CORAL SPRINGS, FLA.
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.
If the boomers want to live in South Florida, they are likely to find their choices limited - there are few undeveloped blocks left for new single-family developments. The Everglades are a boundary on one side, the Atlantic on the other side.
One indication of the diminishing amount of space for development: 58 percent of sales are now condos, compared with 42 percent for single-family houses, says Mr. Shuffield. Even downtown Miami is rapidly getting built out. As a result, developers are spreading to other areas such as North Bay Village, an enclave built on landfill in the middle of Biscayne Bay. One of those buildings is the Lexi, a 19-story development with 164 units.
The Lexi is typical of how the Florida real estate market works. Developer Scott Greenwald purchased a 1970s-style shopping center, and even before the bulldozers had leveled the property, Kirschner Realty International, one of the area's leading marketing organizations, opened up a sales office. Giant photos showed the view looking down Biscayne Bay.
The marketing was like candy: Kirschner quickly presold 80 percent of the 164 units, which will be ready for occupancy in the spring of 2007. As the units sold, the prices rose. "The pricing started in the low [$300,000], and it's now up to the mid-$500s for a similar unit," says Charles Kirschner.
In fact, Mr. Kirschner says the pricing model for condos is the same as for hotels or airlines. "As there are fewer units left, it drives the pricing."
Sometimes the price hikes happen in a matter of hours. Kirschner recently managed the Coral Springs conversion that Bergman waited in line for. The first people in line received discounts that brought prices below market value. Through the day, prices rose. "Otherwise you can't create a frenzied atmosphere," says Kirschner.
The pace may even get faster - if that's possible. Mark Zilbert, a Miami real estate broker, recently announced plans for "Condo Flip," an Internet-based marketplace where buyers, sellers, brokers, real estate agents, and developers can "flip" condominiums - selling and reselling contracts for them - even before they are built.
"There is a genuine demand that we are about to face and this is a way to address the demand," says Mr. Zilbert, who says he has had inquiries about his plan from all over the world.
The demand he refers to is the expected flood of sellers once some of the projects get their certificates of occupancy.
"I estimate 80 percent of the buyers of these units have an interest in reselling," he says, "but I'm not sure we have the capability to resell such a large number. But we can if we expand the buyer base to include someone in France who doesn't know a condo is for sale in Miami, or a buyer from New York who is looking for a retirement place."
All these plans remind some of the other real estate booms in South Florida. In the 1920s, slick-talking salesmen sold 25,000 lots to tourists until the Depression deflated the land rush. Again in the 1950s, 1970s, and 1980s, Florida underwent booms and busts. "If there is a cycle recently, it seems to be every ten years," says Mr. Cannon. "We're in the 13th year of a 10-year cycle."
Ethan Harris, chief economist at Lehman Brothers, says almost anything can cause a real estate bubble to burst. He recalls a Dutch real estate mania that fizzled after a television station aired a story about the boom. Now the CBS news program "60 Minutes" is working on a Miami condo-craze story.
Although he, too, is worried about the future of the real estate market, Bergman's most pressing concern is another condo conversion that will happen soon in Delray Beach. He and Ms. Bolber will be there.
"There's no shade anywhere," he says. "We'll be going through the water and Gatorade."