Florida has seen huge population growth in the past 50 years, drawing Baby Boomers and retirees, people leaving the northern U.S., and others coming from South America and Caribbean countries. Their arrival spurred a rush to build homes, and now, Florida has close to 1.5 million condominiums.
However, many of those structures are starting to show significant wear and tear, while the finances set aside for maintenance — the reserves — are proving insufficient.
Condo boards are left racing to meet higher state standards for budgeting, all while insurance premiums on these structures are skyrocketing. Also, the state is recovering from a spate of devastating hurricanes. All this leaves condo dwellers watching a financial crisis unfold.
➤ Special report: Why Florida’s new safety inspection law is creating havoc for condo owners
That crunch is also starting to impact the real estate market. Once soaring, it is now slowing in some parts.
Marco Island in southwest Florida has twice as many condominium units as single-family homes and it’s seeing the effects of a slow condo real estate market caused by these aforementioned issues.
Total real estate sales were down 8% in August versus a year ago, according to the Marco Island Association of Realtors. Condos are staying on the market 120 days, up 79%, compared to 69 days for single-family homes, which is down 7%.
Marco Island resident Marc Creach, a loan officer at Wesson Group’s Cross Country Mortgage who covers Marco Island, Naples and Bonita Springs, says the impact of multiple hurricanes can’t be understated.
“The biggest issue with condos on Marco and like Naples, a lot of it, without a doubt, has to do with the past storms,” Creach said. “We’ve had Irma in ’17 and then ’22 of course, September of ’22, so the deferred maintenance aspect of it, like when a lender wants to see if there’s any, you know, maintenance that is being deferred.”
The same thing is happening in Daytona Beach on the east coast.
In September, real-estate agent Mike Gagliardi found that in the previous 24 hours, 60 condo units for sale in the Daytona Beach area had dropped their asking prices.
Supply is in pursuit of demand, resulting in a condo sales slowdown.
And, sure, much of it can be attributed to the damage from the 2022 hurricanes, soaring property insurance rates and new assessments for many owners, sometimes in the thousands. But another factor is election uncertainty, Gagliardi and other observers said.
The law that allowed associations to defer critical maintenance was eliminated after the collapse of Surfside’s Champlain Towers in June 2021 which killed 98 people. A state law went into effect this July that was designed to ensure the safety of condo buildings. Engineering inspections are required for condos of three stories and higher when they reach 30 years old and again every 10 years after. Any future repairs must be fully funded.
“The biggest issue here is a lot of condos have deferred maintenance from the storms,” Creach said.
Hurricanes — and now the new Florida condo laws — taking a financial toll
In Marco Island, people’s time references are marked by storms. Was it before Irma or after? Before Ian or after? Or was it further back — closer to hurricanes Donna or Wilma?
On this island of 24 square miles, there are six miles of beaches and 100 miles of waterways. There are about 16,521 full-time residents, but room for as many as 60,000 during the winter tourist season. With more than 10,000 condominium units, there are twice as many condos as single-family homes.
The repercussions of Hurricane Irma in 2017 and Hurricane Ian in 2022 are still being felt, with lawsuits against insurance companies alleging they weren’t paying enough to fix all the damages, or that work was still incomplete. There are roofs and lanais still being replaced even though Irma hit seven years ago. Many were further damaged by Hurricane Ian.
“There are some challenges with the new (Florida) laws,” Creach said. “Marco as a whole isn’t seeing like a widespread problem, like what they’re seeing on the east coast. … I’ve probably only seen one or two places that had issues so far.”
With a deadline of Dec. 31 for Phase 1 “milestone inspection” reports, only 29 of Marco’s qualified condo buildings have filed theirs, according to an open records request with the City of Marco Island. Those reports either give condo associations a clean bill of health and 10 more years or recommend a Phase 2 report if substantial structural deterioration has been identified. In Phase 2, condo associations need a plan and timeline for repairs and reserves to cover the repairs.
A few buildings that haven’t yet filed but are required to do so include Riverside Club in Olde Marco, Tampico at Cape Marco and South Seas Towers. The five-story over parking Riverside Club on Marco River is one of the oldest condos, built in 1981. The South Seas towers on the beach were built in the early 1980s. The 14-floor Tampico at the south end of the island is the oldest and shortest building in Cape Marco, built in 1994.
Creach said he hasn’t been able to write a loan for condos at Riverside Club since before Irma.
“They had issues for a while, and that was just due to Irma damage,” he said.
Irma made a direct hit on Marco Island and Riverside Club saw widespread damage with condos, all of which face the water, blown through from one end to the other; lanais torn off; and the marina flooded and destroyed. Concrete staircases between buildings collapsed during the storm. Only this year, has the reconstruction of the lanais been completed.
“They were in the middle of litigation against insurance companies for proceeds. And you know, of course, we had roof issues there. There were lanai issues, there, staircase issues there,” Creach said. “So, all those were considered safety, but now have been pretty much completely rectified. So, they look to be back in good standing. But those are the type of things that can take place.”
‘We’re just not getting any buyer activity’: Condo inventory sits for more than a year
Dennis Almand — a Eustis businessman who has bought three Daytona Beach Shores condos within the last four years — said he’s seen that hesitancy among would-be buyers.
Interest rates and perhaps even waiting until the election is over may be slowing the market but what’s motivating so many condo owners to sell in 2024 are assessments being levied by condo associations.
Gagliardi, team lead for the Mike Gagliardi Team with Re/Max, said the current inventory on the market is estimated to sell in 14-15 months, making it a buyer’s market. A seller’s market is six months’ inventory or less.
“We’re just not getting any buyer activity,” he said.
“Last year, about 50% of our deals were cash. We’re slowly seeing that transition away,” he said. “It seems like the people with the cash are holding onto it.”
While he said values “haven’t really plummeted,” he expects to see a reduction in the average costs to show up in statistics soon.
In Volusia County, condo sales are on pace for a year-over-year decline in 2024, according to numbers crunched by Mark Wright, director of real estate for the Property Appraiser’s Office.
Almand, who sold one of his three condos, taking a $10,000 loss, said he didn’t mind. The other two were upgrades and the fulfillment of a dream. His wife, two children and four grandkids love the ocean.
“You mention the beach, man,” he said, “and we’re going.”
J. Kyle Foster is the Senior Growth & Development Reporter for the Naples Daily News.
Mark Harper is a Staff Writer and Political Editor at the Daytona Beach News-Journal.
This article originally appeared on Palm Beach Post: Condo sales slow due to Florida’s new Surfside safety inspection law
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