Renters Win as Florida Condo Market Sputters

With big-city condo conversions grinding to a halt in formerly hot real estate markets, some people are finally breathing a sigh of relief.

Renters.

Not only did this group miss out on the double-digit price increases many home owners have enjoyed in recent years as Florida home mortgage costs have hit record lows and prices have soared through the ceiling, but they’ve seen rents spike since 2004 as the condo craze actually shrunk the available rental apartments greatly.

The slowing South Florida housing market is likely to alleviate the squeeze on the supply, and finally give the roughly 30 percent of households that don’t own their own home a much needed break over the next two to three years. An outright drop in rental prices, however, is unlikely - at least for the time being.

After five red-hot years for housing, inventories of unsold condominiums began climbing during the past year, causing a glut of unsold units in formerly hot markets. Developers have quickly shifted gears and started either canceling condo projects or converting units back to rentals.

In Miami, where the vacancy rates of rental apartments hovers around a tight 3 percent, “there will be some pressure” on rental prices in the next year or two, even if Florida mortgage rates remain low, said Greg Laughton, V.P. of commercial mortgage-backed securities and real estate research at Wachovia Capital Markets.

For South Florida, he says:

“I think we’ll continue to see strong rent growth due to (strong demand), but we will not continue to see double-digit rent increases as condo projects are pulled or converted to apartments.”

Statewide in Florida, condo sales fell 31 percent to 3,440 in October from a year earlier, the Florida Association of Realtors reports. Meanwhile, the median sales price for condos statewide fell 2 percent, and was down as much as 19 percent in the Tampa-St. Petersburg- Clearwater area.

In the Washington, D.C., area, also a hotbed for condo conversions in recent years, roughly 10,000 units are likely to be removed from the pipeline of projected condo units in the fourth quarter. Of those 10,000, about 3,000 are likely to become rentals rather than condos.

That compares with 4,390 condo units removed from the pipeline in the third quarter, of which 2,277 were switched to apartments and 2,113 were nixed as appreciation slows.

In Las Vegas, where high-profile projects that involved celebrity investors have all been canned in the past year and a half, with more rental units likely on the way.

As of mid-November, an estimated 6,900 condo units were suspended in the sales process, and 1,900 more have been officially canceled, according to real estate research firms.