Miami Luxury Condo Market Report Q2 2020

2Q20 results show expected drop in sales, but glimmers of recovery appear... 

In April, our CondoBlackBook.com first-quarter report on Miami's luxury condos found that the real estate market had managed to evade any negative impact on sales because of the COVID-19 outbreak. With only the beaches reporting a slowdown, the outlook for 2Q20 had been quite positive. However, with the global situation escalating and shelter-in-place orders locking down South Florida for March and April, we've been anticipating a loss of momentum as inevitable.

With the 2Q20 results out, in general, we don't expect the market to recover to pre-COVID numbers anytime soon. May showed the lowest level of transactions with only 24 sales. However, June's sales numbers are starting to show signs of a recovery. Read on for more details on how luxury condo sales, prices, days on market, and inventory fared in the second quarter of the year for Miami overall, as well as on a neighborhood basis, plus how the market is weathering the market conditions and changes due to COVID-19 and our expectations for the future months.

This luxury condo market report only features properties priced $1 million and above, and covers the neighborhoods of Greater Downtown Miami (inclusive of Edgewater and Brickell), Miami Beach (inclusive of Surfside, Bal Harbour, Sunny Isles Beach and Fisher Island) as well as Coral Gables and Coconut Grove.

Overall Miami Luxury Condo Market Highlights

• Edgewater, Fisher Island, and South Beach show least impact of pandemic-related buyer hesitation, reporting minimal loss of sales year-over-year; additionally, Edgewater posted the highest growth in YOY Price per sq. ft.
• 12-month sales trendline stays negative between Q1 2020 and Q2 2020
• Overall prices up – Median Sales Price up by 6.7% and Price/sq. ft. by 10%
• Fisher Island re-emerges as the most expensive neighborhood in 2Q20 with a Median Sales Price of $1,101/sq. ft., followed closely by South Beach priced at $1,079/sq. ft.
• Buildings built pre-2000 weather the pandemic best with lowest drop in year-over-year sales volume, while those condo buildings built 2000-2014 and 2015-2020 register declines
• Sellers get max return on investment for condos in luxury buildings built 2000-2014 as prices continue to increase over past two quarters, getting closer to peak of Q2 2018
• Overall Days on Market declines 15% year-over-year
• Overall inventory up 46% year-over-year in response to shelter-in-place related loss of momentum
• Coral Gables and Coconut Grove grouping reports lowest inventory at 25 months, while Edgewater (119 months) and Brickell (105 months) post highest months of inventory for the quarter
• 2020 stays a buyer's market with expectations of a delay in trend reversal

Table of Contents

1. Overall Miami Luxury Condo Sales Trends
2. Neighborhood Trends - Number of Sales
3. Overall Miami Luxury Condo Price Trends - Sales Price, Price/Square Foot
4. Neighborhood Trends - Sales Price, Price/Square Foot
5. Miami Condo Sales Price Trends by Building Year
6. Overall Miami Luxury Condo Days on Market Trends
7. Neighborhood Trends - Days on Market
8. Overall Inventory Trends
9. Conclusion
10. Where Does the Miami Luxury Condo Market Go From Here?

Luxury Condo Sales Down in Miami Overall

Overall Miami Luxury Condo Quarterly Market Summary - Fig. 1.1

Sales decline 52.6% year-over-year (expectedly) with negative trendline. As the COVID-19 situation unfolded worldwide during the first quarter, CondoBlackBook's quarterly luxury condo market report showed no signs of a negative impact on sales in Miami. In fact, analysis even pointed towards a healthier second quarter, since it is usually the strongest of any given year and 2019 ended on a very strong note (Fig. 1.2). But as the city went into lockdown during March and April, it was natural to expect a decline in numbers even as virtual showings and closings took over.

