South Florida Condo Prices May Drop Up To 40%, Analyst Says

After a tumultuous post-pandemic period, condo prices in eastern South Florida are set to return to pre-2020 levels, according to a real estate expert.

Peter Zalewski, founder of the Miami Condo Investing Club, stated that the pandemic inflated condominium values east of I-95, and prices could drop by as much as 38% over the next couple of years, reverting to 2019 levels. This would mean a decline from $379 per square foot (seen between May and October 2024) to $231 per square foot, the price in 2019.

Zalewski, a former South Florida real estate journalist, attributes this adjustment to several factors, including the impact of the Surfside collapse, rising interest rates, and the return of tech workers to Silicon Valley as more AI development takes place. He believes these elements will lead to a recalibration of the condo market on the east side of the region.

Since the pandemic, South Florida’s housing market has surged, particularly in single-family homes, as high-income individuals relocated from other parts of the U.S. and abroad, many seeking to escape strict COVID-19 restrictions. Even with the pandemic largely behind us, many continue to migrate to South Florida due to the state’s appealing climate, lack of income tax, and business-friendly environment.

However, condo and townhouse sales across the region fell 19.6% year-over-year in November, according to Florida Realtors, signaling a significant slowdown. Zalewski compared the drop to the period following the 2008 financial crisis when sales plummeted after the collapse of Lehman Brothers.

The situation could worsen due to a new state law requiring stricter inspections for condo buildings over three stories tall and older than 25 years on the coast, or 30 years inland. This legislation, passed after the Champlain Towers collapse in Surfside, has resulted in skyrocketing assessments and stagnant or declining prices for older units.

Zalewski predicts that the downturn won’t be limited to older condos. He anticipates price cuts even for new luxury condos. Furthermore, a University of Miami study found that 35 condo and hotel towers are sinking faster than expected in areas like Sunny Isles Beach, Surfside, Bal Harbour, and Miami Beach. Preliminary findings suggest that some buildings in Broward and Palm Beach counties are also sinking, adding uncertainty to the market.

Additionally, as large companies push remote workers to return to the office, the influx of high-paid tech professionals to South Florida may not materialize as expected. Zalewski pointed out that this trend could affect the condo market’s recovery.

On the other hand, Craig Studnicky, CEO of ISG Group, noted that condos over 30 years old have seen a significant drop in value, losing 21% in the past year due to fears of special assessments and market uncertainty. However, condos under 30 years old have appreciated by 10%. He added that the University of Miami study has had “zero impact” on newer condos, and he expects their prices to continue rising in the coming year as high-income households continue migrating to South Florida.

“We’re talking about supply and demand,” Studnicky said. “There’s simply not enough supply of new condos.”

Source: SFBJ