MIAMI -- March 30, 2006 -- The Sunshine State has had more real estate speculators than other hot markets including Las Vegas and Los Angeles. Now that inventory of luxury condos is soaring, are property flippers in trouble?

The number of half-million-dollar-and-up condos for sale in Miami is twice the number in Los Angeles, where the population is four times as large.

Condo prices in Florida have gone up 63 percent since 2002, and many say speculators are the cause. The Encino, Calif. real estate firm Marcus & Millichap says more than half the mortgages in Florida are high spec. The firm compared price appreciation to income growth in markets across the U.S. and fingered West Palm Beach, Fort Lauderdale and Miami as three of the five most vulnerable to a price correction.

Most South Florida speculators have been selling to other speculators, says Jack McCabe, a consultant to developers. Which works fine, until somebody is left holding the property that nobody wants to buy. The number of unsold condos for sale in and near Miami has more than doubled from a year ago to 2,232 and foreclosures are twice the national rate.

Meanwhile, McCabe is ready to move in for the kill. He’s raising a $250 million vulture fund to buy condos. He hopes to pick up $1 billion of south Florida apartments on the cheap. Lenders are already offering him blocks of condos repossessed from distressed homeowners. “We’ll focus on buying million-dollar properties at 2003 prices -- at 70 cents on the dollar,” he says.

 

Source: Forbes, Stephane Fitch (03/27/2006)

 

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