Nearly 400 South Florida condominiums, townhouses, and single-family houses in the Vultures Database™ have been cut in price to $150,000 or less, with the cheapest residence slashed to $31,000, according to a June study from Condo Vultures® LLC.

The under-$150,000 properties in the Vultures Database™ are comprised of 64 single-family houses and 322 condominiums and townhouses scattered throughout 24 South Florida cities and neighborhoods. Overall, there are 4,356 properties including short sales, foreclosures, Real Estate Owned by the bank in the Vultures Database™, according to the report.

Miami (95 properties), Hallandale Beach (49 properties), and Miami Beach (42 properties) have the greatest concentration of under-$150,000 properties tracked in the Vultures Database™.

Deep discounts also exist on properties in some other popular South Florida cities, such as Aventura (nine properties), Bal Harbour (one property), Fort Lauderdale (22 properties), Sunny Isles Beach (13 properties), and West Palm Beach (15 properties).

“To see properties slashed in price to $150,000 or less in some of the most popular South Florida communities on the barrier island offers a glimpse of just how deep some of the discounting has been,” said Peter Zalewski, a principal with Bal Harbour, Fla.-based consultancy Condo Vultures®, LLC. “The question that remains unanswered is how much more prices will fall on high caliber properties in coastal areas before buyers strike in masses.”

As experts debate where bottom is, discounts in the Vultures Database™ through May 31 have leveled off or strengthened in 22 of the 32 submarkets monitored by Condo Vultures®. The Vultures Database™ tracks condos, townhouses, and single-family houses east of Interstate 95 in Miami-Dade, Broward, and Palm Beach counties that have fallen in price by at least -10 percent or -$100,000.

Of the nearly 4,400 properties in the database, 1,909 residences have been discounted by more than the -28 percent average price drop for the South Florida region. The remaining 2,447 properties have been slashed by -28 percent or less.

The average price drop in dollars in South Florida through May 31 was -$223,067 compared to an average drop of -$225,037 on April 30. On a year-over-year basis, in 2007 the average price drop in South Florida was -$227,619 on May 31 and -$233,495 on April 30, according to the data.

There were 90 properties in the Vultures Database™ that closed in May, pushing the total sales for the year to 507, according to the data. At this pace, there would be 1,217 closings of properties in the Vultures Database™ in 2008, compared to 1,192 in 2007.

As investors scour the market for deal, several unrelated developments this week suggest the time is approaching in some markets.

On the buy side, hedge-fund billionaire Edward S. Lampert has begun to quietly accumulate shares in publicly traded companies in the housing sector, including home builders, home improvement retailers, and mortgage lenders, according to the Wall Street Journal.

NBA center Shaquille O’Neal’s real estate company is launching an enterprise to buy nonperforming residential mortgages in Florida at a discount, according to the Orlando Sentinel.

Former New York Gov. Eliot Spitzer is exploring the creation of his own opportunity fund to buy distressed residential property across the country, including distressed markets such as Florida, according to the New York Sun.

On the sell side, Florida’s largest state-chartered commercial institution is in the midst of selling off nonperforming real estate loans that triggered $80 million in losses. Florida’s largest credit union is preparing to auction off at a deep discount a waterfront site slated for a condominium development in Palm Beach County.

Peter Zalewski is a principal with the consulting company Condo Vultures®LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report.

Copyright © 2008, Condo Vultures® LLC

The go-go days of Miami real estate development when more than 40 construction cranes crowded the downtown skyline to assist in constructing dozens of new condominium towers is rapidly coming to an end.

Fewer than 12 tower cranes stand today in the Greater Downtown Miami area with about one-third of the steel structures focused on constructing three new office buildings, not the residential skyscrapers of the last five years.

The remainder of the construction cranes are finishing up a handful of condominium projects such as the Icon Brickell and the Paramount Bay that are scheduled to be completed in the upcoming months. Many other buildings nearing completion have already removed their cranes as work has shifted to interior buildout.

Once the final cranes are gone by the end of the year (with the exception of one tower), developers estimate it could be at least five years before a new residential condominium construction project is justifiable again in the Greater Downtown Miami area.

Retail pricing would probably have to reach $525 per square foot before a developer –and a lender – would consider moving forward on a new condominium project in Greater Miami’s central business district, industry watchers said.

