Real estate market, heal thyself.
That’s already starting to happen in some markets. Plunging home prices in condo-glutted Miami is attracting bargain hunters.
Already, about 25,000 condos are for sale in Miami. And thanks to the explosion of building during the real estate boom, another 12,000 to 15,000 units will hit the market within two years.
Even at the typical sales pace of 10,000 units per year, that adds up to a massive surplus.
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In January, only 298 existing condos changed hands in Miami, down 46 percent from a year earlier, according to the Florida Association of Realtors.
Bottom line: prices are headed lower.
Home prices in Miami fell 17.5 percent last year, according to the S&P/Case-Shiller index, the largest drop of any of the 20 metropolitan areas tracked by the index. Las Vegas was second at 15.3 percent.
Condo prices in Miami have plunged as much as 40 percent since the market peaked in late 2006, buyers and sellers report.
That plunge has attracted people like Bruce and Suzanne Bowen of San Juan, Puerto Rico, who recently bought a two-bedroom, 1,200-square-foot condo for $348,000, down from an asking price of $480,000 in September.
"We’ve been coming here for 10 or 12 years, and I know how much cheaper it is today,” Bruce, a 46-year-old banker, told The Wall Street Journal.
"I may miss the bottom by 10 percent or so, but five years from now, that will be irrelevant. The underlying fundamentals are still very strong here.”
The numbers indicate that people like the Bowens can count on even better bargains ahead.
Given Miami’s popularity among vacationers, retirees and young people seeking a hip urban environment, buying Miami condos now is a no-brainer to some.
One of the city’s major condo developers, Jorge Perez, chief executive of The Related Group, says his only regret amid Miami’s condo bust is that he didn’t build more.
"We should have bought a lot more land around it, because it immediately acted as a catalyst to all the other developments in downtown. When you come back in five years to downtown Miami, you're going to have 20,000 new units,” Perez told the Miami NBC TV affiliate,
A weak U.S. dollar has been a catalyst for foreign buyers in Florida.
The state ranked first among foreign home buyers last year, accounting for 26 percent of sales to non-U.S. buyers, according to the National Association of Realtors. California was second at 16 percent.
The Canadian dollar’s 25 percent gain against its U.S. counterpart over the past two years sent Canadian retiree Sheldon Kovensky shopping in Southeast Florida.
"We’re hoping to get an apartment worth about US$1 million that I can purchase for about 20 percent less,” he told Reuters.
"The Canadian dollar is on par [with the greenback], and the Florida market has dropped 20-30 percent. So you get a lot of bang for your buck,” he said.
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