The vultures are circling the construction cranes and unfinished concrete-and-glass towers of Miami's white-hot condo craze.
A handful of real estate entrepreneurs are forming "vulture capital" funds to pounce on what they call an inevitable downturn in an exploding south Florida real estate market fueled by foreign buyers searching for safe havens and aging baby boomers looking to downsize and move closer to the coast.
Analysts have long predicted a slowdown in the blazing U.S. real estate market, where stock investors scorched by the Internet bubble of 2000 poured money into rental properties and second homes.
Owners in New York, Washington and California cities have seen double-digit annual growth in property values for years. Nowhere is the champagne fizz of the real estate mania more evident than Miami.
In the city of Miami, more than 60,000 high-rise condo units are in some stage of planning or construction, officials say. The city has fewer than 400,000 people, a fraction of greater Miami's 2.3 million population.
Jack McCabe, chief executive of McCabe Research and Consulting of Deerfield Beach, Florida, said he has formed an "opportunity fund" that is nearly "eight figures" to take advantage of a swoon he sees coming next year as a result of a bulge in the south Florida condo pipeline.
"We're seeing people taking equity loans, people emptying their savings accounts. The really giddy are maxing out their credit cards to get in on this gold rush," he said. "We think a lot of people are not going to be able to close."
The median price of an existing U.S. home climbed from $156,000 to $185,000 from 2002 to 2004, according to the National Association of Realtors. The price of a greater Miami home shot from $190,000 to $277,000 in the same period.
Price rises in Fort Lauderdale and West Palm Beach were even higher, and Florida cities like Bradenton, Melbourne and Sarasota were red-hot as well. Buyers who failed to act quickly tell tales of desired properties rising $10,000 or $20,000 from month to month.
Flood of money
A flood of money from Latin America and Europe has financed 30- and 40-story tower projects in Miami's Brickell banking district, downtown's Biscayne Boulevard and on flashy South Beach, as developers sell urban lifestyle and boomers seek water view homes.
"We're getting, easily, between Latin America and Europe, easily 40 to 50 percent of our buyers in this downtown area," said Pedro Martin, chief executive of developer Terra Group.
Miami's condo boom has shown notable signs of excess. When the bayside Mirador rental building was converted to condos last fall, buyers pitched tents in its driveway for days to have a shot at a unit.
In South Beach, the beach/hip-hop/model mecca, developers throw wine-and-hors d'oeuvres parties to open sales offices with the aim of creating buzz for frothy unbuilt projects where $600,000 apartments will sit next to noisy roadway overpasses.
Last week, developer Leon Cohen revealed plans for the Empire World Towers, a 110-story downtown condo project that would be the world's tallest residential building, if it gets off the ground.
"I believe many of them won't get built," said David Dabby, president of Coral Gables-based Dabby Group and a longtime observer of the Miami market. "If all those projects go forward it seems pretty clear that there will be an oversupply."
Local real estate analysts say 80 percent of the units in some projects are bought by speculators. About 48,000 new condos are scheduled to hit the south Florida market -- Miami, Fort Lauderdale and West Palm Beach, by 2007, McCabe says.
He believes a market downturn beginning next year will leave some speculators unable to close, buyers in bankruptcy or foreclosure and developers out of business. That's when the vulture capitalists will swoop.
"Some of the greatest fortunes were made in down markets," he said. "A down market sorts out the really savvy from the naive. The savvy will understand what opportunities are out there and the naive will suffer the consequences."
The vultures may flock too early, Dabby said, recalling that the south Florida market took about six years to recover from a condo bubble in the early 1980s.
"That's a fool's game right now," he said.
But with an estimated 1,000 new residents moving to Florida every day and land available for development running dry, particularly in south Florida, some analysts say any downturn will be less a crash than a period of flat or moderately lower prices.
"South Florida will always be an excellent real estate market in the long term," McCabe said. "We have a scarcity of land and we have constant population growth."