Florida buyers scramble to get out of contracts

A reader sent in this link to an article in the New York Times about condo buyers trying to get out of presale contracts now that the florida market has tanked. Its an interesting example of how quickly sentiment can change from boom to bust: between March 2005 and 2006 speculators drove prices up 25% in West Palm Beach, but now demand has dropped off and many of the condo construction project started during the boom are starting to complete putting more inventory on the market and driving prices down.

As dozens of condominium towers conceived during Florida’s real estate boom near completion, investors who snatched up units in the preconstruction phase in hopes of turning a quick profit are increasingly trying to break contracts, even walking away from fat deposits.

“Motivated” sellers are flooding online forums like Craigslist with advertisements for condo units still months or years from being finished. And lawyers have been inundated with calls from people hoping to avoid closing on units they bought during the speculative craze of 2004 and 2005.

“I get two or three of these calls a day,” said James Ryan, a lawyer in Boca Raton who said he had 40 clients looking to get out of condo contracts. One, Mr. Ryan said, abandoned a $340,000 deposit rather than close on a $1.6 million unit that lost its appeal as the market faltered.

The numbers suggest that it will only get worse. In Miami-Dade County alone, 8,000 new condo units will be completed this year and nearly 12,000 more in 2008.

The median condo price in Boca Raton dropped about $13,000 in the year leading up to March ’07. Could it happen here? Only time will tell, but here are a couple of graphs you may be interested in. The first is from the UBC Sauder school of business and shows Vancouver population growth over the last 19 years:

The second graph is from the City of Vancouver and shows Condo completions in the Downtown core for the same period, with future supply forecast for projects in the pipeline:

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freako
freako
13 years ago

satv, I was starting to think that you were for real, but the English of the last post was almost perfect, none of that earlier babelfish poetry. Didn't have enough time? In any case, better English or not, I have no clue what you are trying to say.

satv
satv
13 years ago

IT DOESN'T MATTERNormally it is population growth that drives prices, but it looks like it is prices that are curtailing population growth.Topsy turvy is what it is. This can only happen during a market failure, which is that sellers aren't being realistic, and also that part of the demand is from speculators and others who leave units empty. no no nopeople who are moving actually buying out from van are,and were home owners here in van so they are trying to buy out and live free off mortgage or loan anywhere else in canada.let say some one holding a property worth 600.000 and mortgage of 250.000 likewise people are selling their property and find alternative home some where else to get rid off mortgage and money the will earn will go into their pockets.new buyers are not in that position… Read more »

beta
beta
13 years ago

But – surprise – when TSHTF, we find out that the excess demand was coming from local cowboys. It's the same old story, it's the same old game.Well said!

mold city
mold city
13 years ago

M- Thanks for those numbers, by any chance did your previous initials include a 'V' an 'H' and a 'B'?

patriotz
patriotz
13 years ago

It's well known in chinese circle that biggest buyers are people with mysterious chinese government backgroundAnd it was "well known" in Miami that the biggest buyers were people with mysterious Latin American backgrounds.But – surprise – when TSHTF, we find out that the excess demand was coming from local cowboys. It's the same old story, it's the same old game.Where does the Vancouver CMA end?It's the same as the GVRD, i.e. it includes Langley and Maple Ridge but not points east.

freako
freako
13 years ago

"Here are my rough numbers:Quarter GVRD Pop Difference YOY Growth2005.1 2,181,583 10,395 1.92%"Thanks for those. If Q1 2007 followed the recent trend (I assumed 2600), the q1 yoy population growth will be about 0.5%.Why the slowdown? Can only be related to prices and draw to Alberta.Normally it is population growth that drives prices, but it looks like it is prices that are curtailing population growth.Topsy turvy is what it is. This can only happen during a market failure, which is that sellers aren't being realistic, and also that part of the demand is from speculators and others who leave units empty.

markx
markx
13 years ago

grant: The population growth figure is Vancouver CMA, while the chart above show that 3000+ units are expected to complete in Downtown Peninsula alone in 2007. That does put things in perspective, for 10,000/yr pop growth.

tulip-Mania2
tulip-Mania2
13 years ago

" One, Mr. Ryan said, abandoned a $340,000 deposit rather than close on a $1.6 million unit that lost its appeal as the market faltered. The numbers suggest that it will only get worse. "I tried and tried but I just could not shed at tear.Would it surprise anyone on this board if I said I hope the Vancouver speculators get their balls crushed twice as badly?Tick Tock, Tick Tock

grant
grant
13 years ago

How is GVRD population measured, is it taken from census?We were growing 40,000+/yr, and now it's "only" 10,000/yr. So although we have to wonder "who is buying all this new construction" that's still 5,000 condos or 2,500 detached houses/yr worth of new population to house.

