South Florida condo market faces risk of collapse amid rising costs and new regulations
MIAMI - A growing concern in South Florida centers on the condo market, which appears to be headed over a cliff. A new report from UBS shows that Miami is the market most at risk for a bubble burst, particularly in the condo sector.
The reasons behind this risk might sound familiar to many. The report cites laws enacted following the Champlain Towers South collapse in Surfside, as well as, rising insurance costs and lower mortgage rates, which have led to an increase in condos hitting the market.
"Frustrating, and ultimately, the deal ended up dying," shared Diana, whose grandfather recently moved from his condo in Sunrise. "There were just so many requirements by the mortgage company."
Earlier this year, Diana, who agreed to share her family's story but not her last name, faced a difficult process in trying to sell her grandfather's condo in Sunrise.
CBS News Miami asked her via Zoom, "Are you surprised how challenging it was to sell the condo that your grandfather was living in?"
Diana replied, "It was. It came really unexpectedly that it was going to be such a lengthy process."
The family originally listed the two-bedroom Sunrise Lakes condo for $199,000.
"We were under some pressure to sell, and we wanted it done," said Diana.
"They lost multiple buyers along the way before I came on," shared Diana's realtor, Evan Sophir. "That condo, like many others in the area, had continuously increasing assessments, and it was very difficult for a buyer to obtain financing in that development."
The family ultimately settled for $50,000 less than the original listing price after nearly six months on the market.
"The market was much slower because the inventory really increased in the area," said Sophir.
We checked Zillow two weeks ago and found nearly 500 condos currently for sale just in Sunrise.
Our research didn't stop there. Peter Zalewski, who has studied the South Florida condo market for three decades, examined condo listings across Palm Beach, Broward, and Miami-Dade counties. He reports there is at least a nine-month supply of condos over 25 years old, with more than 16,000 available.
When these condos sell, Zalewski said they go for roughly $45,000 less than the original listing price.
"There's a lack of confidence and urgency on behalf of the buyers," shared Zalewski.
This lack of confidence, he explains, stems from the costs required to meet state safety deadlines for inspecting structures. If safety issues are found, residents must cover the expenses.
Gorchow noted to Zalewski, "You have forecasted a condo cliff financially for 2025."
Zalewski confirmed: "Yes."
Gorchow asked, "What does that look like?"
Zalewski replied, "Old buildings where people need to get out because they're on a fixed income, and the cost to maintain it and make it viable and safe. There's nobody to take them out. There's no backstop. So this is a freefall, and this is where the cliff comes in."
Zalewski believes this cliff will emerge months after state laws take effect at the beginning of the year.
"We could have buildings that are effectively zombie buildings that are just barely getting by," he said.
He also predicts that the potential cliff could result in less individual condo ownership and more developers buying properties.
"We're really turning into a rental type of population down here," Zalewski added.
Gorchow asked, "Can anything stop this from happening?"
Zalewski responded, "The only thing that could stop it most likely is going to be government involvement."
CBS News Miami reviewed the rental market in South Florida. Apartments.com published a report last week showing that Miami ranks as the 18th most expensive market for a two-bedroom apartment, while Hialeah ranked 22nd out of the 100 largest U.S. cities included in the report.
