Miami Condos Auctioned at Half Price

Miami Condos Auctioned Off at Half Price

Here is a story about a recent auction in Miami, Florida that gives you a good indication of the blood bath to soon follow in the housing market. A couple of years ago Miami was one of the nation’s housing hot spots. Look for other former hot spots, like Las Vegas and San Diego to be conducting auctions with
similar results.

The downturn in the US housing market will not be pretty. Even those who seem to be getting bargains now may soon wish that they had been a little slower to act. The story from Miami follows:

“There’s a large inventory of unsold condominiums in the Miami market. Economists are saying major cities like Miami and Los Angeles have been in a housing recession for the past year, the worst in 16 years.

There are at least 50 buildings under construction or nearly completed in the downtown Miami area alone, consisting of about 20,000 units.

To move inventories along, developers have gone to the auction block to get them sold.

On Thursday evening, at the Miami Biscayne Bay Marriott Hotel the gavel struck as auctioneers sold about 20 units in the 119-unit Platinum development owned by Alex Redondo.

Redondo never thought his luxury building would ever have to resort to the highest bidder.

Peter Girgoraus of Canada was one of hundreds who came to get a bargain. “I’m hoping to pick up a good property for a good price.”

Dien Pham, another bidder, a South Beach resident, was one of many looking to take advantage of the downward spiraling of prices. “The idea of capturing a unit for very little is very attractive.”

Pham was also cautious, realizing auctions like this may become more common as mortgage loans get more restrictive on consumers, and tightening credit among banks further hurts the real estate market.

He said, “I might be doing this prematurely. Perhaps in three to six months from now ten other buildings will be going to auction, and there might be better offers.”

When it was all over, Pham walked away with a two bedroom unit on the 19th floor. To put the price in perspective, a one bedroom priced at $350,000 sold on average at auction for $176,000, almost half.

A two bedroom unit that sold for about $600,000 last year, sold on average for $295,000.

For people wanting a bargain, they got one. For developers with unsold units, they will be left wondering if they follow the auction block to cut their losses.”

Cutting your losses by selling unsold units at 50% of the original price may sound totally unpleasant but it may beat carrying units in inventory with ongoing interest and other expenses that take even more cash away from your development operation.  Clearly developers will have some difficult decisions to make as the housing market continues to fall over a cliff. 

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