M-
M-
13 years ago

Hi all,Sauder has the data in a table format if you follow the link to their site.I pulled the numbers into a rough population figure. Quarterly growth has basically stalled, from 10,000-12,000 per quarter in 2004/2005, to only about 2,000 to 3,000 per quarter, for the last 3 quarters.Here are my rough numbers:Quarter GVRD Pop Difference YOY Growth2005.1 2,181,583 10,395 1.92%2005.2 2,192,406 10,824 1.98%2005.3 2,203,719 11,313 2.06%2005.4 2,215,866 12,147 2.20%2006.1 2,229,449 13,582 2.19%2006.2 2,231,574 2,125 1.79%2006.3 2,233,952 2,378 1.37%2006.4 2,236,938 2,986 0.95%

freako
freako
13 years ago

"The data point is probably quarterly, but the growth rate is annual growth, so the last few data points may not be valid, "Yes, that is exactly what I meant. That our population declined in the fourth quarter."I suspect the dip at the end of population growth is an artifact, likely due to smoothing of data points. "Not sure what you mean by this. Why would there be smoothing? If Sauder pulled the correct numbers of Cansim, it looks like we lost population in q4. I will reverse engineer the numbers into absolute when i get a chance, but for the annual growth rate to drop like that when all the other quarters were 2%, surely q4 was negative.

jesse
jesse
13 years ago

OT: Interesting post analysing the true meaning of median price increases in Santa Clara County.

digi
digi
13 years ago

I wouldn't be terribly suprised to see population growth for Vancouver drop into negative territory in the next few years. For all the talk of a booming economy the reality is really expensive housing wrapped up in speculative fervor and average incomes lower than a lot of other canadian cities and towns.I had breakfast this weekend with some friends and one topic of conversation was 'moving away from vancouver' We talked about options as well as the friends we know that have already left. The consensus was that Vancouver is nice, but not worth the price.

jesse
jesse
13 years ago

"I suspect the dip at the end of population growth is an artifact, likely due to smoothing of data points."It this is true, one would expect other cities to exhibit similar anomalies. But Vancouver is the only one of the eight CMAs to show this. Given that rents are climbing so quickly I am surprised that pop growth is so anaemic. SFH under utilisation as kids leave home may account for some of this, as could foreign residents or a large amount of discretionary rental supply. That or the Sauder stats are fatally flawed.

rentah
rentah
13 years ago

markx: There may be the kind of direct links you've suggested (which are interesting), but my guess is based on the far broader effects that I expect the Chinese stock pop to have on global stock markets and liquidity.

markx
markx
13 years ago

rentah: I believe that Vancouver RE is not driven by chinese stock market as much as money from corrupt officials. It's well known in chinese circle that biggest buyers are people with mysterious chinese government background. Expect a new round of crackdown on corruption in China after 2008 Olympics, cutting off cash flow to Vancouver, and catching speculators waiting to sell to Chinese investors off guard.

rentah
rentah
13 years ago

1. Question: I take it that the population growth graph takes into account all factors (births, deaths, immigration, etc), that it represents total change in population ?2. I reiterate my previous prediction that our RE prices will peak the moment that the Chinese stock market crashes.Take a look at this article from today's Bloomberg, on the Chinese Stock Market.Can you imagine how many funds/institutions/individuals are sitting with their fingers poised over the 'sell' buttons? The next fall will be a lot bigger than February's 9%.

markx
markx
13 years ago

Freako: I suspect the dip at the end of population growth is an artifact, likely due to smoothing of data points. The data point is probably quarterly, but the growth rate is annual growth, so the last few data points may not be valid, as seen from the almost straight line decline.I would expect the updated graph in 6 month to show flat population growth, i.e. 2007 same as 2006.

Jim
Jim
13 years ago

I was reading Times Online and found this: "Bank of England is expected to report that mortgage approvals, a leading indicator of demand for properties, fell back last month. Hometrack said that the proportion of the country still experiencing a boom in property had shrunk. About 34 per cent of England’s postcode districts enjoyed price rises this month, compared with 44 per cent in April"Finally, clear evidence that just as asset inflation was a world wide phenonanon the correction is becoming global.

Warren
Warren
13 years ago

I suspect that Vancouver CMA population growth must have been close to negative in q4 2006. Why do I think that? Because it has yoy year growth below 1%, but the beginnning of the year had 2%.I thought those were quarterly numbers, not averages.Where does the Vancouver CMA end? I'm guessing that more people are moving into the area not defined as the CMA, but they are there due to its proximity to the CMA, like Abbotsford, or even Langley. Not enough to make up the difference of course, but helping to skew the stats.

julia
julia
13 years ago

Freako, and salaries are probably higher in Seattle than Vancouver no?????This is about Victoria but RE agents smugly say the prices are higher here because it is held together by rich retirees that come for the amazing weather (yeah amazing rain). Anyway, Florida has always been reitrement capital forever … look what is happening there.

freako
freako
13 years ago

Sorry, double Portland. More like 50% higher than Seattle.

freako
freako
13 years ago

seattle is 13% up yoy. Vancouver prices are double Seattle.

tulip-Mania2
tulip-Mania2
13 years ago

Satv may be right, there may be a correlation i.e. Rainfall/Prices

satv
satv
13 years ago

location real estate is locationseattle is 13% up yoy.