Article
and Video Courtesy of FOX News
By Elina Shirazi
Published October 26, 2019
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VIDEO
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MIAMI –– Major cities across the United States saw a
large number of luxury condos transform their skyline the past five
years -- units that boasted glitzy waterfronts and sparkling city views,
with a hefty price tag. But now, cities are seeing ghost towers. And
thousands of unsold units are clogging up the real-estate market.
“Many developers
over-calculated what they could sell," said Katrina
Campins, a luxury real estate specialist in Miami.
"You're experiencing that in various different markets.
One market is South Florida, where you have an
oversupply."
Large cities across the U.S., including Los Angeles and
New York City, also saw a big boom in condo developments
during the past five years, only to see many remain
empty. Economists say a fourth of more than 16,000 new
condos built in the Big Apple over the last six years
remain unsold.
“The New York City real estate market is struggling to
absorb the wave of luxury condos built in the city since
the recovery from the financial crisis," said Grant
Long, an economist with real-estate data company
StreetEasy. "New York’s status as a global city and the
allure of owning trophy properties has led to a number
of high profile deals, yet demand among the global rich
has not been as deep as many developers had hoped." |
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Luxury condos in major cities, once a hot
market, go unsold.
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Softening economies in Latin America and China have
dealt a huge blow to luxury real estate markets across the country.
Experts say a glut of high-end condos has also oversaturated the market,
leading to a growing number of ghost towers.
"We don't have the demand from Latin America, which has definitely
affected the market," Campins said. "A lot of sellers are forced to
become realistic and many times they're selling it for less than what
they paid for."
According to data Fox News compiled from real-estate data companies
Zillow, StreetEasy and Luxury Homes Los Angeles, condo sales have seen a
steep decline over the last several years. Looking at the months January
through September, in Miami, 1,260 units sold in 2016. This year, just
654 units sold, representing a 48 percent sales decrease. In New York,
in 2016 there were 2,141 units sold. This year, only 1,724 units were
sold, showing an almost 20 percent drop in sales.
Luxury condos in Los Angeles had a sales count of 1,518 in 2016. That
dropped to 745 this year, showing a 51 percent drop in sales.
Peter Zalewski, the principal of real estate consulting group Condo
Vultures, said the supply of luxury condos available for sale has more
than doubled since 2011.
“The limited amount of luxury condos available for sale at that time is
what triggered the building boom in South Florida,” Zalewski said. “That
has resulted in today's oversupplied market.”
Miami developer Henry Torres agrees the market is seeing an
oversaturation -- but he believes the demand will eventually catch up to
the supply.
“It is becoming a different type of market. It's not the Florida of 50
years ago,” Torres said.
Torres said he spent more than $100 million on his latest condo
development, Merrick Manor, in Coral Gables, an affluent Miami suburb.
He hopes the market will pick up speed, but for now, he is renting out
units.
“If it's not selling, we're renting it," Torres said. "We are renting it
and holding it for the next cycle, or for the next upturn."
Tony Mariotti, the owner and realtor of Luxury Homes Los Angeles, said
the slowdown in the luxury condo market could be a sign that potential
buyers are uneasy about the economy. He said luxury buyers tend to be
well-informed and are anticipating risks in the market.
“Weak corporate earnings and rising risks of a recession can have a
chilling effect on one's appetite to speculate on real estate,” Mariotti
said.
According to Mariotti, sales have been flat among luxury condos, or
those valued $3 million and above. Eight units sold in the L.A. market
in September 2019, compared to seven in the same month in 2015. However,
the inventory this year is nearly threefold: 144 units were on the
market compared to 54 at the same time in 2015.
In New York City, 63 condo buildings with more than 5,600 units are
listed on StreetEasy. Long said construction is still far outpacing
sales; for every three condos completed in 2018, only two built since
the beginning of 2013 have sold. Agents say even more are in the
pipeline.
“Similar dynamics in other cities around the world are demonstrating the
extent to which real estate can fluctuate like a luxury good, untethered
to the laws of supply and demand,” Long said.
Agents say one thing is certain: For units to be sold in this
competitive market, prices must be lower. That means negotiating power
is in the hands of buyers, and now could be a good time to buy.
“With investors saturating the market, and more units on the way, New
Yorkers can expect this condo hangover to last well into the future,"
Long said. "Prices need to fall enough for residents.”
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