A once-vibrant market has been besieged by huge challenges in recent years – and there could be more ahead
For years, Florida’s condo market was a hotspot for both domestic and international buyers drawn to relatively affordable units, an attractive year-round climate, and an appealing lifestyle in the Sunshine State.
But that picture has changed dramatically during the past five years, with a perfect storm of challenges plunging the sector into crisis and sparking a plunge in condo sales and prices across the state.
In 2021, the collapse of a multistory beachfront condominium in Surfside led to the tragic deaths of 98 people and prompted fresh scrutiny into building safety regulations.
Ownership costs have surged since that catastrophe thanks to a sharp jump in insurance premiums and soaring HOA [Homeowners’ Association] dues – with many insurance carriers withdrawing from the state’s condo market entirely as climate risks spike.
And that’s helped push demand lower: housing analyst Nick Gerli says condo values have slipped by 9.9% in Florida over the past 12 months, with prominent markets including Palm Beach, Miami-Dade, and Tampa all seeing big declines.
The slower current market is no surprise, according to loan originator and Orlicki Group founder Oliver Orlicki (pictured top), because of the challenges facing HOAs – and sellers – in recent times.
“Getting insurance for these associations has been a very expensive endeavor,” he told Mortgage Professional America, “and unfortunately what ends up happening is in order for these associations to get coverage that they need, they either have to raise monthly HOA dues or assessments on owners, or they have to take a policy that doesn’t have as much coverage.
“And what that does from a lending perspective is mean they don’t meet the minimum requirements for financing when it comes to the agencies like Fannie, Freddie, or government loans like FHA or VA. So it’s created a bit of a headwind for condo sellers and we’re seeing prices being discounted accordingly.”
A sliver of good news for Florida condos
If there’s a silver lining for the market, it’s a recent flatlining of home insurance costs – and some mortgage professionals are also optimistic that the market correction and repricing could ultimately bring about something of a reset.
Even a drop in premiums by about 10%, Orlicki said, “could be the determining factor of whether a project can afford the correct coverage to make those deals financeable or not.”
For buyers, the good news is that lower prices mean higher purchasing power, while bidding wars and intense competition are also a thing of the past.
But a downside for all parties: “Every year that goes by, every condo becomes a one-year-older property,” Orlicki said. “And as the property gets older, it gets more expensive [to maintain] and every time there’s a major hurricane and something happens where the roof or balconies need to be replaced or there are structural issues… it just sets owners back from a financial standpoint.”
Could the government be doing more to help?
Last year, Governor Ron DeSantis proposed over $600 million in the Florida budget toward programs reducing homeowners insurance costs, while state Senators put forward other bills to bring those costs down in the fall.
But Orlicki said authorities need to do more to help address that crisis – and in turn, ease some of the challenges facing sellers and buyers in the Florida housing market.
“I think from a government standpoint, they need to fund more. They need to step up to the plate and put a stopgap in between a lot of this stuff,” he said. “And unfortunately, I don’t see that happening anytime in the near future.
“At the end of the day, you’ve got a multitrillion-dollar real estate market in the state of Florida. A lot of coastal properties have a lot of condos on them. They’re going to need to do something. If another major hurricane hits a major metropolis like a Miami or Fort Lauderdale, God knows what’s going to happen to costs.”
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