May 4, 2006 -- Though the temperature hit 100 degrees in Delray Beach, Fla., last summer, eager buyers lined up and waited outdoors for days.
Was it Springsteen tickets? A free tank of gas? Neither of these.
Watch "20/20" Friday night at 10 p.m. ET
The men and women waiting for this modern-day gold rush to begin were looking to buy condominiums in south Florida, a real estate market that over the past four years has become one of the hottest in America.
But is it overheated?
New Jersey native Jay Lutz didn't think so when he and his wife purchased a condo unit in Delray Beach's Pineapple Grove Village that he never planned to move into.
"We didn't get our first choice or our second choice, but we're pretty happy with what we got," Lutz said.
Like other buyers, the Lutz family was happy to spend $350,000 for a one-bedroom condo and up to $800,000 for a three-bedroom unit -- only to resell those units immediately.
"If I can get a buyer and I can flip it right away, I'll do it," Lutz said.
"Flipping" in real estate lingo means buying and quickly reselling properties for big profits. In south Florida and other popular real estate markets, it got to the point where people were buying and flipping contracts on condos before they'd even been built.
Big Returns on Investments Seduce Buyers
The preconstruction market in Miami has seen some of the highest investor returns in the United States. "People are seeing 2, 3, 400 percent returns on what they invest in a construction condo -- over about a year," Mark Zilbert, a Miami real estate broker, said last year.
"What kind of drives the desirability in the Miami area is where the waterfront locations are," Zilbert said.
Zilbert estimates that at one point, up to 80 percent of condo purchases were purely speculative investments, made by people with no plans to ever live in one of the tens of thousands of new condos transforming the Miami skyline.
Though some people who bought in plush waterfront towers intended to move in, the profit potential became too tempting. That's what happened to condo owner Darryl Randall.
Showing the "20/20" crew around his condominium in downtown Miami Beach, Randall said, "This three-bedroom unit was purchased originally at $1.1 million, and right now we have it listed right at $1.8. Planned on staying here forever, but $700,000 is $700,000. And in a market like this, it's time to move up and move out."
But Randall's condo languished on the market for months. Then he sweetened the deal by throwing in all the furnishings and his $125,000 dollar Maserati. It worked.
"And the final selling price was $2.3 million," Randall said.
Despite the hefty sale price, having to throw in those enticing extras after the condo sat on the market for months may have been a sign that the south Florida real estate market was weakening.
And some speculative buyers were getting cold feet. Shortly after the Lutz family put a down payment on a new condo, they decided it was too pricey and got their money back.
A Sudden Change in the Climate
All the little signs were adding up, and by last winter the Florida real estate market had taken a dramatic turn.
"It stopped, frozen. Selling investment property was very difficult," said realtor and investor Peter Celnicker.
Celnicker came to Florida as the market was soaring. After five years of savvy buying, he said that by last summer he was a millionaire -- at least on paper.
Then, almost overnight, the market changed.
"I mean, it was really that quick. [It] went from an absolute seller's market where you could sell a property literally in 24 hours to a buyer's market where it can take three, four months to sell a property," Celnicker said.
Celnicker attributes the chill to higher interest rates and a punishing Florida hurricane season. But he and his investment partners had put some money aside, rented out all their properties, and weathered what they hope is the worst of it.
"I knew as long as I could ride out those first couple of months, then I'd be safe," Celnicker said.
There are a lot of unknowns today in south Florida real estate, where there's concern that words like "hot" and "flip" may soon be replaced with "chilly" and "stalled."
One reason: Experts now say Miami Beach has perhaps the most overvalued real estate in America.
"Construction costs have gone up, prices have gone up and so there is a point, we think, that buyers are reluctant to overpay for an apartment -- especially when there's an oversupply," said Zilbert.
He remembers the moment he realized the market was changing.
"There was a day that I woke up at the launch of a new building, and I contacted my clients and I sent out my e-mails and I did my advertising, and not a single person wanted it. Not a single person showed up. And the feedback was, 'I think prices are gettin' outta control,'" Zilbert said.
But even in harder real estate times, Zilbert has a way to make money and, he said. He can bail out investors who may have gotten in too deep. His Web site, CondoFlip.com, can connect desperate sellers with "vultures," people who are ready to buy at a low price.
And he's recently added something called the panic button.
"The CondoFlip panic button gives the seller an option -- push the panic button and then we have vultures lined up, and it's something that is going to probably happen more often than we would like to see. And people will lose some money," said Zilbert.
Celnicker agrees that desperation has hit the south Florida real estate market. "I think there's going to be a lot of desperate sellers," he said.
And speculative investors who bought into the high-priced, preconstruction condo market in south Florida may be in for a rough ride, Celnicker believes. But he won't be one of them because he bought low-end properties that can be rented to cover costs if there's a downturn in the real estate market.
"This is not a 'get rich quick' thing. This is a minimum two- to three-year investment. Real estate is a long-term investment vehicle, and you have to be prepared for contingencies. And if you are, then I think it's a very safe investment. But if you're just jumping in because your neighbor made $50,000, you could get stung," Celnicker said.
Buyers, Zilbert says, are becoming more cautious. "There's not a day that goes by that I don't take a buyer to a property he or she will find something he absolutely adores, wants to purchase it, but at the end of every conversation is, 'I think I'm going to wait six months and see what happens.'"
Some realtors say even if the "flipping" frenzy has cooled for some investment speculators, Florida's got an ace in the hole. It's still a place where people want to buy homes and condos they actually plan to live in.
"We have a thousand people moving to Florida every single day. Then add to that all the vacation, the second-home buyers from Europe and around the world," Zilbert said.
If you're ready to buy a south Florida residence right now, the market could be working in your favor.
Take those Delray Beach condos launched last summer. It turns out 40 percent of those units are still available, and some of the prices have dropped dramatically.
That's good news for new buyers, but not so good for those who paid $100,000 more just eight months ago.
But, after all, no one ever said buying real estate came without risks.