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KAI RYSSDAL: We’ve talked a lot on the program recently about the downturn in real estate, and condos are no exception so developers are trying all kinds of tricks to lure buyers. This week the Moinian Group announced you can buy one of its million dollar condominiums in Manhattan with no cash down. Just put it on your AmEx card and while you wait for the closing, take a free trip to Tahiti. Now that’s incentive and it shows just how desperate some markets have become. Dan Grech reports from one city where condo-buying has been something of a vice: Miami.
DAN GRECH: A year ago, Matthew Haggman was deluged with invitations to swank parties all over Miami, but the invites weren’t from new restaurants or hot nightclubs. They were from condo developers.
MATTHEW HAGGMAN: “They would spend hundreds of thousands of dollars to put on a show to sweep you the buyer away. They were trying to make you feel as though you’re that person on TV and live that fabulous lifestyle in that lavish high-end condominium with views of Biscayne Bay.”
Haggman is the real estate reporter for The Miami Herald. He doesn’t get those invites anymore.
The days are over when people slept on the sidewalk to buy a condo that isn’t even built yet.
HAGGMAN: “So we went through that period with the long lines at the condo, and during that period we all wondered: When would the slowdown arrive? Well, it’s here, but it’s just starting. The question is: how long and how deep will it run for?”
It’s a question on a lot of people’s minds here — especially those who hope to turn a quick profit on a pre-construction condo.
Again, Matthew Haggman.
HAGGMAN: “Condo development sort of invited speculation, in part because you need a lot of buyers to step forward and put down 20 percent of the price of a unit some two, three years ahead of time before they can move in.”
Investment firm Raymond James estimated last year that up to 85 percent of condos in downtown Miami were bought by people with no intention of living there.
Chris Mayer is the director of the Paul Milstein Center for Real Estate at Columbia University.
He says condo speculators in Miami could be in for some trouble.
CHRIS MAYER: “I think investors who don’t have long term view of the market and are just looking at what prices have done, in a few markets have really driven up prices and condominium developers have stepped in and said, ‘Well, fine, I’ll sell to you.’ It’s kind of the classic bubble story.”
Elizabeth Razzi is an author whose advice is finely tuned to the times. Her first book was “The Fearless Home Buyer,” written at the height of the boom. Her next book’s due out in February.
It’s called the “Fearless Home Seller.”
Her advice is simple.
ELIZABETH RAZZI: “Figure out how desperately you need to sell right now. You might just want to take down the for sale sign, remodel the family room and wait this thing out.”
And for those who do have to sell quickly?
RAZZI: “You have to give them a deal. And it could even mean you have to bring money to the closing table if you bought this property over the last year or two.”
So how do you price your condo? First, look at what your neighbors are offering. Then, says Columbia’s Chris Mayer, underbid them.
CHRIS MAYER: “The big thing is to not overprice your property. It’s a big mistake to look at what other people are listing their property at, and price the same as everyone else.”
Miami, the land of lavish open houses and queued up buyers, is seeing a new phenomenon these days. The Miami Herald’s Haggman calls it: The Standoff.
HAGGMAN: “The seller still is trying to make the money that they made, say, 10 months, a year ago. Whereas now the buyer, who formerly was very eager to grab property as soon as they could, is now willing to wait.”
Economist Edward Leamer is with the UCLA Anderson Forecast. He talks of a ticking clock in condo markets from Miami to Las Vegas to LA.
EDWARD LEAMER: “Because with each tick of that clock comes lower prices and a more difficult selling environment. Every investor has a tendency to imagine that tomorrow’s gonna be better, I’m gonna wait this thing out. But that clock ticks on and on and on and it’s just slowly taking away your money.”
Meanwhile, if you’re a buyer, things have come full circle. Your mission: make them give you a great deal.
In Miami, I’m Dan Grech for Marketplace Money.