Condo crazy at the heart of a boom

For four humid days and three sweaty nights, Michael Bergman and Karen Bolber camped outside an apartment complex that was converting to condominium ownership. They endured thunderstorms, the threat of a hurricane, and mosquitoes from the nearby Everglades.

But it was all worth it, says Mr. Bergman, a real estate broker with RE/MAX Partners in Coral Springs. Once the condo's sales office opened, he and Ms. Bolber, also a real estate broker, bought $3 million worth of property for clients in Connecticut, New York, and Florida. He envisions some of those investors quickly selling their stakes and making $50,000 to $60,000.

"It was worth eight or ten mosquito bites," he says.

Lines of people waiting to buy condos for quick profits and white-hot real estate - it's all part of what some analysts are calling the biggest real estate bubble in America. In Miami, the construction crane could become the new state bird as some 25,00 new units are punching into the skyline - with another 40,000 on the drawing board. And with prices going up 27 to 37 percent per year in the past two years, some buildings' ownership is up to 70 percent investors.

The huge new supply of condos, combined with sharply rising prices, is causing some to break out the storm-warning flags.

"There is a four- to five- year supply of condos hitting the market in the next 2-1/2 years," says Jack McCabe of McCabe Research & Consulting in Deerfield Beach. "While the fundamentals are strong long term - some 1,000 people a day move to Florida - there could be some adjustments due to oversupply."

Recently, Merrill Lynch & Co., in a report called "Mega Metro Bubbles," ranked Miami as the hottest housing market in the nation for the third year in a row. Lehman Brothers housing guru Joe Abate says Miami, like California, is "frothy and speculative," with home prices rising faster than income levels.

And Peter Schiff, president of stock-brokerage firm Euro Pacific Capital, says "I'll probably buy a few myself - they'll be in foreclosure."

For economists, one of the red flags in Miami, as in other white-hot markets, is the home-price-to-income ratio. The higher the ratio, the more the buyer has to stretch to make payments. Since 2001, home prices in Miami are up 85 percent, nearly double the national average, according to the Office of Federal Housing Enterprise Oversight. At the same time, per capita income growth has averaged below 3 percent.

"It's getting a lot more difficult to afford housing," says Claudia Lokody, a Merrill Lynch economist who worked on the firm's report.

Of course, some Floridians shrug off the negative talk. "It's all people who don't live here," says Mr. Bergman.

Indeed, some say the booming real estate market in Miami is merely reflecting demographic changes. Of the 1,000 people per day who move to Florida, some 28 percent move to the southern part of the state.

Many of those - some 36 percent - are foreign-born, attracted to the tropical city with its mix of Latino culture and "Miami Vice" sex appeal. Many want their children educated in the US - or at least in a place denominated in US dollars.

At the same time, Miami has become a gateway to Latin American commerce, something that is sure to expand, especially with the city a candidate to host the secretariat of the proposed Central American Free Trade Agreement.

"It would cause another boost to the urban core," says Michael Cannon, managing director of Integra Realty Resources in Miami. "It would be like a mini-UN."

Baby boomers, hoping to escape northern winters, are buying second homes in the Sunshine State. "The big story is the return of the American buyer," says Ron Shuffield, president of Esslinger- Wooten-Maxwell Inc. realtors, who are marketing the Metropolitan, a huge residential and commercial complex in downtown Miami.

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