will be redeveloped by the Miami Art Museum and the Miami Museum of Science and Planetarium to be transformed into a world-renowned park. It may not seem like a lot of land from the picture above but it is actually comprised of 30-plus acres. The luxury condo buildings in Park West are walking distance to the American Airlines Arena, the newly constructed Carnival Center for the Performing Arts and Bayside Marketplace.
In future months, as closing dates approach, there will be many opportunities to buy into these four buildings at discounted prices. Condo units in these buildings, as well as the thousands of other units coming to market in Miami over the next 18 months, were heavily purchased by investors. Their plan was to flip each condo unit for a profit prior to closing, but demand dried and prices headed south. Many will end up walking away from 20 percent deposits and instead write it off on their taxes. Closings at Ten Museum Park have already begun and Marina Blue should begin theirs towards the beginning of August.
The following pictorial review will give you a closer look at each of these buildings as they appear today:
Note: Watson Island offers the best views of both the Miami and Miami Beach skylines. With the exception of Parrot Jungle and the Miami Children’s Museum, it is a wonder how this land has remained vacant for so long. Flagstone Property Group is supposed to develop a mix-used project known as Island Gardens, with hotel, restaurant and retail space as well as a a “50-slip mega-yacht marina that would accommodate yachts of up 450-feet long”. I haven’t heard of any progress in over twelve months and it doesn’t appear as though anyone has broken ground on the land that I stood on today.
Ten Museum Park – Pricing & Availability Update with Pictures & Video
I revisited Ten Museum Park yesterday with another client. I was able to take a few pictures and shoot a short video but our time was very limited. You can find a picture slideshow at the end of this post along with a short video clip of a unit at Ten Museum Park.
I discovered that there have been a total of seven closings so far at Ten Museum Park. I also received an update on which of the units left to close are problematic cases. They are considered problematic because the contract holder either keeps delaying their closing date and/or they have voiced a strong desire not to close. These represent opportunities as they afford the best pricing currently available at Ten Museum Park. Keep in mind that the prices below only represent the list price. They are not firm prices. Contract holders who are truly motivated or those looking to possibly walk from their deposit may be willing to take a significant loss. They were required to deposit 20 percent of the purchase price into escrow. These were originally placed under contract in January 2004.
First I will show you the 1 bedroom/1.5 bathroom units that are available at Ten Museum Park. As you can see from the floor plan above, the 08 line has a southern exposure while the 05 line has a northern exposure. The one bedrooms have 858 square feet of interior space, a 143 square foot terrace and 10-foot ceilings with floor-to-ceiling glass. The following were originally purchased in the $350,000 to $400,000 price range in January 2004.
Next, we have the smaller 2 bedroom/2.5 bathroom units at Ten Museum Park. The 07 line has a southwest exposure while the 06 line has a northwest exposure. These units have 1,239 square feet of interior space, a 122 square foot terrace and 10-foot ceilings with floor-to-ceiling glass. These were originally purchased in the $450,000 to $505,000 price range in January 2004.
Finally, we have the large 2 bedroom/2.5 bathroom units at Ten Museum Park. These units have the best water views. The view from the southeast corner is my favorite, which is the 01 line. The 02 and 03 lines have a direct east exposure while the 04 has a northeast exposure. These units have 1,949 square feet of interior space, a 192 square foot terrace and 20-foot ceilings with a split-level floor plan and floor-to-ceiling glass. These were originally purchased in the $825,000 to $995,000 price range in January 2004.
The one bedroom units at Ten Museum Park come with one parking space while all two bedroom units come with two parking spaces. There are a total of four elevators to service six units per floor. The maintenance fee is 55 cents per square foot. The Clinique La Prairie spa will be located on the 8th and 9th floors of Ten Museum Park. Other amenities found on those floors include a yoga room, cardio room and weight room. The swimming pool deck has a total of five pools and Jacuzzi, cabanas and aromatherapy stations. A total of ten percent is required at contract signing with the balance due at closing.
The picture slideshow and video clip below are from one of the large 2 bedroom floor plans at Ten Museum Park. It has 1,949 square feet of interior space, a 192 square foot terrace and a split-level floor plan with 20-foot ceilings and floor-to-ceiling glass windows.
To Close or Not to Close? – Tough Decision Ahead for Preconstruction Contract Holders as Closing Dates Approach
Closing dates are quickly approaching for preconstruction condo holders in several big name developments. Closings continue at Midtown 2 while closings at Latitude on the River and Ten Museum Park began a few weeks ago. Closings at Opera Tower and Onyx on the Bay should begin later this month.
I’m sure a good number of these contract holders have asked themselves whether or not they should close. Most have probably even crunched some numbers to figure out what they should do. With deposit money equal to 20 percent of the total purchase price at stake, it is a very important decision.
