📈 Tale of Two Condos 📉

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Happy Friday Highest & Best! Today we’re talking old versus new:

⌛ Older condos aren’t selling

📈 New home listings are climbing— but that’s OK

🌴 Jimmy Buffett’s Palm Beach homes are for sale

🫣 Prime Boca Raton office building sells at a loss

Let’s get to it!

A Tale of Two Condos

South Florida is awash in old condos for sale. And few people want to buy them.

There were 20,293 condos on the market in Miami-Dade, Broward and Palm Beach Counties during the second quarter of this year, according to a report by brokerage ISG World. Of those listings, 88 percent were in buildings that are over 30 years old.

Owners of vintage condos — many on fixed incomes — are racing to sell their units before the end of the year, ahead of a deadline that could prove costly. A new state law requires older buildings to meet certain safety standards, and mandates that they set aside funds for their biggest maintenance issues.

Florida’s Building Safety Act, passed after the deadly 2021 collapse of Champlain Towers in Surfside, requires all buildings over 30 years old to complete an assessment of their structural integrity by Dec 31. Those studies will likely unveil some major problems— and hefty price tags to fix them that owners of those old condos will have to bear.

“So they're calling their local realtors and saying, ‘This is my apartment, get me out of here before I get hit with a special assessment,’” Craig Studnicky, CEO of ISG World, said in an interview. “Well, they’re already way late.”

Condos 30 years and older are piling onto the South Florida market and lingering there. And their values are declining while most other property is seeing healthy price gains. According to ISG World data:

😯 The median sale price of a South Florida condo that’s over 30 years old is $225,000 this year — a 19% plunge from 2023. (Compare that to condos that are less than 10 years old, which saw a 9% increase in median price)

😯 There were 1,115 old condos that found buyers in the second quarter of this year. But nearly three times more such condos came onto the sales market in that time.

 😯 There’s 24 months worth of old condo inventory on the market — meaning it would take two years to sell all those listings at the current pace of sales.

“No one's going to buy that stuff right now, and mortgage lenders have virtually blackballed those buildings,” Studnicky said. “They won’t lend to them.”

🚨 At the Cricket Club, a bay-front condominium in North Miami, 30 units are listed for sale at unusually low prices after the condo association levied a $30 million special assessment — which works out to about $134,000 per owner— on the building, which is nearly 50 years old.

🚨At Miami’s Palm Bay Yacht Club, owners were hit this year with a $46 million special assessment , a tab of $170,000 per unit. There are seven units for sale at the 42-year old property, including this one, which touts that the owner has paid nearly $90,000 toward the assessment.

There’s plenty of other buildings that have yet to discover what their repair tabs will be, pending engineering reports that are not due until the end of the year. In the interim, condos are cheap in older buildings with prime waterfront views but risky to purchase, Studnicky said.

“Yeah, you get a great buy, because the prices have come way down on the older stuff,” he said. “But you don't know how deep the special assessments are going to go next year. You're taking a hell of a risk.”

(See complete ISG World report here).

⏪ Catch up on recent Highest & Best issues:

• Flock of Floridians, July 12, 2024

• Ruthless Rental Reality, June 29, 2024

• Going Full Floridian, June 22, 2024

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Home Listings are Rising! Still No Apocalypse

Home listings are climbing sharply in South Florida. Thing is, in most locales, there’s still fewer properties for sale now than there were in 2019.

So talk of gluts, selloffs, and an impending price apocalypse is waaaaaay premature.

🌴 Take Miami Beach: Listings of homes and condos there jumped 28% in the second quarter from the same period a year ago, according to a report by appraiser Miller Samuel and brokerage Douglas Elliman Real Estate. And yet, there’s still 43% fewer homes on the market than there were in the same quarter of 2019 — before Florida’s pandemic-era population swell.

Oh, and Miami Beach home prices just jumped 15%, because there’s not yet enough inventory to meet demand.

🌴In Palm Beach, there were 228 homes and condos listed for sale in the second quarter— a 21% increase from last year. Compare that to 2019, and there’s actually 46% fewer properties to buy this year than there were then.

👋 But hey, Fort Lauderdale! The city had 83% more homes and condos for sale in the second quarter than it did the same time last year. This is where it gets interesting: That’s just 0.4 percent fewer homes than there were in 2019. Which means Fort Lauderdale is actually getting close to meeting its pre-pandemic levels of inventory.

👀 Fort Lauderdale is a place worth watching. The median sale price of houses in the city fell 11% in the quarter, while condos dropped 6.4%, according to Miller Samuel and Douglas Elliman.

 👀 👀 For Fort Lauderdale’s single family homes, the listing discount— the amount that sellers had to whittle off their asking price in order to get to a deal — was 8.2%. That’s the highest listing discount since the first quarter of 2020. 🤔 

😀 On a related note, Jonathan Miller, the CEO of Miller Samuel who compiled this data, had some comments on the merchants of apocalyptic thinking in his Housing Notes newsletter this week. “A Lot of Professionals in Real Estate are Crackpots,” he writes.

Changes in Latitudes: Jimmy Buffett’s Homes for Sale

Live as Jimmy Buffett did.

A trio of the late singer’s Palm Beach homes, all evoking a tropical bungalow feel, have been listed for sale this month at price tags that add up to $20 million.

Or they’re available a la carte:

The priciest property for sale, at 138 Root Trail, has 1,523 square feet and three bedrooms— two in a main single-story home, and the third in a detached unit. It’s listed for $7.25 million. (That works out to about $4,760 per-square-foot, but hey, the house is a designated landmark, it’s close to the water, and Buffett used the standalone bungalow as a music studio).

Also for sale are two side-by-side houses across the street, which Buffett bought in 2013, according to the Palm Beach Post. Unit A at 135 Root Trail has 3,071 square feet, three bedrooms, and is seeking $6.65 million.

Unit B, has 2,100 square feet, two bedrooms, and is listed for $6.125 million.

The houses at No. 135 are connected by a brick-paved breezeway, and were once part of an apartment complex dating to the 1920s, the Palm Beach Post reported. They were converted by developers more than a decade ago into separate single-family houses.

Buffett bought the houses at No. 135 in separate transactions using his ownership company, according to the newspaper. He paid $950,000 for Unit B in March 2013. Then he bought Unit A in May of that year for $1.3 million.

Buffett, a businessman and singer-songwriter whose hits include “Margaritaville” and “Cheeseburger in Paradise” died of skin cancer in September at the age of 76.

Surprise!? Boca Raton Office Building Sells at a Loss

A Class-A office building in Boca Raton has just traded hands — at an 18% loss from what the seller paid for it just three years ago.

One Town Center, a 191,000-square-foot office property in Central Boca, was sold for $82 million, according to property records cited by data firm Vizzda. The seller, Singapore-based Prime US REIT had purchased the building in July 2021 for $99.5 million, according to property records.

Prime US REIT, a publicly traded company, announced it was divesting of the property in a press release earlier this year. The firm described it as “a strategic sale, in line with Prime US REIT’s deleveraging strategy.”

The company is selling the office property as a way to ”maximize liquidity” as it seeks to pare down debt, according to the statement.

Demand for office space in Boca softened this year, with more space being vacated than leased, according to brokerage CBRE. In the six months through June, the East Boca office market had a “negative absorption” of 45,800 square feet.

📣 Newsletter Shout-Out Corner:

A shout out here to new Beehiiv newsletter, FounderShark, which seeks to chronicle young entrepreneurs.

That’s it for today!

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