Mike Morgan at MorganFlorida had this to say.
I have 43 clients walking away from deposits that range from $35,000 to $80,000. Thatâs 43 out of 43, and we were very careful to buy the very lowest price per square foot and the best amenities. None of these buyers are in condos or even in areas where there are condos. Youâre not seeing the real story in the press. Agents donât want to talk about it.
In one local project built by Lennar there are 184 units. About 120 of them are pre-sold with deliveries starting this summer. They have been unable to sell the remaining 64 units, even though they have lowered prices by 10-20%. They are spending a great deal more on marketing and advertising, as well as double commissions. Lower prices and higher selling costs, not to mention increasing cost of raw materials.
Of the 120 units that have been sold, at least 110 are speculators. Within a couple of miles there are other projects under construction or recently built with more than 400 similar units on the market . . . all speculators that canât sell. For our market, that represents at least a three year supply.
A final thought on condo sales. Look for mind boggling cancellation numbers 6-18 months down the road. These projects take longer to build, so there is no reason for a speculator to walk away from a contract. They will wait until the builder demands a closing. Word on the street in our markets is scary. It appears more than half of the condo projects under development will either be cancelled, and half of those that do make it to completion will see vacancy rates of more than 50%.
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Do the math. In Miami alone there are 70,000 condos under development with a 2,500 a year absorbtion rate. Sounds ugly? Well we canât even get hard numbers for Floridaâs Gulf Coast, but that market is in far worse shape than Miami. Most of the WCI projects are on the West Coast of Florida, and these are unrealistic seven figure condos. This end of the market has not slowed . . . it has stopped, and is now going in reverse with more cancellations than orders.
Another problem is facing home builders. The labor shortage has been compounded by inexperienced labor, illegal immigrants with absolutely no experience, and contractors cutting corners. Of the 43 clients I have that are going to walk from deposits, I will most likely be able to get all of their deposits back due to code violations in the construction. I have a 10 for 10 batting average so far. The builders only have to hear my name, and they ask . . . what do you want in exchange for signing a confidentially agreement.
