Florida Condo Foreclosures on the Rise

Jade at Brickell Bay, one of the success stories of Miami-Dade County’s condo boom era, is leading the pack with a more dubious distinction: the most foreclosures at any condo development in the county this year.
The 48-story luxury tower on Biscayne Bay had 17 Florida mortgage defaults seeking payment of $15 million, according to court filings this year through May 4.

At the high end of the scale, owner Jose Collazo owes Citibank $1.07 million on the 1,700-square-foot unit he bought in March 2006 for $1.43 million. Jade’s homeowner association also is going after owners like Patricia Martinez for $11,429 in unpaid fees on a $2.1 million unit she bought in April 2006.

Creditors will force the properties to be sold at auction unless owners resolve their debts.

The 326-unit complex at 1331 Brickell Bay Drive had more foreclosures than any other building in Miami-Dade and was second in the South Florida housing market to Sailboat Pointe in Oakland Park, a condo conversion with 20 properties in default. Another condo conversion, The Tides on Hollywood Beach, followed with 16 foreclosure filings.

The numbers support Miami real estate analyst Lewis Goodkin’s belief that the South Florida condo market “is nowhere near bottom.”

He said the true impact of the slowdown on prices and resale activity won’t be known until late 2007 and into 2008 when condos that sold before or during construction at the peak of the market in 2005 start coming online.

Attempts to sell now are being compounded by falling appraisals and hesitant Florida mortgage lenders. At least one has sworn off Jade (pictured) already.

Jade’s unwanted distinction signals the housing freefall hasn’t hit bottom, said broker Peter Zalewski, head of Condo Vultures Realty and a former Daily Business Review reporter.

“It’s significant because Jade was the first property to come to market at $500 a square foot and the first generation to come online,” he said. “If the first is in trouble, imagine what’s going to happen with the other ones.”

Florida mortgage brokers and lenders once said waterfront condos would be the last to be hurt.

But trouble for Jade and The Tides, an oceanfront conversion by Chicago-based joint venture MCZ/Centrum Florida, illustrate the impact of the housing slowdown and the speculative activity that propped up the five-year boom.

Jade turned heads before construction because it showed new condos could sell and resell for more than $1,000 per square foot, usually a price reserved for Miami Beach mansions and Fisher Island condos.

Jade developer Edgardo Defortuna’s profile rose with the $16.65 million acquisition of the Jade site in 2001 by investors led by him and Argentine developer Miguel Angel Barbagallo after Brazilian developer Grupo Multiplan nixed development plans.

Defortuna’s Fortune International bought the site, designed the project and launched pre-construction sales on its own. Fortune later paired up with Swire Properties, the developer of Brickell Key, as equity partner on the $145 million construction project.

The buzz about South Florida condos in the early part of the decade drew investors to the market and got people to sleep on sidewalks for the first crack at units. Fast forward a few years and Miami-Dade has thousands of units ready to be delivered this year, but absorption is not close to keeping pace.

The average number of monthly condo sales from February to April was down 31 percent from the same months last year, according to sales brokerage Esslinger Wooten Maxwell.

Experts say the market needs six to 12 months of inventory for steady growth in a healthy market. At the peak of the market, inventory was down to two to three months.

Today, Miami-Dade has 28 months of existing inventory — without taking into account the new units that haven’t closed yet, said Ron Shuffield, president of EWM.

In April 2005, there were 5,125 condos on the market. One year later, the number of available units spiked to 15,581, and the number rose to 22,924 in April, according to Multiple Listing Service research by EWM.

And that number is expected to continue rising as projects are completed.

Owners of Jade units under foreclosure owe lenders and the homeowner association nearly $15 million. Three owners owe a total of nearly $40,000 in fees to the Jade Residences at Brickell Condo Association.

Shuffield was surprised that quality buildings such as Jade would have such a high number of foreclosures because developers typically asked for at least 20 percent down.

Buyers had been buying and selling with ease there, but now there are plenty of would-be sellers and landlords.

Another problem for Jade owners trying to sell is that even willing buyers may have trouble finding a Florida mortgage loan. Greenpointe Mortgage Funding stopped lending at Jade because of inflated appraisals and prior resale activity.

“Greenpointe is not the most conservative, but they are the most picky about appraisals,” said Grant Stern, owner of Morningside Mortgage. “They caught it about a year ago and cut off funding.”

Stern said the foreclosure activity has prevented his peers from closing on deals at Jade because lenders are staying away. It’s common to have some owners fall behind on maintenance fees, but “bank foreclosures are the real red flag.”

Miami City Commissioner Marc Sarnoff, whose district includes Jade and who campaigned to limit high-rise condo development to the downtown area, said he sees a silver lining in the dark foreclosure clouds.

“This will bring the cost of buying a condominium down in South Florida, which in and of itself is probably not a bad thing as the market needs to correct itself. That is what free enterprise does … self-corrects,” he said. “There is an abundance of supply, and there is not enough demand.”