The developer of Icon Brickell recently reduced prices, though not to the fire-sale levels seen in some other Miami condo projects.
The developer of Icon Brickell recently reduced prices, though not to the fire-sale levels seen in some other Miami condo projects. Greg Allen/NPR
If you've visited Miami recently, you've seen the new additions to the city's skyline.
Dozens of high-rise condominiums containing more than 20,000 units were built in Miami over the past few years. But since the boom went bust, many have remained mostly empty.
There are encouraging signs across the country that the housing crisis may be easing. That's even the case in downtown Miami.
The new residential condo towers have distinctive names: Marina Blue, Icon, Epic Miami. There's also dramatic architecture, inside and out.
Last year, the Miami condo market was just about dead. Thousands of new units were being delivered, but buyers were nowhere to be found.
But lately,"it's really been a crazy, hectic time in South Florida. It sort of reminds you of 2005 all over again," says Peter Zalewski, a real estate broker who runs the Condo Vultures consulting firm.
That year was the height of the boom, when people were lining up to pay top dollar for condos that were years away from completion.
Once again, many investors are looking to get a piece of Miami real estate. The difference is that now, they're looking to get it on the cheap.
Lower Prices Spark Sales
The upswing in sales began earlier this year with a development called Brickell on the River. Condos there had been priced around $400 per square foot, and they were sitting. But when prices were cut in half — to about $200 a square foot — they quickly sold out.
Zalewski says other condo projects followed suit and the market was reborn. "At $200 a square foot," he says, "as soon as a building hits that magic price number, you'll see a building burn out in downtown Miami within six to eight weeks. And these are all cash buyers, primarily foreign nationals."
One-bedroom units that were selling for $400,000 are now going for half that. It's a price that has attracted buyers like Frank Kanayet, chairman of an energy company in Colombia.
Kanayet recently invested in 10 condos at Brickell on the River. He expects to hold them several months before selling at a profit, perhaps to other buyers from Latin America.
"Most of the people in Latin America, Miami is just like their second home," he says. "You buy, you tell a friend, a friend tells another friend. So, [I'm] pretty sure they will go out quite quickly."
A decade ago, officials in Miami welcomed nearly every new condo project that was proposed — a strategy aimed at bringing people downtown and improving the tax base.
But now, there's little question that the city built too many condos, too quickly. The result, says Rodrigo Nino, president of Prodigy International, a real estate company, is an overbuilt market full of bargains.
He says, "You can literally buy a unit in Miami for less than you can buy a unit in Caracas or in Bogota."
The Missing Ingredient: Financing
But although prices are good, and buyers are back, there's still something missing in the Miami condo market: financing.
Last year, as the housing collapse continued to worsen, mortgage giants Fannie Mae and Freddie Mac rewrote lending guidelines in a way that essentially blacklisted the entire Miami condo market.
Since then, Fannie and Freddie have relaxed their guidelines, but Zalewski says financing is still very hard to come by — and that's hurting first-time homebuyers and others looking to move to downtown Miami.
"The lenders more often than not are rejecting most of the applications, even if these are credible buyers," Zalewski says. "Many of the lenders do not want to get involved with financing a condominium in greater downtown Miami, where the inventory has tripled within seven years."
One of the newest and most opulent of the new Miami condo projects is Icon Brickell. Real estate broker Alicia Cervera Lamadrid likes to show prospective buyers the spa: an open and airy space she calls the "water living room."
"You have three plunge pools," she says, "and the reflecting pool. They have different oils in them so as to enhance moods."
The rooftop pool, which overlooks downtown Miami, is said to be the longest in Florida. At street level, designer Philippe Starck has fashioned building columns into arresting, modern versions of the giant heads from Easter Island.
The developer, The Related Group, has recently reduced prices, though not to the fire-sale levels seen in some other Miami condo projects. One thing the project does have is financing: Banks involved in building the project have agreed to offer buyers short-term, five-year mortgages.
Ken Smuts, a vice president with Related, says buyers are looking for value. And he thinks some are looking not for a Chevy, but a Cadillac. He says, "We have Sub-Zero refrigerators. We have Hansgrohe plumbing fixtures. We have Wolf ranges. So when you're buying a unit here, it's significantly different and of greater value than something else down Brickell Avenue."
Apparently, Jennifer Lopez and Marc Anthony think so. The celebrity couple recently bought a three-bedroom condo in Icon Brickell.
In Miami, there is still a substantial inventory of unsold units — nearly 9,000, according to one estimate.
Prices, though, have begun to rise, and that's enough encouragement for at least one developer, who plans to break ground on a brand new 35-story condo tower in downtown Miami later this year.