As expected, the market has reported a 52.6% decline in year-over-year sales for Q2 2020 (Fig. 1.1). A look at the monthly sales chart in Fig. 1.3 shows how, after peaking in March to 75, sales gradually dropped to 40 in April and 24 in May. However, a closer look reveals that numbers started rising back up to 37 sales in June as the city adjusted to the "new normal" of doing business. Pent up demand is making its way back to the market, and as of July, we can safely report that the luxury condo market is still very active.

Consistent with the expected decline in year-over-year and quarter-on-quarter sales, the 12-month trendline continues to stay negative into Q2 this year (Fig. 1.4). Hopefully, a strong summer will lead to a trend reversal, however, we do not anticipate 2020 will be able to recover to 2019 numbers. Thus, the focus is on individual quarter growth to provide indicators of market recovery. 

Neighborhood Trends - YoY Number of Sales

Q2 Year-over-Year Sales Trends (Fig. 1.5)

Considering the pandemic's shelter-in-place orders stalled businesses and individuals worldwide, all the neighborhoods in our luxury condo market report posted negative sales compared to Q2 last year. Below is a list of the neighborhoods segmented as sales being the least or most affected:

• Least Affected / Most Stable: Edgewater (-25%), Fisher Island (-25%), South Beach (-26%), plus Coconut Grove and Coral Gables (-41%) – all showed resilience and stability, and are poised for a relatively early comeback
• Most Affected / Least Stable: Brickell (-78%), Mid-North Beach (-68%), Greater Downtown Miami (-68%), Sunny Isles Beach (-63%), plus Surfside & Bal Harbour (-50%) - all report more than a 50% drop in year-over-year sales

More details available, including quarterly data, in the dedicated reports for Greater Downtown Miami, Miami Beach and the Barrier Islands, plus Coral Gables & Coconut Grove.

Overall Luxury Condo Prices Up - Both Sales Price and Price/Sq. Ft.

Price/sq. ft. up 10% at $826, Median Price up 6.7% year-over-year. Overall, the price per sq. ft. for luxury condos in Miami increased quarter-to-quarter (Fig. 2.1), as well as year-over-year (fig. 1.1). The Median Sales Price too increased 6.7% from $1,575,000 last year to $1,680,000 this Q2 (Fig. 1.1).

Gradually increasing over the past two quarters to reach $826/sq. ft., it's quite interesting to note that the Median Price per Sq. ft. is now at par with 2016-2018 levels for the second quarter (as Fig. 2.1 shows, only Q2 2019 registered lower than average prices). This is quite encouraging to see, since it indicates that despite the pandemic, sellers were able to get fair value for their properties.

Neighborhood Trends - Price/Square Foot, Sales Price

Q2 Year-over-Year Price Trends

Price per Sq. Ft. - Median (Fig. 2.2.1)

• Winner: Fisher Island is the most expensive neighborhood with a median price of $1,101/sq. ft., overtaking the first quarter's most expensive district of Surfside & Bal Harbour
• Winner: Edgewater reports the highest percentage growth in year-over-year Price per sq. ft. (18.4%), overtaking Surfside & Bal Harbour from the previous quarter
• Up: Other neighborhoods posting an increase in year-over-year Price per sq. ft. -         Fisher Island (15.6%) and Mid-North Beach (6%)
• Flat: Brickell (-0.4%), Coconut Grove & Coral Gables (-0.5%), Greater Downtown Miami (-1%), Surfside & Bal Harbour (-1.4%)
• Down: Neighborhoods posting a decline in year-over-year Price per sq. ft. – Sunny Isles Beach (-12.5%) and South Beach (-15%)

Sales Price - Median (Fig. 2.2.2)

