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Prices plummet, making Orlando condo market worst in U.S.
By Mary Shanklin
Orlando Sentinel
Condo prices have fallen more in Orlando during the past year than in any other metro area in the state and, most
likely, the country, according to state and national Realtor reports.
The median price for an existing unit in Orlando was $50,600 in the third quarter -- a 56 percent drop from the same
time a year ago, when the midpoint sales price was $114,000. Statewide, condo prices fell 34 percent during that time.
Nationally, the only city that comes even close to Orlando's dropping prices is Las Vegas, which had a 46 percent
decline in median prices for condominiums during that same period.
The national findings for cities outside Florida include co-ops and other multi-family properties, but they represent
such a small amount -- less than 2 percent -- that it's reasonable to assume Orlando's prices have fallen the most, said
a spokesperson for the National Association of Realtors.
Orlando's distinction for falling condominium prices comes as no surprise to Winter Park condo owner David Burt.
He paid $167,000 in 2006 for his two-bedroom unit at the Lancelot complex in the Goldenrod area. Three years later,
he's hoping to sell it for $37,000.
"I thought for sure there would be some kind of bottoming-out point -- you know, the point where mortgage
payments would be the same as you're paying in rent," said Burt, who recently relocated from his condo in the
Goldenrod area to San Francisco. "But they haven't. Rental prices have either stayed the same or they've even risen
in some places. But the condo prices have just dropped through the floor."
The discount prices drove more than 1,600 units sold in the area during the third quarter, up 265?percent from the
same period a year earlier and, by far, the largest increase in the state, according to records from the Florida
Association of Realtors.
Most of the flurry of buyers have cash. Conventional lenders and the government will not take a risk on the
plummeting properties that are often managed by associations on the brink of financial disaster, with many owners
not paying maintenance fees.
"It's a cash game -- lenders not interested in lending," said Shelton Granade, vice president of investment properties
for CB Richard Ellis in Orlando. "There are good properties and good locations that could get the FHA financing. .?.?.
Others? It's cash-only deals, and that drives down the price."
What's driving the fall? It's not as much an oversupply of downtown high-rises built during the peak of the market
as it is Orlando's fast pace of conversions from apartments to condominiums from 2004 until early 2007. In 2005, the
city led the nation in the number of conversions, with many of the complexes in outlying areas.
"There was a tremendous amount of inventory purchased earlier in the decade for condo conversions," said Dan
Fasulo, managing director of Realty Capital Analytics. "There's no question that it created a huge shake-up in the
supply down there."
The conversions met a need -- they offered the prospect of ownership at a much lower price than at new condo
complexes, Fasulo said. Relatively low prices, coupled with an easy availability of mortgages, pushed many renters
into purchasing converted units, "and probably many of them shouldn't have been homeowners," he said. Investors
added into the buying mix.
"The actual demand was overstated in Florida, Phoenix and Vegas," Fasulo said. "With the combination of investors
and these homeowners, developers reacted by buying old apartment complexes and converting them." Orlando real
-estate agent Heather Joubran said the conversions were such a risky purchase that she discouraged her buyers
from them.
"I honestly wouldn't sell them when people wanted to buy them because, honestly, who will want to buy your
converted apartment when you ultimately want to sell?" Joubran said.
Another factor driving down the prices has been the condition of some of the units. Absentee investors sometimes
neglected maintenance and, in a few cases, owners who lost the units in foreclosure lashed out in anger. In a
complex where units are selling for $80,000, Joubran recently sold one for $18,000 because the previous owners
turned on the faucets, locked the doors and left the place to be ruined. That sale will bring down all other nearby
sales.
Manny del Valle, president of Foreclosure Cleanup Pros, said the unit was infested with so much mold that anyone
entering had to wear a mask. The cost to tear out and replace everything in it will run about $30,000, he added. There
are so many vacant units throughout the area that more of these hidden horrors will continue to pop up. "There are
some places out there that I have seen, I don't want to call them ghost towns, but there are a significant number of
vacancies," del Valle said. "You go out to MetroWest, and there are tens and hundreds of these things vacant
everywhere."
In some newer projects, units are converting back into apartments, as in the case at 55 West in downtown Orlando.
And others are selling units in bulk. In November, for instance, Smith Equities Real Estate Investment Advisors of
Orlando sold 640 units at Park Central in South Orlando to a Canadian buyer for $58,750 per condo.
"The key to closing this transaction was getting both the buyer and seller comfortable with the financial condition of
both the rental operations and the condominium associations' economic stability," said Gerald Smith, senior
investment adviser for the firm.
Granade projected that Orlando would not continue to hang onto the biggest-price-fall distinction much longer.
Other cities, such as Miami, are getting ready to have new condo projects come online, and that will further extend
their recovery for the sector.
"Thankfully, we're not in that position," he said.
Mary Shanklin can be reached at mshanklin@orlandosentinel.com or 407-420-5538.
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