On Thursday, the Federal Reserve Bank of Atlanta reported on the comeback of the construction crane in downtown Miami, touting it as a harbinger of good things to come in the South Florida condominium market. As reported in the Atlanta Fed’s EconSouth, during the peak of the South Florida construction boom, more than 140 cranes filled the Miami skyline. Today, there are only four. However, with thirty new buildings slated for development, experts are anticipating a resurgence of the heavy-duty machines. In fact, a Miami city commissioner recently projected that 17 cranes would be assembled in the downtown area by the end of 2013.
In their article Does the Return of the Cranes Signal a Housing Revival in South Florida, authors Jessica Dill, a senior economic research analyst and Carl Hudson, director of the Atlanta Fed’s Center for Real Estate Analytics, studied sales, financing and rental market trends before concluding that the South Florida condo market is well on its way to recovery.
In 2007, condo completions in Miami-Dade and Palm Beach counties peaked at 16,220 units. This figure plummeted to 1,422 units in 2011. As of June 2012, the number of South Florida condo units in one stage of planning or another stood at 8,263–a 26 percent increase from June 2011.
Driving forces behind South Florida condo market growth
The authors attribute the growth in the South Florida condo market primarily to the following three phenomenons: renewed in-migration to Florida, increased international demand, and a new construction finance model.
With a population nearing 20 million and 700 new net residents added each day, Florida is on track to become the third most populous state in the country, expected to surpass New York in 2013.
Added to this growth is increased international demand, not only from Latin America, but also Canada and Europe. As noted in the article, “Miami will always be a safe harbor, for both those that urgently need a safe place to house their money and those with great prosperity. Europeans and Latin Americans will continue to come to Miami after stabilization because of the cultural affinity. They can always find what they’re looking for.”
Finally, as previously reported, developers have found a new way to finance condo construction in the wake of the housing bust. Builders and buyers are now expected to commit funds up front–sometimes as much as 80 percent–and then incrementally pay as the building progresses. This pay-as-you-go model “serves to limit speculative excess in that as a project is completed, the buyer has more equity and [sh]ould be less willing to walk away should the market turn during construction. In addition, the pool of potential buyers is much smaller, thus fewer projects will be started in the first place, making overbuilding much less likely.”