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Working Papers

The South Florida Condominium Market

Working paper #551
Kenneth T. Rosen and Charlie H. Rose

Approximately 15,000 high-rise luxury condominium units are currently under construction in South Florida, with more than 50,000 additional units either planned or proposed for the area. Rapid price appreciation has occurred for both new and existing condominiums in the area. Similar, but less extreme, price appreciation in the late 1970s and early 1980s preceded declining values in subsequent years. Although condominium price appreciation in recent years has mirrored similar gains in the single-family market and in prices nationwide, price appreciation for preconstruction units and the overall volume of activity are causes for concern. The risk for declining values is most significant in the luxury market, but risk is high throughout the region and all product segments. As tens of thousands of new units come online and speculators attempt to flip their units to owner-users, supply will outstrip demand and recent price increases will come to an end. The speculative investors who are unable to close on their units, the developers who have sold to those people, and the lenders who have lent to those developers are poised to potentially experience substantial loss.

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