Supply of Condos for Sale Increases as Sales Continue to Slow in South Florida
Published Date: October 28, 2024
The South Florida condominium market is experiencing a noticeable slowdown, as condo sales continued to decline in September. Sales volumes across Miami-Dade, Broward, and Palm Beach counties dropped by double digits compared to the previous year. This decrease in sales comes amid a growing inventory of condos for sale, and a significant delay in the time it takes for units to find buyers.
The slowdown in sales coincides with a state law passed in the wake of the Surfside tragedy, which mandates that older condo buildings undergo a structural inspection. Buildings at least three stories tall and 30 years old must complete a milestone structural inspection by the end of 2024. This law was designed to ensure the safety of older buildings, especially after the Champlain Towers South collapse that tragically killed 98 people.
The new law also requires condo associations to start setting aside funds for the long-term maintenance of vital systems like electrical and plumbing. This was a significant change from the past when associations could waive this responsibility. The financial burden and uncertainty created by these requirements seem to be affecting the market for older condos, as owners and buyers face higher costs and potential repairs.
Sales volumes in Miami-Dade and Broward counties have now fallen for five consecutive months. In Palm Beach County, condo sales activity has been down for ten months in a row. This drop in sales is accompanied by a steady increase in condo inventory. The total number of condos and single-family homes for sale in Miami-Dade County is now at its highest level since February 2021. Similarly, inventory is at a four-year high in Palm Beach County and a five-year high in Broward County.
A report from real estate firm ISG World highlighted that 85% of condos listed for sale in the region are at least 30 years old, meaning they are subject to the mandatory structural inspections under the new law. These older condos are also selling for less. According to ISG World, the average price of these condos has dropped by 21% this year, which is further contributing to the cooling market.
Despite these declines, the Miami Association of Realtors points out that condo inventory is still below historic and pre-pandemic levels. The association noted that the decline in sales could be even more significant if the region’s robust new construction market were included in the figures. The drop in sales has largely been attributed to a lack of condo financing and inventory at key price points.
A key factor in the market slowdown has been the average 30-year mortgage rate, which hit an 18-month low before rising again in October. However, more than half of all condo sales in the region last month were completed in cash, avoiding the complications that financing could introduce. A cash deal eliminates the need for financing, which can be particularly complicated as lenders become more cautious in the wake of the new reforms.
Another obstacle for buyers is the limited availability of Federal Housing Administration (FHA) loans for many existing condos. These loans are popular among first-time buyers because they offer lower down payments and are available to buyers with lower credit scores. However, for a condo to qualify for an FHA loan, it must meet certain criteria, and only 23 condo buildings across the three counties are currently approved for FHA loans.
In contrast, the drop in demand for condos is pushing up prices for single-family homes. In the three counties, the average price for a single-family home sold last month topped $600,000, marking the eighth consecutive month above that threshold. Prices have risen by 4% in Miami-Dade and 7% in Broward, while prices in Palm Beach County have remained flat. This price increase comes despite the challenges posed by higher mortgage rates, indicating a continued strong demand for single-family homes in the area.
As the condo market faces these hurdles, it remains to be seen how the new regulations, combined with the rising costs and changes in financing, will impact the broader real estate market in South Florida in the coming months.
Original Article by Tom Hudson /// WLRN Public Media
