The Florida condo market is in trouble. Sales are down year over year. Prices are dropping. The cost of owning a condominium is on the rise. There have also been changes in the Florida legislation that will take effect in 2024 that you need to pay attention to. If you own a condo, you should consider selling before the condo market crashes.
We have condos throughout Brevard County. Since most of the condo sales are in the Cocoa Beach area, I am focusing on the sales data in this area. Condo sales for Cocoa Beach in our MLS for July 2023 is one of the slowest I have seen since I have been tracking the data. Average condo sales peeked in 2021 with 64 per month. So far in 2023, we are averaging 46 per month with only 30 condo sales in July 2023.
One of the factors I believe is causing the slowdown is the dramatic increase in the monthly association fees. Just a couple years ago, it was common to see condo fees under $500 per month with several associations under $300 per month. Fast forward to 2023 and you will see most of the condo fees are well over $500 per month. The reason for this increase is due to insurance premiums rising in Florida.
Increases in condo fees are not new. Usually, the increase was minimal, $20-$30 per month. The increase in 2023 I am seeing is $40 increase per month on the low end. Most have been $100 to $150 per month increase. I have seen a few increases over $300 per month. This will be an ongoing issue until something is done about the insurance premiums.
Condo assessments are happening at more condo complexes. This isn’t just a Cocoa Beach condo issue, it is happening throughout the county & I imagine throughout the state. If a condo has to do any concrete restoration, it takes a long time and is expensive. It is one of the deferred maintenance issues that most associations do not have in reserves (or enough in reserves to cover the expense) I have seen assessments range on the low end of $14,000 to the high end of over $50,000 per unit. Most of the time, some type of payment option is available. Either the contractor doing the work offers options or the association contacts a lender and takes out a loan. If the concrete work involves just the balconies, you can stay living in the condo (it will be loud and you can’t use the balcony) If they have to repair or replace the walkways, you cannot live in the condo while the work is being done.
We are all aware of the tragedy that took place in South Florida with the collapse of the Surfside condominium. This has triggered the passing of an update to Florida Statute 718 for condominiums that are 30 years old or older (built in 1993 or earlier) and at least 3 stories tall. If the condo is within 3 miles of the beach, it is for condos 25 years or older (built in 1998 or earlier).
To give you an idea of the impact this will have on condo owners in Cocoa Beach. There are 183 condominium complexes and over 6500 condos. 5900 of the condo units were built before 1998 and will be affected by the updates to Florida Statute 718.
These condos will need to have a phase 1 milestone inspection/structural integrity inspection done every 10 years with the first inspection to be completed before December 31, 2024. The phase 1 study is a visual inspection of the building to see if there is substantial structural deterioration. If they identify anything in the phase 1 milestone inspection, then a phase 2 milestone inspection study must be completed.
The purpose of a Phase 2 inspection, if required, is to fully assess the building and to confirm the building is structurally sound and safe to live in. The inspector is required to recommend a plan to fully assess and repair the distressed and damaged portions of the building. The Phase 2 inspection might require some demolition of parts of the structure to see the extent of the work needed to make the building safe and sound. Once this is completed, they will know what work will be required to be done and the costs to the association to complete the work.
The other change in Florida Law is the reserves condominiums need to have in place. They are now required to have a Structural Integrity Reserve Study done to make certain the association has the money on hand to do the work on the building and minimize the amount of a special assessment. Some associations right now have elected to have minimal reserves or no reserves to keep the monthly association fee low and planned on having a special assessment to cover any big ticket items (roof replacement, resurfacing the pool, paving the parking lot, etc) This is no longer an option and associations will have to have a fully funded reserve starting in 2025. The Structural Integrity Reserve Study will help associations submit a fully funded budget with a reserve schedule.
To have a fully funded budget with a reserve schedule, the association will have to do one or both of the following: increase the monthly association fee and/or have a special assessment.
No matter what, the cost of owning a condo will be going up in Florida, especially in our beach towns. We have seen the increase in insurance costs have an impact over the last 2 years and the changes to Florida Statute 718 will cause another increase in the monthly condo association fees. If your condo also needs to have repairs done due to a phase 2 milestone inspection, there will also be assessments coming. As an owner, you will be responsible for these one way or another.
By 2025, you will know if your condominium complex will need any major repair work done and what the costs will be. If you are OK with taking a chance and have the funds to pay for a large assessment, great! Just know that some of the other owners might not have the ability to pay and will be selling at a discounted rate. This is why I am recommending you consider selling your condo in 2023 to protect some of the equity you have in your property. If you have questions about these changes and how they could affect you, let’s schedule a call. My cell is 321.795.1854 or you can leave a message below.
Eric Larkin is a Broker Associate with Real Broker, LLC. He lives, works, and plays in the Cocoa Beach area. If you have questions about moving or relocating to Cocoa Beach and the Space Coast, let me know! I get calls, texts, direct messages & comments on my posts every day about the real estate market and things that are happening in Cocoa Beach and the Space Coast that I love answering. Ask me your questions on moving, relocating here, or anything about the community. I am here to help. I have been helping buyers and sellers with their real estate needs since becoming a real estate agent in 2003. My focus is always on helping, answering your questions, and doing everything possible to make certain you have a smooth transaction from beginning to end.
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