Miami’s condo market, known for its booms and busts, is in the middle of a big boom that would typically be threatened by, inevitably, an oversupply of condos. But the dreaded trio of supply chain breakdowns, rising costs, and labor shortages pose the most significant hazard.

To offset rising construction costs and prepare for supply chain-induced shortages, some contractors and developers purchase materials and store them in warehouses earlier or modify sales contracts to account for changes to materials and appliances. And those measures may be more widely adopted now that a land war in Europe, and some of the toughest financial sanctions against Russians in generations, threaten to disrupt supply chains even further.

“Construction prices are out of control, and supply chain issues are really problematic,” said Suzanne Amaducci-Adams, a Miami attorney who heads the real estate practice at Bilzin Sumberg. Jon Paul Pérez, president of Related, said construction costs are increasing 10 to 15 percent every month, he said in December.

The cost increases are already being built into single-family home sales contracts between homebuilders and buyers. That means buyers agree to pay a price that may not be fixed.

“We have addenda that basically say if our price for lumber, etc. goes above ‘x,’ either the developer/seller has the right to terminate or pass that cost onto the buyer,” creating more of a “ballpark purchase price.” while the price is supposed to be a basic element of the contract.

Once they launch sales, developers and brokers are just hoping to capture as many buyers as possible, even if that means selling out before the sales office is completed and open. Who actually delivers is another question.

(source: therealdeal.com)