Miami-Dade Market Analysis

Implications: South Florida is undergoing a major change from the height of development to the peaks of uncertainty. With almost 20,000 units in the pipeline for 2008/2009 and at least 10,000 more orginally planned after that, it shouldn't be a surprise that condos are being sold wholesale right now. Keep this in mind for South Florida real estate investment: 1. There is wide variation between what is available on the market and the boom and bust cycle is actually in its infancy. As the article illustrates, banks and the foreclosure process are just starting to make units available. 2. The economics of investing in South Florida, at least in the short run are questionable. For the longer term, there may be opportunity, but with other problems on the horizon for the Florida economy, judicious analysis is required. 3. Lenders and investment professionals are spooked by the news out of South Florida and the prospect of buying at even at 50% discount pales by the reality of continued falling prices.

Analysis: South Florida has seen boom and bust cycles over the years and this one is different. The vast numbers of units across the skyline, along with limited offshore interest raise the bar on levels of risk. The vulture funds that are seeking buying opportunities in South Florida ignore at their peril the levels of existing rental stock and what is happening in the single family home markets. As the cost of renting, relative to the cost of ownership continue to converge, and in many places it is getting closer every day, renters that might have moved into a condo now have alternatives that make the vulture strategy more risky. The likelyhood of increased stresses in the South Florida metropolitan markets, coupled with infrastructure, traffic and low job growth are going to create situations that investors need to factor in, and be wary about. Ultimately the ability to buy in at the right price, with the correct timing takes careful analysis, an understanding of the rental markets and understanding reasons why renters make the choices they do.