Retail condo pricing today for Miami condo investors in the Greater Downtown area on an individual unit basis ranges from $300 to $500 per square foot. Pricing on resale units is even less given the tremendous number of short sales, foreclosures, and Real-Estate Owned by banks. On a Bulk basis, pricing on new condominium construction product is between $190 to $350 per square foot.

“Florida’s newest endangered species is the construction crane,” said Peter Zalewski, a principal with the Bal Harbour, Fla.-based consultancy Condo Vultures®LLC. “The crane is going the way of the South Florida speculator, which became extinct in 2006. Once the construction cranes are taken down, packed up, and hauled off on flatbeds later this year, don’t expect to see a tower crane on a residential project in Downtown Miami again for a long as a generation.”

According to the Condo Vultures® Official Condo Buyers Guide to Miami – 2008™, there are 32 condo buildings in the Greater Downtown Miami area that are already or scheduled to be completed in 2008. An additional eight tower are scheduled to be delivered in 2009 with one more condominium coming online in 2010.

When these projects are finished, there will be a total of 157 condominium buildings – old and new - in a 60-plus block stretch of the Greater Downtown Miami area from the Rickenbacker Causeway north to the Julia Tuttle Causeway, and from I-95east to Biscayne Bay, according to the Official Condo Buyers Guide.

The tower cranes were critical for the developers to be able to construct 2,672 floors of condominium residences since 2003. When the new floors are included, the total inventory in Greater Downtown Miami is nearly 4,000 stories, according to the Official Condo Buyers Guide.

“The disappearance of the construction crane really is the symbolic end of Miami’s condo building boom era,” Zalewski said.

Peter Zalewski is a principal with the consulting company Condo Vultures®LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report™.

Copyright © 2008, Condo Vultures® LLC

As South Florida’s enters into the summer season, discounts on condominiums in the Vultures Database™ have leveled off or strengthened in 43 percent of the South Florida coastal markets being tracked by Condo Vultures® LLC.

The Vultures Database™ Report for April determined that 12 of the 28 condominium markets in South Florida being monitored experienced no change or even a slight strengthening in discounts through March 31, according to a new report from Condo Vultures®, a Bal Harbour, Fla.-based consultancy.

By comparison, the Vultures Database™ Report for March determined that discounts in eight condominium markets had leveled off or strengthened.

This means conditions in four additional South Florida markets have shifted from a status of falling to one of stabilization. Each of the markets is distinctly different but all share the common characteristics of being a popular destination for full-time residents of South Florida.

“It is too early to determine what this all means specifically,” said Peter Zalewski, a principal with Condo Vultures®. “That being said, it is probably not too farfetched to think that some of the discounts in specific South Florida markets are beginning to level off. Whether this strengthening in discounts is temporary or permanent will only be known with time.”

There are 4,293 properties in the Vultures Database™ with the typical property being reduced by an average of -27 percent off of the historical high asking price. The Vultures Database™ tracks South Florida properties east of I-95 from Palmetto Bay to West Palm Beach that have been reduced in asking price by at least 10 percent or $100,000 from the historical high amount.
Condominiums represent 70.4 percent of the total inventory, and single-family houses the remaining 29.6 percent, or 1,270 properties.

The average discount on a single-family house in the Vultures Database™ works out to a drop of -$337,303, according to the data.

The remaining 3,023 properties in the Vultures Database™ Report for April are condominiums distributed throughout 28 markets, with Fisher Island having the smallest discount of -19 percent and Palm Beach the largest discount at -34 percent.

The average discount for a condo in the Vultures Database™ in April is -27 percent, or -$174,765, off of the historical high asking price.

In the Vultures Database™ Report for March, there was an inventory of 3,015 condos that had an average discount of -26 percent, or -$172,601.

The 10 markets where the discounts have stabilized are Aventura (-28 percent), Bal Harbour (-22 percent), Coconut Grove (-26 percent), Eastern Shores (-25 percent), Fort Lauderdale (-27 percent), Hollywood (-28 percent), Palm Beach Gardens (-28 percent), South Miami (-27 percent), Surfside (-27 percent), and Wilton Manors (-29 percent).

