Miami Becoming A Renter's Paradise

Here's a sunny take on the bevy of empty condos cluttering up downtown Miami. The area may become a renter's paradise.

Investors and second-home buyers account for a stunning 60% of the nearly 13,000 new condo units sold in downtown Miami since 2003, according a report by real estate consulting firm Condo Vultures LLC.

That means many owners in the area don't live there, and the upscale waterfront towers that crowd the area are quickly becoming a renter's paradise. It could become the largest concentration of tenants in the Southeast - if not the country - the firm says.

"There is an enormous number of unwanted condo units," says Brad Hunter, chief economist/national director of consulting for Metrostudy, a housing market research firm. "The oversupply in downtown Miami is absolutely massive. It's bearish for the market's health, that's for sure."

Things will likely get worse as developers try to unload another 10,000 new, unclosed units into one of the nation's worst housing markets, adds Peter Zalewski, a Condo Vultures principal who is also a real estate broker.

Many units are under contracts inked during better days. But with prices plummeting, foreclosures soaring and loans hard to come by, contracted buyers are afraid to or unable to close.

As the market continues to sour, expect investors - especially bulk buyers eyeing a bargain - to snap up the units, Zalewski says.

If this happens - and many industry watchers think it will - the percentage of primary users living in the area could dip below 35%, delivering the market another blow. The ratio of primary users to investors and second-home buyers is key for buyers seeking financing.

Jittery lenders, stung by losses to investors, have tightened their requirements for condo lending, viewing more owner-occupants as safer. Both Fannie Mae (FNM) and Freddie Mac (FRE) have tightened condo guidelines. In Florida, Fannie must review each new project for stability before it will guarantee financing.

But there's a silver lining for all those renters. "They're going to have the opportunity to live in a brand-new luxury building for a very, very low rent considering the quality," says Hunter. "This is unprecedented."

-By Dawn Wotapka; Dow Jones Newswires; 201-938-5248; [e-mail]