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| November 24, 2009 |
By: Polyana da Costa |
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hen Veronica Cedeno paid $161,000 for a condo in a Palm Springs building, she could not imagine that about a year later, units in the complex be would worth as little as $15,000 to $30,000.
Cedeno bought the unit in a condo conversion called Sabal Pointe in mid-2008, well into the collapse of South Florida’s residential real estate market. At the time, her condo was assessed by the Palm Beach County appraiser’s office at $153,000. It is now assessed at $31,000 and the assessment for 2010 will probably be even lower, said Pamela Lamb, manager of the condo department in the county’s appraiser office.
“It’s sickening,” Cedeno said of her condo’s sharp drop in value. “And we have no control over it.”
Cedeno’s nightmare is far from an isolated case. Residents in dozens of other condo and townhouse communities in the region — mostly conversion projects in Broward and Palm Beach counties — have seen the appraised values of their properties plummet over the last year, often as much as 80 percent according to data from the appraiser’s offices in Miami-Dade, Broward and Palm Beach counties.
Even for an area that has seen sharp declines in real estate prices, the numbers are stunning.
“It’s very shocking, its terrible — but it is what it is,” said John Thomas, director of residential appraisal services at the Palm Beach County appraiser’s office.
And as some owners realize their units may be worth less than their down payment, an increasing number simply abandon their properties and let lenders take over.
Cedeno, who is vice president of Sabal Pointe’s condominium association, said she is one of about 10 owners still living at Sabal Pointe, an 188-unit complex that recorded the biggest decline in value last year in Palm Beach County. Based on county appraisal data, Sabal Pointe units declined 83 percent from 2008 to 2009. That far exceeds the county’s 20 percent year-over-year decline in condo prices reported Monday by Florida Realtors.
As lenders foreclose on many of these units, they have no choice but to get rid of the condos at fire sale prices, despite the fact the mortgage on the property may be 10 times as much what the unit is worth.
At Ponte Verde, another condo conversion project in West Palm Beach, Countrywide won a foreclosure judgment of about $210,000 on a unit that is assessed at $22,000 by the county. At least five units in the 398-unit complex have sold for about $20,000 in the past three months. One sold for $14,000 in April.
Ponte Verde’s developer, Grec Conversion XX, sold many of the units in 2007 for more than $250,000.
BIG BROWARD DROP
In Pompano Beach, the Windward Lakes condo conversion project suffered Broward County’s largest drop in assessed values over the past year. In 2008, the average unit was appraised at about $200,000, according to county records. This year the average value was $49,000.
The 276 units in the complex had a total assessed value of $54.4 million in 2008. This year‘s total value was $13.6 million, a 75 percent decline in assessed value from 2008 to 2009. The assessments in 2010 are expected to drop another 21 percent, bringing the average unit assessment to about $37,000, according to Scott Lewis, the condo supervisor in the Broward County appraiser’s office.
Meanwhile, the median price of a condominium in Broward fell 28 percent in a year, according to Florida Realtors.
As in Miami-Dade and Palm Beach counties, Broward’s assessed values are normally 15 percent below market value to offset sales costs.
SUBURBAN WOES
Whil e appraised values in many Broward and Palm Beach County condo conversions have cratered to the 80 percent range, declines at Miami-Dade condo projects have not been as drastic.
The hardest hit Miami-Dade properties are in lower-end, suburban conversion projects, but even those did not suffer more than a 60 percent decline in the past year.
One reason, according to Condo Vultures’ Peter Zalewski, is because the Miami-Dade property appraiser does not factor in foreclosure sales when assessing values. Property appraisers working for Broward and Palm Beach County do.
“Palm Beach and Broward assessments are more indicative of the real market price,” said Zalewski, who heads the Bal Harbour-based real estate brokerage and consulting firm.
Patrick Smikle, a spokesman for Miami-Dade property appraiser’s office, said the office does not normally factor in foreclosures because “foreclosed properties are usually in extremely poor condition and not representative of the area in which they are located.”
Smikle said, “an exception to this approach to foreclosures this year was Homestead where foreclosures dominated, and thus significantly influenced the market to an extent that they did not in other locations.”
Regardless of the county’s method of determining assessments, drastic drops in the 80 percent range are unlikely to be found in Miami-Dade, Zalweski said. That’s because condo projects in the county still attract foreign investors. Foreign buyers account for about 70 percent of condo buyers in South Florida and most of those are in Miami-Dade, helping to bolster values in the county, according to Zalewski’s research.
