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: