Fort Lauderdale’s Little Secret: Condo Market is Quite Healthy

Downtown Fort Lauderdale and the Beach have a healthy little condo secret that few people seem to realize: Inventory is limited. Unlike the well-documented condo oversupply in Greater Downtown Miami where developers still have nearly 3,600 unsold units out of the 22,250 units created during the real estate boom, the Downtown Fort Lauderdale and the beach market has virtually no remaining new condos available for purchase.

Of the 5,100 units created since 2003 in downtown Fort Lauderdale and the beach, only 160 new units remained unsold at the end of 2010. This unsold new condo total does not include the 298-unit condo-hotel project formerly known as the Trump International Hotel & Tower on Fort Lauderdale Beach Boulevard that has yet to begin sales.

A significant chunk of the remaining available units built during the boom era were sold in February when a bulk buyer acquired 68 units in the Village East condominium complex near the 17th Street Causeway just east of Federal Highway.

This relatively low number of unsold developer condo units is remarkable for an area bordered from Sunrise Boulevard south to State Road 84/Southeast 24th Street, and the Atlantic Ocean west to Northwest 7th/Southwest 4th avenues.

IMPRESSIVE FEAT

The feat is even more impressive given the lack of financing options available for condo buyers. The limited mortgage choices have worked to significantly reduce the pool of qualified and capable buyers who do not have enough cash to purchase units outright.

A major reason for the undersupply — in South Florida terms — of new condos was the anti-development stance of former Fort Lauderdale mayor Jim Naugle — who is a licensed real estate broker — and members of the commission who opposed numerous new construction projects that were proposed while in office during the boom.

Projects that were proposed on the north bank of the New River in downtown, on Fort Lauderdale Beach Boulevard, or the west side of the barrier island at the foot of the Las Olas Boulevard Causeway were never constructed.

As a result, the majority of the condo developments in downtown Fort Lauderdale and the beach that were approved ended up being constructed and sold out before the South Florida real estate crash began in 2007.

Consider that nearly 3,600 units out of 5,100 units added in the downtown Fort Lauderdale and the beach market during the boom transacted between the beginning of 2003 and the end of 2006.

Of the 1,500 new units not sold by the end of 2006, developers were able to sell 722 units in 2007, 238 units in 2008, 65 units in 2009, and 122 units in 2010.

To better understand the boom, consider the dramatic price fluctuations along the way in the downtown Fort Lauderdale and the beach markets.

During the real estate boom, the average price per square foot for new condos jumped from $235 in 2003 to $309 in 2004 to $339 in 2005 to $372 in 2006 before peaking at $499 in 2007 as buyers previously under contract opted to purchase.

Prices for new condos since have dropped to about $356 in 2008 and 2009 before plummeting to $185 in 2010. The year 2011 pricing could be even less as the Village East bulk deal sold at $121 per square foot.

Consequently, buyers looking for deals on condos in the downtown Fort Lauderdale and beach markets are forced to look almost exclusively at resales.

The downtown Fort Lauderdale and beach markets have 550 condos available for resale as of March 20. An additional 162 units are under contract waiting to transact, according to an analysis based on data from the Florida Realtors association.

DWINDLING SUPPLY

In the past six months, buyers have acquired 372 existing units for an average of 62 units per month, meaning the downtown Fort Lauderdale and beach markets have less than a 10-month supply of available product.

Compare this to Greater Downtown Miami where the original developers still controlled 3,600 new units at the end of 2010. More than 1,300 additional units that were acquired in bulk during the previous three years are also now on the resale market.

Adding to Greater Downtown Miami’s condo inventory overhang are 1,840 units currently available for resale. Some 600 units are currently under contract.

In the last six months, buyers have acquired 766 units — an average of 128 condos per month — in Greater Downtown Miami. At this pace, the Greater Downtown Miami resale market has more than 14 months of remaining inventory excluding the available units from the original developers or bulk buyers.

Going forward, the downtown Fort Lauderdale and the Beach market is quietly being considered among the first South Florida areas that developers will consider when the inkling — and the financing — to construct new condo towers once again returns.