Coral Gables (-25 percent) and Miami Shores (-28 percent) are the markets experiencing a strengthening in pricing, according to the data.

Despite the strengthening in pricing in some markets, the overall number of closings of properties in the Vultures Database™ is down slightly from last year.

In the three months of 2008, there have been 275 properties in the Vultures Database™ that have closed. This averages out to three transactions per calendar day. In 2007, there were 1,190 properties in the Vultures Database™ that sold throughout the year for an average of 3.3 transactions per calendar day.

On a month-by-month basis this year, there were 89 transactions in March, 94 transactions in February and 92 transactions in January. At this pace, there would be 1,095 transactions in 2008. Given the overall inventory in the Vultures Database™ and the current absorption rate, there is about a four-year inventory of product.

“The ongoing trend is that quality product priced at a discount is moving, and the inferior product just doesn’t move regardless of the reduction in pricing,” Zalewski said. “Generally speaking, this product is usually inferior product that tends to be given back to the lender because no one else will take it under these conditions.”

Lenders have taken back nearly 5,000 properties in the tri-county South Florida region in the first three months of 2008, which represents a 255 percent increase compared to 2007. Lenders in the region are on pace to repossess nearly 20,000 properties in Miami-Dade, Broward and Palm Beach counties, according to a recent report.

Peter Zalewski is a principal with the consulting company Condo Vultures®LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report.

Copyright © 2008, Condo Vultures® LLC

At least three banks with a sizable presence in Florida have begun to sell off - at a significant discount - their nonperforming loans on residential undeveloped land throughout the state, two banking experts tell CondoVultures.com.

A Miami-based institution and two out-of-state banks with a significant presence in Florida have each started to discount their land loans by as much as 70 percent in hopes of moving the improved and entitled dirt at a brisk pace, the banking experts said.

The strategy of the banks is to dump problem land loans in the second quarter (which ends on June 30) in an attempt to absorb their inevitable write-offs at the same time that their competitors are also expected to report disappointing financial results, the banking experts said.

In the first quarter of this year, banks had asked for about 70 cents on the dollar for this residential developable land with utility hookups, streetscape improvements, and landscaping. Now, this same land is being quietly marketed in bulk for as little as 30 cents on the dollar, the banking experts said.

Given the amount of time and the expenses necessary for investors to carry this land before being able to resell or justify building upon it, serious buyers are offering between 15 cents and 20 cents on the dollar. At least three banks are said to be actively considering these offers in return for quick and quiet closings, the banking experts said.

“The moment of capitulation appears to be near for lenders that control repossessed land,” said Peter Zalewski, a principal in the Condo Vultures® LLC, a Bal Harbour, Fla.-based consultancy. “We expect that more time could be necessary before banks begin to accept comparable deep discounts in pricing on finished bulk residential product such as condos and single-family houses.”

Failed condo conversions are likely to be the next product that lenders in possession of bulk Florida product are expected to dump at discounts of about 40 percent.

The discounts are expected to be much deeper for condo conversions built earlier than the 1990s as bulk buyers anticipate not being able to resell these units to individual buyers for at least five years. If that time range proves correct, any projects built in the 1970s and/or 1980s would be nearly four decades old when a bulk buyer could realistically look to exit such an investment.

During the period between buying and before selling, a bulk buyer must be able to absorb any difference between the rents generated at a project and the monthly expenses. Any discrepancy in the rent collected compared to carrying costs incurred depends almost entirely on the purchase price paid by the bulk buyers.

This difference in revenue versus expenses, not capital, is proving to be the biggest obstacle to completing a bulk condo deal in Florida, regardless of whether the product is old or new, experts said.

The caveat to this scenario is the international buyer with the rich foreign currency who fears that the U.S. dollar will strengthen later this year.

New residential condo units, especially the towers in Downtown Miami, Brickell Avenue, and the Biscayne Boulevard corridor, are expected to be the last bulk product to be discounted deeply for buyers as the bank-controlled release prices are too rich, experts said.
Still, that isn’t stopping many investors both domestic and foreign from attempting to purchase blocks of condo units in the towers coming online in Greater Miami, experts said.

