Another Condo Bust Looms in Miami

            Miami is currently facing a condo bust, which is when a housing bubble is first run-up in housing prices by demand and then erupts due to rise in interest rates that decreases demand and ultimately causes the housing bubble to burst. A burst such as this one typically occurs on average every thirteen years and lasts for about two and a half years. While the market is slowing, developers have started canceling projects, dropping prices, and offering some attractive motivation for buying right now. One development group, Verzasca Group, is even offering buyers of the Aurora a free membership to JetSmart, which allows members to use shared private jets and has a retail value of $12,000, to get sales going. Miami development groups are trying to appeal to the growing demand from New York customers wanting second homes in the Miami area. Part of the JetSmart offer that The Aurora extends to buyers is a few flights a week from New York to SoFlo (Southern Florida), which looks attractive to potential New York buyers. This marketing strategy is unique and luring for potential buyers that may be exactly the type of incentives that the market needs in order to get it going again.

            To understand just how much the market has slowed down in 2015, “Carlos Rosso, President of condo development at Related Group (Miami’s largest condo developer), said he sells about 20 units a week in the Miami-Fort Lauderdale area, versus about 100 a week last year. The biggest problem with the condo bust is that while the market has slowed down significantly, inventory has increased at least a third of what it was a year ago. However, because developers and other in the industry recognized how slow the market was moving, they were able to prevent the excessive inventory by stopping projects, lowing prices, and offering incentives to sell what there is now. Another factor that is Affecting the Miami condo market is that the value of the dollar is very strong right now while many foreign currencies value has dropped significantly, which is a large portion of customers in the Miami market. In addition to the foreign market, the unstable stock market has made Miami locals nervous and reluctant to making large real estate purchases as well. The Miami real estate market will be back up in no time, but part of being in real estate is knowing when to start new projects and knowing when to sell the inventory before it becomes excessive by analyzing the markets and economies.

http://www.wsj.com/articles/another-condo-bust-looms-in-miami-1459266180