Groundbreaking parties are back and champagne glasses are clinking again on South Florida's Gold Coast. Hello to new condo towers from Miami to West Palm Beach, less than a year since one of the hardest-hit regions started showing signs of a real estate recovery.
The scene evokes the mid-2000s' bubble years, before the housing market crashed and left condo canyons of empty new buildings.
New condos are going up as developers try to lure cash-rich foreign buyers to the balmy region, especially the global hub of Miami. But a potential oversupply and financing hurdles could dampen odds that all envisioned projects will succeed.
About 60 condo towers with 10,000 units are in the pipeline on or by the coast in Miami-Dade, Broward and Palm Beach counties, says Peter Zalewski, principal of Miami consulting firm CondoVultures.
Meanwhile, 3,400 units still remain unsold from the boom years of 2003 to 2006, when about 49,000 new units arrived. The rest of the inventory burned off as bargain-hungry investors paid cash for units priced so low that they were sometimes below the construction cost.
Still, "developers are really getting ahead of themselves by tripling the new condo inventory," Zalewski said. "It's crazy. Here we go again."
Miami, the area's top market, has a long history of booms and busts.
"Three come to mind since the 1970s," said Jack McCabe, CEO of McCabe Research & Consulting in Deerfield Beach, Fla. "This (last one) has been the most spectacular since the Great Depression. It was all due to speculative loans to anyone who could fog a mirror."
Different This Time
Speculators flipped properties before buildings were even built, but this time around more cash is required to reserve a unit before completion, and flipping is discouraged.
With mortgages for new condos hard to get, buyers are paying largely in cash. Most are foreign nationals, especially from South America, Russia and Canada, analysts say.
"This is a market that is being propped up by foreign buyers paying cash," McCabe said. "And Americans are unable (or unwilling) to participate because they either lack cash or they cannot qualify for a mortgage due to today's stricter lending standards."
South Florida isn't the only part of the state rising from the ashes of the housing bust. On the Gulf Coast, asking prices for single-family homes and condos in Cape Coral-Fort Myers jumped 15.9% in July from a year ago, according to real estate site Trulia, as sales lifted off lows.