Zai sent in a link to this Reuters article showing the dismal result of condo speculation in American cities.
MIAMI (Reuters) – Rust pokes through the peeling paint on the railings, pest control has been curtailed and the palm trees are no longer being fertilized at the 1940s-era Miami Modern condominium building in Miami Beach.
The condo association has been forced to cut expenses because the owners of 11 of the 28 apartments in the modest two-story building are delinquent, victims of a mammoth U.S. real estate collapse that has hit Florida especially hard.
With so many cash-strapped owners failing to pay their monthly fees for upkeep, the condo board last year had to raise $40,000 with a special levy to fill a giant hole in the $80,000 annual budget, but only managed to collect $19,000 from the owners who are still able to pay their bills.
Florida’s condominium and homeowners’ associations are facing what experts call a trickle-down disaster from the property crisis. Dozens and perhaps hundreds of condo buildings have budget shortfalls as thousands of owners, under water on their mortgages or in foreclosure, stop paying monthly fees.
“I call it a death spiral,” Miami Beach city commissioner Jerry Libbin said. “It’s a catastrophe in the making.”
Fortunately for them things can’t possibly get worse because Florida is running out of land and has many wealthy foreigners that want to live there. Some people consider it ‘the best place on earth‘. I also hear that they have an illegal drug trade that pumps a lot of undeclared income into the economy – that should help keep property values from falling further.
On the same topic the radio series This American Life has an interesting episode titled Scenes from the recession that touches on the same issue happening in Chicago. There’s a horror story in that episode about a ‘luxury’ condo development with hardwood floors and granite countertops where the owners can no longer get in touch with the developer and have recently discovered that the building was built directly on unpacked dirt. The entire show runs about an hour and is worth a listen if you have the time.