• Winner: Fisher Island again reports the highest percentage growth in year-over-year Median Sales Price (115.6%)
• Winner: Besides Fisher Island posting a 115.6% jump to $4.9 million (Fisher Island perpetually has the highest priced luxury condos in Miami on a median sales price basis), the combined neighborhood of Surfside & Bal Harbour reports the highest sales price of $2.4 million this second quarter
• Up: Other neighborhoods reporting an increase in year-over-year Median Sales Price – Coconut Grove & Coral Gables (23%), Surfside & Bal Harbour (22.8%), Greater Downtown (8.7%), Edgewater (7.7%) and Brickell (2.3%)
• Flat: Mid-North Beach (1.2%)
• Down: Neighborhoods reporting a decrease in year-over-year Median Sales Price - South Beach (-8.3%) and Sunny Isles Beach (-27.8%)

Sales Price Trends by Building Year - Miami Market Overall

Below is a detailed analysis of how prices added up on the basis of age of construction for luxury condos in Miami, categorized as new construction buildings (2015-2020), buildings built from 2000-2014, and pre-2000 buildings.

NEW CONSTRUCTION BUILDINGS BUILT:  2015-2020

Inevitably, sales dropped for these new construction buildings over the second quarter of 2020. This newly built segment posted a 53% decline over the previous quarter and 51% decrease year-over-year (Fig. 2.3). Nonetheless, the median price per sq. ft. remained stable year-over-year with only a 17.5% decline seen quarter-over-quarter. At $932/sq. ft., the price trends in the mid-range of median prices traced over the past five years (Fig. 2.4).

BUILDINGS BUILT:  2000-2014

These newer luxury condo buildings see a big drop in sales volume of 62% year-over-year and 39% quarter-to-quarter this second quarter (fig. 2.5). However, the median price per sq. ft. continues its upward trek to almost touch the highs of the same quarter in 2018 ($900/sq. ft.) at $863/sq. ft. (fig. 2.6). This points to sellers getting good value for their investments in the segment.

BUILDINGS BUILT BEFORE YEAR 2000

For Miami's older luxury buildings, sales stayed stable quarter-to-quarter, decreasing only 28% year-over-year (Fig. 3.8). This seasoned segment seems to have weathered the effects of the pandemic rather well, posting the least decline in sales volume of all the segments under review. The median price per sq. ft. also increased to $679/sq. ft. (Fig. 3.9), which is close to previous year's $696/sq. ft., and a jump up from its lowest figures in five years reported last quarter ($610/sq. ft.).

Overall Days on Market Down QoQ & YoY

Days on Market decline by 15% year-over-year. Luxury condos in Miami posted a decline in their Median Days on Market compared to Q1 this year as well as Q2 last year. Properties spent 19 fewer days on market compared to the same quarter 2019 and 26 fewer days compared to the previous quarter. This decline in median Days on Market for 2Q20 is in part due to sellers temporarily taking their condos off the market, and in part due to buyers and sellers reaching a consensus sooner.

Neighborhood Trends - Days on Market

Q2 Year-over-Year Days on Market Trends (Fig. 3.2)

• A majority of the neighborhoods post a decline in their Median Days on Market for luxury condos – South Beach (-41%), Miami Beach (-34%), Fisher Island (-28%), Sunny Isles Beach (-27%), Edgewater (-12%)
• Mid-North Beach posts a flat Median Days on Market compared to Q2 last year
• Brickell reports the highest increase of 213 days of all the neighborhoods in our study. The business district reports a 361% increase, taking the metric up to 272 days on market this second quarter
• Other neighborhoods reporting an increase in the trend include Greater Downtown Miami (140%), Surfside & Bal Harbour (13%), plus Coconut Grove & Coral Gables (12%)

Inventory at Highest Since Mar. 2019, Buyers Benefit Again

Q2 closes with 57 months of inventory. As expected, the sudden slowdown in sales due to the pandemic led to an increase in the active inventory of luxury condos. While the first quarter ended with 43 months' worth of inventory on the market, the second quarter posts an increase of 33% at 57 months.

