Miami Becoming A Renter's Paradise
April 27 2009 - 7:05AM
Dow Jones News
Here's a sunny take on the bevy of empty condos cluttering up
downtown Miami. The area may become a renter's paradise.
Investors and second-home buyers account for a stunning 60% of
the nearly 13,000 new condo units sold in downtown Miami since
2003, according a report by real estate consulting firm Condo
Vultures LLC.
That means many owners in the area don't live there, and the
upscale waterfront towers that crowd the area are quickly becoming
a renter's paradise. It could become the largest concentration of
tenants in the Southeast - if not the country - the firm says.
"There is an enormous number of unwanted condo units," says Brad
Hunter, chief economist/national director of consulting for
Metrostudy, a housing market research firm. "The oversupply in
downtown Miami is absolutely massive. It's bearish for the market's
health, that's for sure."
Things will likely get worse as developers try to unload another
10,000 new, unclosed units into one of the nation's worst housing
markets, adds Peter Zalewski, a Condo Vultures principal who is
also a real estate broker.
Many units are under contracts inked during better days. But
with prices plummeting, foreclosures soaring and loans hard to come
by, contracted buyers are afraid to or unable to close.
As the market continues to sour, expect investors - especially
bulk buyers eyeing a bargain - to snap up the units, Zalewski
says.
If this happens - and many industry watchers think it will - the
percentage of primary users living in the area could dip below 35%,
delivering the market another blow. The ratio of primary users to
investors and second-home buyers is key for buyers seeking
financing.
Jittery lenders, stung by losses to investors, have tightened
their requirements for condo lending, viewing more owner-occupants
as safer. Both Fannie Mae (FNM) and Freddie Mac (FRE) have
tightened condo guidelines. In Florida, Fannie must review each new
project for stability before it will guarantee financing.
But there's a silver lining for all those renters. "They're
going to have the opportunity to live in a brand-new luxury
building for a very, very low rent considering the quality," says
Hunter. "This is unprecedented."
-By Dawn Wotapka; Dow Jones Newswires; 201-938-5248;
dawn.wotapka@dowjones.com