New Index Provides Information on Condo Building Health in Miami

By Erika Schnitzer, Associate EditorMiami—CondoReports.com recently launched a BuildingHealth Index, the first measure of condominium building health county-wide throughout Miami Dade County. The index will provide ratings on nearly 2,000 condominium and townhome communities. “It is vitally important for buyers to know the stability and potential risk of the buildings they are buying into. Just because a unit appears to be cheap, doesn’t mean it may not drop in price further,” says Adam Cappel, president of CondoReports.com and creator of the index. “Beyond pricing dynamics, lower-rated buildings are more prone to special assessment or higher maintenance simply because of the dynamics of the building.” The index, based on a measure developed by CondoReports.com using its condominium and market data and calculated from variables such as foreclosures, owner occupancy percentage, number of units for sale and original unit purchase price versus current market price, indicates likely condominium association stability and historical pricing trends within a condominium community.  The BuildingHealth Index was developed as a way to quantify and understand potential financial problems in associations and previous price trend on a county-wide basis. One of its uses, for example, is to provide a proxy for those trying to better understand potential exposure to higher maintenance fees or special assessment.A rating of 50 is the median rating and indicates that half the buildings in the county are healthier and half are less healthy than that building. On average, the higher the index reading, the more stable the building is relative to other buildings. Buildings with higher ratings have experienced little—if any—foreclosure activity, more stable pricing trends compared to other buildings and larger populations of owner occupants. They are also less likely to have cash-strapped condo associations.While the BuildingHealth index provides a measure of condo association health and is reflective of previous price trends, Cappel warns that it is not intended to be a direct predictor of future values or price trends. Low ratings do not necessarily indicate that a building is subject to substantial future price declines as prices in many of these buildings have already come down substantially. Nor is a high rating indicative of a building that will not see future price declines.  “The correlation that we’re seeing is that many of the buildings with the lowest ratings are starting to see prices stabilize and activity increase,” says Cappel. “All-cash buyers are seeing investment opportunities in these condos as price declines in these buildings have outpaced the overall market. These buildings may, in fact, prove to be some of the best buying opportunities, assuming you have the ability to close all cash and weather the storm of higher maintenance fees and special assessments.”The recently released ratings are available free for a limited time at CondoReports.com.