Developers and lenders almost on a tower-by-tower basis have different expectations as to the number of units and the discounts that will be available. Some towers are closing at a high rate while others are anticipating as many as 40 percent of contract holders to walk away from their deposits.

Since many of the large funds circling Miami want to buy a large quantity of units in a limited number of towers in hopes of realizing operational efficiencies, developers are increasingly considering defaulting out buyers who cannot obtaining financing to close on their units by the original deadline.

By taking back units and a large chunk of the original buyer’s 20 percent deposit, developers are hoping to be able to amass enough inventory to fulfill the common fund requirement of a minimum of 100 units in a project and 60 percent of the association’s voting power.

For the successful towers where buyers are closing on a majority of their contracts, the dilemma for the developer becomes whether to continue selling off the remaining units on an individual basis for an unknown period of time in hopes of maximizing profits or simply dumping the remaining units in bulk fast for a minimal return.

The advantage of selling fast with a limited return is that a developer would be able to move on to other opportunities, including buying discounted units in bulk from their competitors.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report .Copyright © 2008, Condo Vultures® LLC

Sales of distressed properties in the Vultures Database™ increased by 23 percent in April, triggered by a surge in discount buying in Miami Beach, Fort Lauderdale, Sunny Isles Beach, Hallandale, and Hollywood, according to a new report from Condo Vultures® LLC.

Buyers purchased 116 condos, townhouses, and single-family homes east of I-95 in Miami-Dade, Broward, and Palm Beach counties in April compared to 94 acquisitions in March. For the year, 408 distressed properties in the Vultures Database™ have traded, according to the report.

At this pace 1,224 properties in the Vultures Database™ would be sold in 2008, representing a 3 percent increase on the 1,194 homes that traded in 2007.

In 2008, the average discount for a Vultures Database™ property that sells is -37 percent, or -$297,130, but only after sitting on the market for an average of 498 days. In 2007, the average discount for a closed sale was -29 percent, or -$255,955, with 402 days on the market, according to the data.

“As the overall discount grows, evidence is building that certain submarkets are strengthening in price as all-cash buyers pursue attractive product in well-established areas, primarily on the water,” said Peter Zalewski, a principal with the Bal Harbour, Fla.-based consultancy Condo Vultures®.

The international tourist destination of Miami Beach has had 83 distressed properties in the Vultures Database™ sell this year, with 23 transactions in April alone, at an average discount of -34 percent off of the historical high asking price.

Coastal Fort Lauderdale, a popular destination for North American visitors, ranks second for the number of distressed sales closed by submarket in April with 18 transactions, and 48 deals this year. The average discount is -36 percent, according to the data.

Another area where distressed properties are selling at a steady pace is the stretch of Sunny Isles Beach, Hallandale Beach, and Hollywood in northeast Miami-Dade county and Southeast Broward county.

These three contiguous submarkets recorded 36 transactions in April and 99 sales this year. The average discount is about -36 percent, slightly stronger than the market average of -37 percent.

“Today’s buyers are opting to compromise on the price discount and the quality of the property in hopes of securing the best possible value amidst stepped up competition,” Zalewski said. “The influx of buyers with strong foreign currencies searching for beachfront property is a phenomenon that many people are being forced to consider.”

As the number of closed sales jumped in April, the average discount on condos in the Vultures Database™ remained steady at a -28 percent drop for a second consecutive month, according to the data.

In April, the average condo had been discounted by -$174,821 and been on the market for 586 days. A month earlier in March, pricing on a typical condo had been reduced by -$174,765 after sitting on the market for 570 days, according to the data.

There are 4,284 properties in the Vultures Database™, which tracks South Florida properties east of I-95 from Cutler Bay to West Palm Beach that have been reduced in asking price by at least 10 percent or $100,000 from the historical high price.

Condominiums represent 70.3 percent, or 3,012 properties, of the total inventory, and single-family houses the remaining 29.7 percent, or 1,272 properties.

The average discount on a single-family house in the Vultures Database™ works out to a drop of -$343,947, according to the data.

Discounts in the Vultures Database™ increased in 16 submarkets but remained unchanged in 15 submarkets. No submarkets experienced a strengthening in pricing.

Peter Zalewski is a principal with the consulting company Condo Vultures®LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Don’t forget to sign up for our weekly Market Intelligence Report.

