Real estate broker Gabriel Miranda thought it could take a while to sell unit 905.
The vacant condo is in Echo Brickell, a recently-built, sleek residential tower that overlooks Biscayne Bay and Key Biscayne. The building has elevators for cars, an enormous aquarium in the main lobby and a $42 million penthouse.
But unit 905 has been on the market since February. And although its price has dropped more than 10 percent, making it the lowest-priced two-bedroom condo at Echo Brickell, Miranda is still waiting for a good enough offer.
Competition is stiff, he says. “You have a lot of two-bedroom units on the market.”
Compare Miami’s skyline in 2008 to now, and the difference is stark. Ten years after property values crashed and foreclosure rates soured, the housing market has recovered and dozens of new high-end residential buildings have sprouted up across Downtown.
Buyers from Latin America have fueled much of the boom, Miranda and other real estate analysts say. They have bought many of the new condominiums as investments in hopes of flipping and selling them for profits.
But a lot of the units are vacant, and demand for them is lagging behind supply. The resulting glut is causing a decline in prices across greater Downtown, says Christopher Zoller, a realtor with EWM Realty International.
“When you’ve got too many loaves of bread on the shelf, the next day you’re going to see day-old bread sold at half price,” Zoller says, using a metaphor to describe the Downtown market.
Real estate experts caution that the decline in prices is not as severe as the crash 10 years ago. Indeed, prices remain stable or are increasing in other areas like Doral that do not have an oversupply of condos.
But in the greater Downtown area, there is a 32-month backlog of condos, says Peter Zalewski, a real estate consultant who runs the website cranespotters.com. Online listings show thousands of units for sale at luxury condo towers including Rise, SLS Brickell, the Bond and 50 Biscayne.
Some of the condos are listed for more than $6 million, and others have been on sale for longer than a year. Values for several units have dropped more than 20 percent.
The oversupply comes as Miami-Dade County suffers from an affordability crisis. The supply of affordable homes is shrinking, and more than half of all families in the county spend over 30 percent of their income on rent—the third worst rent-to-income ratio in the country.
Even so, many of the luxury condos for sale in Downtown are sitting unused. Zalewski walks around the area several nights each week and monitors the number of lights on to estimate how vacant the buildings are.
There are obviously other reasons for the dark windows—snowbirds and people on vacation or just out for dinner. But Zalewski says the buildings, or “ghost towers,” are unlit regardless of the day and time.
“You’re basically looking at 6,000 units in a circle,” he says on a recent Thursday night while standing on the Miami Avenue bridge and looking at several mostly dark condos. “My best guestimate is that one out of every three units has a light on.”
Zoller says the oversupply is forcing some people to sell their units for less than what they bought them for. And condos are staying on the market longer, making them less attractive to buyers who are turned off by units that have been on sale for a while.
Zoller's warning to clients: “If you don’t have to sell now, don’t sell now.”
But some people do not have that choice. And the glut is even affecting sellers who do live in their condos, like Deborah Shelton-Tynes.
She owns two units at the Marquis across from Museum Park. Her condos feature unimpeded views of Biscayne Bay, Miami Beach, PortMiami and Miami International Airport. She previously listed her units for about a combined $3.5 million in 2015 before deciding not to sell them.
She’s now listing them for less than $2.4 million.
“There’s just too much competition out there,” she says. “By 2016, everything started to go down. I started watching properties going down.”
Shelton-Tynes, who plans on moving to Key West, says she will not drop her price because she can afford to wait for a buyer who is willing to pay more.
But several other Marquis residents have already sold their units for losses, she says. People “lose their shirts."
Seth Denison, a principal with the real estate firm Brickell Ventures, says prices will continue to decline as more units go on the market. Condo owners are now renting out their units until they are sold. And developers are even shelving projects until values rebound.
Buyers, however, can capitalize on the drop in prices. Zalewski expects people from more affordable areas out west like Kendall to move to Downtown and purchase or rent out some of the now-cheaper condos.
The market decline also won't be as severe as the housing crash of 2008, real estate analysts say. Back then, developers required 10 percent down payments from new buyers. Once condo values began to drop, they walked from their deposits.
“When the new developers came out of the box about five years ago, they changed the whole model,” Zoller says. “They wanted 50 percent down. So that’s going to shape the buyer’s attitude strongly.”
Denison and Zalewski say they expect condo construction to restart in the next three to four years as more people move to Miami and buy up the existing condos.
Prices will stabilize and more buildings will go up around Brickell Avenue, they say. The Miami River, Little Haiti and Allapattah neighborhoods could also become the next hotbeds for new luxury developments. Such areas are already seeing housing prices rise, which is forcing out some people.
"Historically, Miami has always been a bit of a boom-bust market," Denison says. "We don't tend to do things slow and steady."