Article Courtesy of The Florida
By Kevin Turner
September 20, 2010
While attention has been focused on
shrinking values in Jacksonville's single-family housing market,something
much worse has been happening in the condominium market.
Numbers tell the story: The median sales
price for condominiums in Clay, Duval, Nassau and St. Johns counties has
sunk by more than 70 percent since a five-year high of $239,200 in April
2007, falling to a low of $64,400 in April of this year, according to the
Florida Association of Realtors.
By comparison, the median sales price for
single-family homes in the area fell 33 percent from a five-year high
median price of $213,500 in June 2006 to $143,400 in July 2010.
In recent years, Jacksonville has spawned
dozens of condominium buildings - both new and those converted from former
apartment complexes - but when the economy tanked, there were too many for
the market and too many owners in financial trouble. The shocking drop in
condominium values followed.
Recently though, real estate professionals
have begun to see a turnaround. Sales volume has picked up substantially
and some think price increases will follow, albeit slowly.
Eric Miller, a real estate agent at Keller
Williams Realty, said so many condominiums were built or converted here
because at the beginning of the decade, there was pent-up demand for
housing around the inner circles of the city, near jobs and nightlife. The
first condominiums to market were snapped up quickly, he said.
"The demand was huge, and then too
many buildings were being built for the end user," Miller said.
Soon, they were appearing all over town,
with names like Avanti, Bella Terraza, Il Villagio and The Colony. It was
a microcosm of a statewide trend - more than 150,000 conversion units
alone appeared in Florida between 2004 and 2006, according to a 2007
But by 2006, some began to feel that the
market being ballooned above its actual values and that the trend could
not be sustained for long, he said.
"I saw it here. I felt it," he
said. "We couldn't do any more developments. And by the time 2007
came around, people were saying, 'uh-oh, we don't want to live here, we're
upside-down in it.'"
"underwater" refers to the phenomena when a property owner owes
more in mortgage debt than the property is worth.
Ann Van Fleet, agent and broker for St.
Augustine Prudential Network Realty, said as the boom was thundering
along, she couldn't help but think it could end abruptly.
"In St. Augustine, properties were
selling for ridiculous prices. It was insane, really," she said.
At the beginning of the boom, condominium
median sales prices trailed single-family home prices fairly closely, and
intermittent price spikes suggested an influx of high-end condominiums
sold. After the market peaked and then sputtered in 2007, condominium
prices and demand declined into 2008 - and the rate of decline was sharper
than that of single-family homes.
After the crash there were plenty of
"Everyone was pretty
disappointed," Van Fleet said. "They lost a lot of money. And
not only did they lose their value, they couldn't sell them," she
The fall in condominium median values in
Orlando bottomed out to depths lower than Jacksonville, Miami or Tampa.
Its median values fell to around $50,000 in May 2009 and have stayed there
since. In Miami, the median value remained above $250,000 from mid-2005
until May 2008, when they began a plunge toward $100,000. Tampa's condo
market median prices have descended at a pace close to Jacksonville's.
It wasn't just a boom-fueled condominium
glut that put such downward pressure on condo prices. Like the
single-family home market, much of that also is attributed to
"distressed" sales - foreclosures, sales for less than mortgaged
amount or "short" sales and bank-owned property sales.
According to the Northeast Florida
Association of Realtors, condominiums and townhouses accounted for 8.6
percent of all lender-mediated sales in August 2009, with 39 out of 453.
Last month, the number mushroomed by 246 percent, as lender-mediated condo
sales rose to 19.2 percent of all distressed sales, accounting for 135 out
The high end is especially hurt by the
economy because bargain hunters dominate the condo market currently, Van
But getting funding for a condo can be
harder than just finding a bargain, she said. Condo owners, especially
boom buyers who can't sell their units for enough to pay off what they owe
are forced to rent, she said.
And that throws off the ratio of owner
occupation in many condo developments, hurting financing for buyers
because most lenders want a complex to be only 25 to 30 percent or fewer
rentals to approve a condominium mortgage loan, she said.
Still, there's reason for optimism, she
said. Van Fleet said her office's sales are up 300 percent from last year.
"I am getting a lot of contacts from
people up north," she said. "It's interesting how many are
looking at condos. And they have the cash. Even for the ones that are
higher priced, people are paying cash."
Sales volumes took a nose dive since the
boom, but have recovered since. Real estate professionals say the
increased sales activity was borne out of bargain-hunting. Looking ahead,
they say more value could be lost in the future, but likely not as much as
what was lost as the real estate balloon burst.
"Hopefully, we can get a level market
and keep it there," Van Fleet said.
Investors also are actively buying,
snapping up promising properties at low prices and positioning themselves
for profit when good times return. SIG Partners announced Aug. 12 that it
had purchased the former "Gulf View," a bank-owned,
half-finished 36-unit St. Augustine golf course condominium project for a
thrifty $2.2 million - just $61,000 per unit. The developer indicated
plans to convert the project into $1,000-per-month rental units.
The market is bound to get better, Miller
said, but it could take up to another two years to soak up excess
inventory from the new condo boom.
"You get a lot now for under $150,000
to $200,000. They've got to go up. Until they start building more stuff,
you're going to see appreciation eventually," he said.
Still, with condo prices low, it makes
sense for buyers who can get financing to buy, he added.
"I think there is still some downside
in prices, but it won't be like it was," he said.