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Florida’s Housing Market Was Surging, Then a Condo Building Collapsed. What Happens Now?

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The horrifying collapse of a condo building just outside of Miami has left the nation grappling with how a tragedy of this magnitude could have occurred on U.S. soil.

In the aftermath of the deadly disaster, questions will need to be answered on what caused the unprecedented collapse of Champlain Towers South last Thursday. Building and inspection codes will likely be revised. And Southern Florida’s oceanfront condo market, where units had been in high demand, will need to reckon with the immediate and longer-term repercussions of the the collapse.

“Never underestimate the draw of ocean views. But that’s going to be tempered by the fact that people are going to be nervous,” says Randall Bell, CEO of Landmark Research Group. His firm analyzes real estate after cataclysmic events. “The fact that people died in this shifts this into a new category.”

Real estate experts believe the sheer scale of the catastrophe, which resulted in 18 deaths and 145 missing people as of Thursday morning, will depress real estate prices on the beach in Southern Florida.

Many property owners are expected to put their condos on the market at a time when frightened buyers will be more hesitant to scoop them up, even at a discount. Older buildings like the Champlain Towers South, which was beginning its 40-year structural review and was constructed before newer building codes were enacted, are expected to be particularly hard-hit.

The cost of living on the water is also expected to rise. In the wake of the tragedy, decades-old buildings are expected to undergo rigorous inspections that could uncover pricey problems that need to be remedied. The cost of that work will typically be passed on to buyers and owners through higher monthly, maintenance fees.

However, Florida’s popularity with everyone from retirees to international investors, the appeal of oceanfront real estate, and the insanely hot housing market are expected to cushion the housing market. It became a top destination during the COVID-19 pandemic as employers moved operations to the Sunshine State and remote workers, particularly from the Northeast, flooded the housing market and drove up prices.

“In the near term, this is going to have a big impact on the market,” says luxury real estate broker Lani Kahn Drody, of Lowell International Realty. But “I don’t think there’s going to be a complete rejection of condo living. … It’s not like there are tons of options for people right now.”

The fallout is likely to be far worse in the short term

With the tragedy fresh in the public’s mind and receiving 24/7 news coverage, the condo market in South Florida won’t escape unscathed. Prices are expected to fall, even in newer buildings where they could dip a little, say appraisers.

“Similar to other natural disasters, there’s an element here of panic selling,” says real estate appraiser Orell Anderson, of Strategic Property Analytics. “There’s high uncertainty. People are really afraid. They don’t know if it will happen to their building tomorrow.”

This influx of real estate will likely help to lower prices as buyers will have more to choose from—and better bargaining power.

The disaster will dissuade many would-be buyers—but not everyone. Investors and those looking for a good deal typically swoop in after catastrophe strikes.

The damage isn’t expected to be permanent, either.

“Long-term is always pretty good,” says Landmark Research Group’s Bell. “There’s a limited memory of the public.”

Buyers tend to forget once the damage has been cleared away. The wildfires that swept through California’s wine country hasn’t dampened the appeal of the area, nor do violent hurricanes tend to do lasting damage to a real estate market. Just look at New Orleans, which the deadly Hurricane Katrina devastated in 2005, or Houston, which was ravaged by Hurricane Harvey in 2017.

“There’s still this really strong demand for oceanfront living. I haven’t seen any kind of pullback based on rising sea levels and storms,” says Lesley Deutch, managing principal at John Burns Real Estate Consulting. She’s based in Boca Raton, FL, and works in Florida and the Southeast. “There is always a scare and people may leave for the short term, but people come back.”

Bell also believes the tragedy won’t affect beachfront real estate much outside of South Florida. That’s because this appears to be a one-off event, and because it didn’t happen locally, it’s not likely to spook buyers in, say, California.

“It’s going to be more regional,” Bell says of the impact.

Demand for condos in older buildings will likely recover

Don’t expect demand to disappear for older buildings, though. With home prices hitting record highs and budgets being stretched to the brink, buyers are desperate for bargains.

Before the disaster, prices in Champlain Towers were significantly lower than the newer, nearby luxury buildings. Most of the more recent sales there were between $600,000 and $1 million, according to broker Kahn Drody’s analysis of multiple listing service data. One much larger unit sold for $3 million, but that appears to be an exception.

Then look at 87 Park, a nearby condo complex constructed in 2020. One-bedroom units there start at just under $2 million. Recent sales ranged from $6 million to $8 million.

Those determined to live on the beach may not let the age of a building get in their way—particularly when the alternatives cost millions more.

However, they’re likely to pay much closer attention to structural engineering, maintenance, and cash reserves for the buildings to cover repairs or fix problems. They may ask more questions about construction defects and potential issues that may not have been raised previously. And there may be an increased focus on rising sea levels, flooding, and hurricanes, which can damage buildings.

“Things like chipped concrete, constant flooding, and peeling paint—especially in waterside communities—can be a warning sign and can indicate the building isn’t being properly maintained,” Kahn Drody says. “Whenever you’re purchasing in any condominium building, it’s important to do the homework and look at the financial stability of the building. Is it planning for its future?”

The South building, which was the one that collapsed, was constructed in 1982. Newer, safer building codes weren’t put in place until after Hurricane Andrew hit in 1992.

Forty years is still relatively young for a building, says George Dotzler, director of Construction Research Laboratory. The Miami-based firms tests facades as well as other building features for resiliency.

Well-maintained structures should last forever, he says. “This is a complete outlier. This should never happen.”

The post Florida’s Housing Market Was Surging, Then a Condo Building Collapsed. What Happens Now? appeared first on Real Estate News & Insights | realtor.com®.

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