Miami in a Vice

"As credit conditions tighten around overstretched buyers, Florida is rapidly climbing to the top of the foreclosure list. Unlike Ohio or Michigan, where job losses have pushed homeowners out of their homes, here the culprits are speculation and overbuilding. The percentage of Florida home mortgages entering the foreclosure process tripled between the fourth quarters of 2006 and 2007, according to the U.S. Mortgage Bankers Association.

Miami now enjoys the dubious distinction of being the worst major real estate market in the United States, perhaps the world.

Prices citywide were 17.5 per cent lower in December than a year earlier, according to the latest S&P Case-Schiller national home price index - easily eclipsing other speculative hot spots, such as Las Vegas, Phoenix and San Diego.

The market value of downtown condos has plunged as much as 50 per cent, from a peak average price of $500 to $700 (U.S.) a square foot to as low as $300 a square foot - or less than it costs to build a condo.

And the bottom may still be nine months or more away because a giant wave of new units is about to hit the market, sending prices tumbling further.

More than a dozen cranes dot the downtown skyline as work continues on several new projects. Mr. Zalewski estimates that as many as 25,000 condo units are under construction in a six-kilometre stretch of downtown. That's more than twice the number of new condos all of Miami-Dade County typically absorbs in a year.

...[At the height of the boom] the city went on a spending spree, pouring money into roads, parks, police and fire stations, a cultural centre and a new town hall.

Now, city officials, struggling to deal with state-mandated tax reform, are looking at a looming budget crunch. Like countless U.S. towns and cities, its tax receipts are stagnant or falling, and demand for its services is way up.

The sobering message from Miami: The worst isn't nearly over in the real estate market - here, and across the United States."