In Miami-Dade, the Club at Brickell Bay Plaza, a 463-unit complex on Miami’s Brickell Avenue, recorded one of the most severe declines in value in the past year, according to the appraiser’s office. Based on the total assessed value of the project, units at Club at Brickell Bay Plaza were assessed at about $450,000 in 2008. This year the average unit was assessed at $188,000, about a 57 percent decline.
According to Florida Realtors, the median price of a Miami-Dade condo declined 30 percent over the last year.
INFLATED PRICES
Most condo properties have taken a hit since the market swoon two years ago. Appraisers and brokers in part blame high foreclosures and financially troubled condo associations.
But why have some complexes seen values decline has much as 80 percent?
The problem is that some condo converters sold units at inflated prices, said Richard Swerdlow, founder of Condo.com.
“The converter overpaid to start with, thinking it was going to be an easy market for people to flip the units,” he said. “So when the oversupply showed up in the market, the prices went back to pre-conversion, more realistic numbers.”
Zalewski agreed.
“In many of these cases, the units were purchased for $50,000 each, put on the market for sale by the developer for $200,000 to $250,000. Now they are going back to what they were actually worth.”
In Sabal Pointe, for example, the developer, Palm Springs Development, paid $14.4 million, or about $76,000 per unit in 2005. After renovating the complex, it sold units for twice as much.
Palm Springs Development is owned by Legacy Conversions and Holdings and headed by Jorge Diaz and Marc Suarez. The company’s phone line has been disconnected. Diaz and Suarez could not be reached for comment.
Grec Conversions, the developer that converted Ponte Verde, paid $51 million, or about $128,000 per unit, for the property in 2005. After renovating the complex, Grec sold units for twice that price.
Lamb, of the Palm Beach County property appraiser’s office, said evidence of overpriced units in some of condo buildings started to appear last year.
“There were a lot of things going on in some of these projects, that you wouldn’t know by looking at warranty deed,” she said.
“We were told that there were major concessions being offered to buyers at Sabal Pointe, including cars,” she said, noting that the concessions were taken into consideration by the appraisers office as a factor to determine the real value of the property.
Ask Cedeno who is to blame for the devaluation of her condo and she is quick to answer:
“It’s the developers fault,” she said. “We had no control of what happened here. The developer walked away; the maintenance people — which were hired by the developer and were owed money by the developer — started renting out apartments without credit checks. Some of the people who moved out busted windows in their units. No more than 10 people were paying condo dues. But now with the lender in charge we are hoping things will get better.”
International Bank of Miami recently took title to 93 units in the complex.
The bank has been paying the condo dues for the units it owns, according to Cedena.
That may stablize the property, but it will likely be forced to unload the units at deep discounts and that won’t help bolster values.
Zalewski said that as values continue to sink, the question that many owners are asking is, ‘Do I stop paying? Do I do the financial savvy thing or the morally correct thing?”
Unlike many other residents, Cedeno said she is choosing the morally correct path.
“I value my credit and still have hopes things will turn around and get better.”
Polyana da Costa can be reached at (561) 820-2065.
Reader's comments
No name said:1. The reporter does not indicate the severest of price drops in the story (aand in the market) have occcurred in apartment to condominium conversions, not newly developerd condos. While new ones have dropped substantially, it's the conversions that havee dropped from $200K at the height of the market to $30-50K now. An important fact the reporter did not identify. 2. Interesting the non-assessor sources the reporter selected did not perform research on condo conversions or perform reports on conversions until last year. An unbiased reporter would have attempted to contact the top source in the market for this data and expert analysis. This publication, in my opinion, is biased and unreliable due to editorial management and subjective reporters. Nov. 24 at 9:30 a.m.
Anonymous said: Hey, no name. What part of this graph did you not understand? Residents in dozens of other condo and townhouse communities in the region — MOSTLY CONVERSION PROJECTS in Broward and Palm Beach counties — have seen the appraised values of their properties plummet over the last year, often as much as 80 percent. What about the many examples of failed CONVERSION PROJECTS mentioned in the story and the discussion about CONVERTERS who overpaid? Did you miss that part of the story too? Also interested in knowing who would be "the top source in the market for this data"? 11:49 a.m. |
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