Inventory gradually increased from 44 months in April to 57 in June due to the 6-month average sales dipping by June-end and a higher active-plus-pending sales compared to May 2020. So, even as sales started picking up pace by June-end, inventory still has a long way to go before leveling down to its ideal mark of 9-12 months. This means buyers have a strong edge in negotiations, as this increase buys them more time and opportunities to find the best deals as they look for luxury condos for sale in Miami.

A balanced market has only 9-12 months of inventory. The months of inventory are calculated as – no. of active listings + no. of pending listings divided by the average number of deals in the last 6 months.

Conclusion

Luxury condo market shows full impact of COVID-19, extends timeline for buyers' market cycle. Even as the year started off on a good note, with most neighborhoods reporting an increase in sales in Q1, the full impact of the pandemic was yet to be seen. And that is exactly what we expected the data to show in the second-quarter results - in terms of sales, at least.

As all the neighborhoods post negative sales, the good news is that Edgewater, Fisher Island, and South Beach still managed to retain volumes, with only a 25-26% drop in their year-over-year sales. Further, moving contrary to popular belief that prices might tank to appeal to buyers during this global health crisis, the Overall Sales Price and Median Price per Sq. ft. metrics both posted year-over-year gains. This is highly notable and showed that most sellers were still able to get fair value for their luxury condos. Couple that with pent up sales demand coming through in June and following into July, we have good reason to believe that the summer months will post good numbers.

However, even if numbers go back to their pre-COVID normal, we expect inventory levels to remain high for the remainder of the year. This gives buyers a big window of opportunity to find top deals as the luxury condo market in Miami stays tipped in their favor, for longer. Good neighborhoods with the most stability to buy and invest in appear to be Edgewater, Fisher Island and South Beach. 

Luxury Market Predictions and Analysis: Where Does the Market Go From Here?

With Miami's luxury condo market in favor of buyers for the past couple of years, 2020 could have been the year of change to shift the balance back to sellers. However, with COVID-19 playing the wild card, this buyer-friendly cycle has found itself an extension. Considering the current global situation, the following factors will have a big impact on the way the luxury condo market pans out over the remainder of the year:

COVID-19 Crisis. As expected, the full impact of the pandemic is clearly visible in the sales figures for this second-quarter. However, as the city reopened, the month of June posted an uptick against May's lows, giving hope for the upcoming months. But, as the number of coronavirus cases have recently risen in South Florida, travel to Miami will remain subdued and the pandemic continues being a wild card in how long the market will take to regain its balance. The good news is that the pandemic doesn't seem to be affecting luxury condo values. This has also been true for the single family housing market as well.

Pent-up Demand Coming Through, But Inventory Stays High. Anecdotally, we have been seeing sales skyrocket as all the pent-up demand from the second-quarter comes through with the "new normal." July has been a very active month for sales and we only see demand staying up this entire summer. However, once this pent-up demand is met and the dust settles, we are expecting the market to go back to its regular momentum, leaving inventory levels high.

Miami Still a Buyer Favorite. It's no secret that Miami continues attracting buyers from other major US cities with our zero income tax, beautiful weather year-round, and a dynamic lifestyle. Further, compared to other major cities, Miami and the Miami Beaches offer less density with more outdoor amenities, making it a top U.S. choice for many seeking to have real estate options outside of the Northeastern and Midwest U.S., like New York City, Boston, and Chicago. The multinational culture of Miami and the overall handling by local leaders of the current major issues Americans are facing, including the coronavirus pandemic and current civil rights and Black Lives Matter protests, lend to Miami's brand and unique desirability.

Presidential Elections. As we get closer to the elections, we expect a slowdown in momentum. Election years have always led to buyer hesitation. However, it is also expected that some emboldened buyers and investors will take advantage of distressed properties as the overall price pressure and economic challenges continue. 

Inventory. Irrespective of sales picking up, we expect the luxury condo market to remain inventory-heavy over the next few cycles. And, even though fewer pre-construction deliveries are scheduled for the year, the time frame to reach a balanced market has been extended for now.

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