The question on everyone’s mind is what percentage of these condo units are owned by investors versus those who intend to occupy the unit. An even better question though is of the investor-owned units, what percentage are owned by people who were looking to flip their unit prior to closing versus those intending to hold long term.
Those who were looking to flip their condo prior to closing most likely had their unit in the developer’s resale program. Each resale program is a bit different and the fees required to resell the unit can vary greatly. Most charge a 6 percent commission as well as a transfer fee which I’ve seen range from as little as .75 percent to as high as 7 percent. For example, Ten Museum Park charges a .75 percent transfer fee, or 6.75 percent when including the commission, while Opera Tower charges a 7 percent transfer fee, or a total of 13 percent when including the commission.
I think Ten Museum Park might have a few forfeited deposits but nothing too serious. It gave contract holders another option besides walking away from their entire deposit. They are allowing contract holders to accept a loss but still get back a portion of their deposit money. This past week I had a client who purchased a unit at Ten Museum Park from a contract holder for $55,000 less than what it was purchased for in January of 2004. The contract holder also paid the 6.75 percent fee which totaled $61,087.50. Of the $181,000 that the contract holder laid down as a deposit, they will see $64,912.50 at closing. It’s a big loss but it is still better than walking away from the entire 20 percent.
Buildings like Opera Tower and Quantum on the Bay, however, are not giving their contract holders many options. They aren’t allowing people to take a loss until after closing. In fact, at Quantum on the Bay, it is required that you list your unit at a minimum of 16 percent above the purchase price. That is insane! Who is going to buy that? You might as well not have your unit in the resale program because it won’t sell. Quantum on the Bay charges a total of 12 percent in fees to resell a unit in their resale program.
Of course, contract holders could do a simultaneous closing to avoid these heavy transfer fees. However, most first time investors are unaware that this option exists. Even if they are aware of this option, they still need to find a replacement buyer or hire a real estate agent to help find one for them.
Time is running out and many are asking whether it is better to close on their unit or walk away from their 20 percent deposit. Keep in mind that most developers charge a developer’s fee which is due at closing. This fee is typically 1.75 percent of the purchase price. Also, units come “decorator-ready” so additional money will be required if you want to have the option of renting it out in case it doesn’t sell. Too many times I have seen people hope that they could quickly flip the unit after closing rather than invest additional money into the unit. The unit ends up sitting on the market for six months and then they decide that they’ll have to rent it out. They would have saved themselves a lot of money if they had prepared to have the option of renting the unit at the beginning rather than wasting six months. You’ll need to spend money to install floors, window treatments, light fixtures and to have the walls painted since most come with the walls only primed.
A lot of people will end up pulling money out at closing to pay for these expenditures. For example, someone might choose to do 90 percent financing so that they can get 10 percent back at closing. That 10 percent will pay the developer’s fee, closing costs and expenses for flooring, window treatments, light fixtures, etc. The money will also help pay the mortgage until the condo is either sold or rented. Unfortunately, in recent times, 90 percent financing isn’t as readily available as it was in the past.
Ten Museum Park – More Opportunities as Closing Dates Approach
I met with a sales rep today who works for Ten Museum Park to go over pricing and availability for a few out-of-state clients who are interested in buying a condo unit there. I took in a lot of good information during my 30 minute meeting and want to share it with everyone. Ten Museum Park has received its TCO (temporary certificate of occupancy) and closings for units on the first 35 floors will begin shortly. I learned that the developer will grant one extension to people scheduled to close. Then, a letter will be sent out notifying the contract holder of a firm closing date. They will be charged for each day that they are unable to close at an 18 percent APR.
There are a lot of great deals currently available at Ten Museum Park. People holding contracts for condo units in the building were required to put down a total of 20% in deposit money. The first 10% was payable in January 2004. The second 10% was due in December 2004 when the building broke ground. Many of those people are currently looking for a purchaser to step in and close for them. In many cases they are willing to sell their unit at a price point that would allow them to break even or accept a small loss. This is an opportunity to get in at January 2004 pricing. The developer charges the contract holder a transfer fee of 3.75 percent and a co-broker fee of 3 percent. Most contract holders have factored in this cost to compute their break-even point. The worksheet below will show some of the deals that are available. The majority of these deals do not appear in the MLS. The data used to create this spreadsheet was provided by a sales agent working for Ten Museum Park.
The best deal in the building right now is unit 1607. As the worksheet reveals, it has a price per square foot of $363. That is remarkable for a building of this caliber!
