You Spin Me Wrong Round Baby Wrong Round

It's the real estate death spiral, and in the Miami condo game, everybody gets a spin.

Rust pokes through the peeling paint on the railings, pest control has been curtailed and the palm trees are no longer being fertilized at the 1940s-era Miami Modern condominium building in Miami Beach.

The condo association has been forced to cut expenses because the owners of 11 of the 28 apartments in the modest two-story building are delinquent, victims of a mammoth U.S. real estate collapse that has hit Florida especially hard.

With so many cash-strapped owners failing to pay their monthly fees for upkeep, the condo board last year had to raise $40,000 with a special levy to fill a giant hole in the $80,000 annual budget, but only managed to collect $19,000 from the owners who are still able to pay their bills.

Florida's condominium and homeowners' associations are facing what experts call a trickle-down disaster from the property crisis. Dozens and perhaps hundreds of condo buildings have budget shortfalls as thousands of owners, under water on their mortgages or in foreclosure, stop paying monthly fees.

"I call it a death spiral," Miami Beach city commissioner Jerry Libbin said. "It's a catastrophe in the making."

Nearly half of Florida's 18 million residents live in condo or homeowners associations, communities where owners pay monthly fees for common expenses like cleaning, landscaping, pool maintenance and building insurance.

When a unit owner stops paying monthly fees, which can range from $150 in a small building to over $1,000 in a luxury tower, a condo board must collect money from other owners to make up the shortfall. Rising fees or special assessments, or levies, can drive other vulnerable owners into insolvency.

We're getting to the point where real estate has taken such a hit in some parts of the country like Florida that we're past the point of no return. You can replace "condo buildings" with "neighborhoods" or "subdivisions" but the results are the same: vacancy, deliquency, and foreclosure rates are so high, and so many blighted properties are for sale, that the property owners that are left find themselves in a situation where they're below the critical mass for a stable community. Shops, gas stations, grocery stores, all the things that sprout up around a neighborhood go under too. The whole place turns into a ghost town.

The same principle for Miami condos applies to your local mall in the commercial real estate game too. Enough stores at the mall close, the entire mall goes under.

We're seeing these systemic losses in both residential and commercial real estate, where developments, malls, condos, hotels, and entire neighborhoods are simply no longer going concerns.

Death spiral, headed down the drain. The housing depression continues unabated.