Copyright © 2008, Condo Vultures® LLC

Chances are most people aren’t even aware that the U.S. real estate market has already reached the bottom, according to a hedge fund manager who wrote a May 6 opinion column that appeared in the Wall Street Journal.

“How can this be?” the Wall Street Journal quotes Cyril Moulle-Berteaux, managing partner of Traxis Partners LP in New York, stating in his “The Housing Crisis Is Over” column.

“For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won’t happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.”

Moulle-Berteaux goes on to elaborate how and why the U.S. real estate market in general is unlikely to get any worse in the future.

Even if this New York fund manager is proven correct, how and why would any reasonable person realistically realize the bottom is upon us?

After all, the latest data nationwide shows that median sales prices still appear to be falling, inventory keeps growing, year-over-year sales data continues to tumble, new housing starts are way down, and corporate write-offs are a weekly occurrence.

In South Florida, foreclosures are spiking, and bank repossessions are up 255 percent in the first quarter of 2008 compared to a year earlier. Banks are taking title on average 52 properties a day, including weekends, as borrowers forsake their properties, according to a recent Condo Vultures® LLC report .

Contributing to the pessimistic outlook on housing is the lack of financing available in the market, especially for condos.

This lack of available financing is not limited only to subprime borrowers but also to primary users who have a 25 percent down-payment and an above-average credit score.

With these bleak circumstances, the pundits declare that no one in good faith would think that this is the time to buy.

Buyers are opting to purchase today because no one else is doing it. Remember that for many qualified buyers, the credit crunch, and not a disdain for real estate, is really what is keeping many individuals on the sidelines against their will.

“Even if the trumpets were sounding and the fireworks were exploding to signify the bottom of the market, many people still couldn’t buy real estate right now because of the lack of financing available on the street,” said Peter Zalewski, a principal in Condo Vultures®LLC, a Bal Harbour, Fla.-based consultancy. “That being said, we are dealing with a steady flow of all-cash buyers, both bulk funds and individual purchasers, who are in the market. These all-cash buyers realize the window of time before credit returns to the market won’t be long given the efforts by the federal government and central bank.”

Several buyers looking to purchase today have decided to acquire properties for a variety of reasons that goes beyond real estate. Some of the most cited external factors spurring a desire to buy today are the weak U.S. dollar, the inevitable change in the presidential administration, record high prices for precious metals, and low interest rates.

In South Florida, two other factors – new product coming online and the quieter summer season - are contributing to a growing sentiment that the time to buy is quickly approaching if not already here.

The bulk of the new condominium product in Greater Miami is scheduled to be finished within six months. As buyers scour the market looking for discounts, many are getting a chance to see each tower in person, rather than just studying the architectural renderings and floor plans.

“People are realizing that the overbuilding in the condo market has created in effect a bad sector that still has good buildings,” Zalewski said. “Today’s buyers are quickly figuring out which buildings are superior, and actively working to purchase units in these condominium towers at attractive prices. The inferior buildings are having a difficult time with closings as buyers are deciding to walk away from their 20 percent deposits rather than be stuck with a difficult resell in the future.”

The other South Florida factor influencing today’s buyers is the seasonal transition from the bustling winter tourism season into the quieter summer season when real estate transactions typically tail off. Many buyers see the summer stretch between May and September as the right time to get in before the market begins to head back into the winter tourism season that begins in November.

This particular November is of particular interest to bulk buyers and individuals with foreign currencies as a new president will be elected this year. Many of the bulk buyers and foreigners seem to think that the U.S. dollar is poised to strengthen heading into next year for a variety of reasons including a change in presidents.

The buyers reason that purchasing discounted South Florida property with a strong foreign currency offers an opportunity during the next several years to realize a gain not only from real estate but a strengthening U.S. dollar.

“No one knows where the bottom is, or when the right time to purchase really is,” Zalewski said. “All a buyer can try to do is determine a comfortable price point and then let the market come to them. If the market never gets to that buyer’s comfort level, the buyer then has to decide whether or not to revisit his or her strategy.”

Peter Zalewski is a principal with the consulting company Condo Vultures®LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com . Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report.

Copyright © 2008, Condo Vultures® LLC