Ten Museum Park is located in a Downtown Miami neighborhood now known as Park West. Besides Ten Museum Park, Park West will have three additions to the neighborhood in the next 12 months. These include the following:
There are a few things that I love about Ten Museum Park. One, is that it only has 200 units. I definitely wouldn’t call it a boutique building but it isn’t a monster development either. Two, the price per square foot is much lower than in these other buildings. The building was able to launch sales and begin construction in 2004, prior to when construction costs began to escalate. These other developments weren’t as fortunate and had to price their units in accordance with the higher construction costs that needed to be taken into consideration. I also love the open floor plans at Ten Museum Park. If you’re a fan of lofts then you’ll appreciate the layouts of the units at Ten Museum Park.
I learned today that when the real estate market was red hot, a few of the “04” units sold as high as $1.3M during resales. Those people are pretty screwed. Fortunately, the lender, Mellon Financial Corporation, only allowed the unit to be resold a maximum of one time. It may seem logical for some of these buyers to walk away from their deposits seeing that comparable units are now on the market at a 38% discount to what they paid. If one of the resale buyers walks away from their deposit then the initial buyer is on the hook to close. I learned, however, that if this scenario were to occur, the 20% deposit forfeited by the second buyer would be applied to the initial purchase price of the first buyer. That is a pretty sweet deal! An instant 20 percent in equity just like that.
I’ve scheduled to have a tour of Ten Museum Park late next week. I’ll be sure to take lots of pictures and shoot as much video as I can. I’m looking forward to seeing the penthouse unit with the 1,298 square foot rooftop terrace and vitality pool.
Coming Soon: Ten Museum Park
Ten Museum Park is a highly anticipated luxury condo building that will begin closings later this month. Ten Museum Park is located in the recently-dubbed neighborhood of Park West and offers spectacular views of the city, Biscayne Bay and even the ocean and South Beach from high floors. Park West is making way to be the most high-end neighborhood of Miami. Ten Museum Park is walking distance to the American Airlines Arena, Entertainment District of Miami, the newly opened Carnival Center for the Performing Arts and the shops and restaurants at Bayside Marketplace. There are also plans for Bicentennial Park, which will be renamed Museum Park Miami, located across the street in the underutilized parcel of land that you see in the picture above. $13.5M has already been allocated for the new park and the Miami Art Museum and the Museum of Science are collaborating to work on the plans. The pictures below show a model of the design for Museum Park Miami. It will be the premier public park in Miami.
Ten Museum Park will have a total of 200 units on 50 floors and has units ranging in size from 858 square feet to 4,100 square feet with either 10-foot or 20-foot ceilings. Units at Ten Museum Park will have stainless steel appliances by Bosch and Sub-Zero, high-end bathroom fixtures by Duravit and Dornbracht, glass-enclosed showers with body jets and rain shower and much, much more. Take a look at the Ten Museum Park website for more information.
Ten Museum Park will receive its TCO (temporary certificate of occupancy) in the next week or two and closings will follow soon thereafter on units located on the first 35 floors. Condo units located on floors 36-50 will begin closings in 30-60 days. There are resales currently available at Ten Museum Park. There are quite a few people holding contracts in the building that have their units priced at, or slightly higher than, what they paid for them back in January 2004 to prevent from having to close on their units.
I am eagerly awaiting to see the inside of Ten Museum Park. I will try to gain access this week and post pictures and video of what I see.
Judgment Day Just Around the Corner for the Miami Condo Market
There are a number of premier condo buildings that are scheduled for completion in the next six months throughout Miami. These include, but are not limited to, the following:
It will be interesting to see, in the coming months, where prices will go from here. The number of distressed properties has been climbing throughout Miami-Dade County and that number should escalate as these new units hit the market. A year ago properties in Miami were selling like hotcakes. 12 months later the market has cooled considerably in Miami, as has the overall national real estate market. Vulture capitalists have been circling the skies of Miami for over two years, waiting for the right moment to swoop in and scavenge the real estate market here in Miami. 12 months ago vulture capitalists were told that their moment would never come as some real estate markets, throughout the United States, turned in double-digit growth. However, the next six months might be just the moment that they have been waiting for as national foreclosure filings has increased 35 percent over the previous year, according to RealtyTrac. Coupled with the increasing number of new properties that will come on board in the coming months, Miami may be ripe for the picking. The question is “Will the vulture capitalists provide a cushioned bottom for the inevitable judgment day that awaits the condo market?”. “Can their deep pockets provide the support that this market needs or will we find out just how deep the rabbit-hole goes?”
As the day of judgment comes we, here at Miami Condo Investments, will be ready to seek out the best opportunities and pass them along to our faithful blog subscribers. We plan to provide a complete analysis on all condo investment opportunities that meet our criteria, along with a comparative market analysis, pictures of the properties and, in some cases, video so our subscribers can fully grasp the opportunity.
