Although the number of South Florida condominiums in the development pipeline continues to rise, area lenders Florida RealtorŪ magazine spoke to see no signs of a bubble. 'New projects are still getting funded, and money is readily available for buyers,' says Ray Castellanos, past president of the Mortgage Bankers Association of Florida and regional vice president of GMAC Mortgage in Miami.
In the city of Miami, the epicenter of the regional condo boom, 70,000 units were under construction or at some stage of planning as of August ' up from 65,000 units in July. In the tri-county South Florida market, the total number of new condo units is well over 100,000, according to real estate analysts, who caution that many announced developments may not be built if mortgage rates rise significantly and dampen investments.
As the number of units rises, lenders are becoming more cautious, adds Castellanos. Many lenders have put restrictive clauses on their loans to developers in order to prevent speculators from reserving units at an early stage and assigning them to other buyers prior to closing. The risk is that if market conditions change and speculators can't find buyers, they will simply walk away, leaving the developer with unsold units.
'Today, there are clauses in condo [purchase] documents [stating] that a buyer must hold the unit for one or two years before selling,' says Castellanos. 'That's not a problem for purchasers who intend to use the units themselves or rent them out for a longer-term stream of income.'
When it comes to construction loans, lenders are looking for experienced owners and for developers who have new condominium and condo conversion projects in good locations, according to Marc Yavinsky, vice president of GMAC Commercial Mortgage in Boca Raton, 'But it seems like there's a lender for every deal,' he adds. 'The developers are building, and the units are getting sold. There are no signs of a slowdown in the condo market at all.'
Looking ahead to 2005, Yavinsky says lenders' only area of concern is ultra-high-end condo projects. 'We're not seeing any housing bubble in the middle-tier condos, nor do we expect to see one,' he adds. 'Prices of single-family homes continue to rise throughout South Florida. There is still a tremendous influx of people to our region, and not everyone can afford a $500,000 home. Therefore, there will still be a large need for condos in the middle market and those priced below $500,000.'
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