H OUSING N EWS R EPORT
June 2016
right.”
But the sheer volume of new condos flooding the market could put downward pressure on both new condo sales and the re- sale condo market. Last year, Miami builders pulled more than 23,400 new home building permits, according to the Census Bureau. The rush to build new condo towers is creating an affordability crisis in Miami. The influx of foreign cash has largely priced out local Miamians from the current condo boom. With local median income at $45,000, most locals in South Florida can’t afford the pricey skyscrapers, according to the Bureau of Labor Statics. But not everyone believes the U.S. housing market is in a bubble, nor that some markets are frothy. Yale professor and the 2013 Nobel economics laureate Robert J. Shiller, thinks the bubble is still several years out. “Certainly, I think bubbles are always a possibility,” Shiller, co- creator of the S&P/Case Shiller Index, told Yahoo! Finance in a May 2016 interview. “So it looks like right now we’re sitting on something like we were in 2003 maybe. That developed over the next three years into quite a bubble. I don’t see that happening yet. I think maybe we won’t have such a big bubble right after another one. Maybe we’re a little bit wiser from the last experience.” The “smart money” has already left San Francisco, Manhattan and Miami. And the “dumb money” is rushing in to buy new homes, according the latest new home sales data from the Census Bureau, which showed that new home sales surged a staggering 16.6 percent in April 2016. We don’t know what is coming or when. But history does tell us that there are some markets that are getting frothy. We’re Not in a Housing Bubble…Yet!
Miller said Venezuelan buyers have largely disappeared, due largely to the political and economic crisis there. But other buyers have filled their absence. “Chile has become a big buyer pool,” she said. “And buyers from New York, Chicago and the Midwest are also buying second homes here.” Demand in the condo market is waning because of a perfect storm of events converging, including the drop in oil prices, currency devaluations in Latin America and Russia, stock market volatility in China and a flood of new condo units coming on the market. A staggering 32,600 condo units have been completed, are under construction or approved for development in the South Florida market since 2011, according to Cranespotters.com. Another 18,200 have not been approved, but are in the planning phase. That’s more than 50,000 new units. Moreover, an avalanche of new mega-projects is underway in Miami. Construction started in March for Miami Worldcenter, a massive $1.7 billion, 27-acre downtown development that includes an outdoor shopping center and adjoining 60-story luxury condominium tower with 500 residential units called Paramount. Spanning six blocks just north of the American Airlines Arena, the project is set for completion in 2018. In downtown Miami, Hong-Kong-based developer Swire Properties is building Brickell City Centre, a $1.05 billion project on 9.1 acres with an open-air shopping center, two luxury towers, an upscale hotel and an office tower. Reach and Rise, the project’s two 43-story residential condo towers, are slated for opening this year. Condo prices range from $595,000 to $2.7 million. The project dates back to 2008, when the condo market hit rock bottom amid the recession and the development was temporarily shelved. Some argue that compared with the last bubble, developers have shifted risk to the buyers, who are required to put down deposits ranging from 50 to 60 percent. Moreover, developers have written sales contracts that place stiff penalties for condo flippers. Condo Inventory Soars
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