What Will Happen With the Brickell Condo Market in 2018?
Should you sell your Brickell Condo now or hold on to it for a few more years?
This blog focuses on Brickell, but the analysis is valid for the greater Downtown Area including Edgewater
The Brickell condo market is now seeing those price corrections we have been talking about for the last two years. Many sellers see their units sit on the market for a long period of time while potential sellers are contemplating whether to sell now or wait till the market shifts. For these sellers it is important to understand the “Months of inventory” of the Brickell market. It might not be new to you that the Brickell condo market is seeing high levels of inventory, but what many sellers (and buyers) don’t understand is what this level of inventory really means. Once you understand the months of inventory, also known as absorption rate you will be better able to understand whether you should sell or hold on to your unit.
The months of inventory in the Brickell Condo Market in 2018
As you can see from the above data, the Brickell condo market is seeing low levels of absorption / high levels of inventory. Of course, the 63 months of inventory measured in the $750K range is based on the amount of properties that sold last year. If we sell at the same speed as last year it would take up to 5 years to sell all current inventory. Needless to say, today’s market conditions might change and a sudden sharp decrease in prices might lead to a new pool of buyers and a faster absorption of listings. With other words, depending on the market conditions these 63 months of inventory might be absorbed at a faster or slower pace than last year. In the last two years the Brickell Market has seen high inventories while we barely saw any price decreases. In today’s market we see that these price drops are actually starting to happen in order to move units.
Selling My Brickell Condo Now vs Selling my Condo in a Few Years
The question on everybody’s mind is whether we foresee any change in the Brickell condo market. To be honest: No. The Brickell condo surge was fed by the massive influx of foreign investors, which led to an upwards price spiral. A high percentage of these investors are now looking to offload their condos. Many have bought a generic unit above market value and because of tough competition they unfortunately might have to take a hit in order to sell. We are seeing condo units today that are listed at $600K, while their actual value is $500K at best. There are less buyers looking at the Brickell condo market than a few years ago and these buyers are not willing to pay inflated prices. With many months of (often overpriced) inventory and no increase in the number of buyers, we do not see the months of inventory decrease any time soon. As a matter of fact, the market might only get more months of inventory as the supply side is moving faster than the demand side. This means that the only way to bring back the market balance is by decreasing sales prices.
The sooner sellers will decrease their price, the more advantage they will have. Decreasing your price now will give you a competitive advantage over other sellers. In case you wait with selling till next year, most sellers will have dropped their prices, which affects your unit’s competitiveness. With an inventory of 2+ years and many units being priced at between 10% and 20% over its actual value, we expect that holding on to your unit will only have a negative effect on your sales price. This is specially true for the generic units mostly in the brand new condos. These generic units all offer equal features and many do not have water views or obstructed water views. From our own experience, as well as from what we hear from colleagues, many of these units do not even show more than once per two weeks.
Lets say you have a Brickell condo on the market priced at $600K. Decreasing the sales price with 10% to $540K gives you a massive competitive advantage (This might be less than you paid for, but that is the reality). If you keep this unit on the market for the next two years, the market will have adapted its prices in order to sell. If you want to stand out in that market you will have to lower your price even more, lets say at that point you will need a total reduction of 15% or 20% in order to sell . With HOA costs between $600 and $1000 per month and yearly taxes of approximately $10,000, each year you don’t sell will cost you an additional $20,000 (not even mentioning when you bought with a mortgage and you are paying interest)