Within just four years, Jack McCabe's McCabe Research Inc. has established itself as one of the leading condo-construction and conversion consulting firms in the Southeast. McCabe got even greater notice last year when he announced the creation of an investment fund that plans to snap up distressed condo units around the state, thus gambling on a crash and subsequent recovery of the Florida condo market. We caught up with McCabe at his Deerfield Beach office for an update on the Sarasota-Bradenton market and his perceptions of the Florida condo crisis.

One of my hobbies during high season is driving by new condo high-rises at night to count how many lights are on. There are very few. Is it naive to think that condos should actually be used, not just bought and sold? It's a sign of the excess of the building and housing boom. This is an artificial boom.

Why artificial? Because condo construction projects were not driven by real demand. They were driven by speculative purchases—short-term investors seeking high profits in a quick flip.

Last year you started a fund that seeks wealthy investors to snap up distressed condos. What can you tell us about it? I can't identify the fund, because it is a private company that has expressed its desire to remain private. At this point, I have contracted with a large pool of money, about $4 billion. They have expressed their desire to acquire, in particular, condo conversion units geographically specific to Florida. It's estimated they have an available pool for these acquisitions in the $600 million to $700 million range.

How long do you think it will take the market to recover from a price drop? In condo acquisitions we expect the turnaround to vary in different markets. In Miami-Dade County, we expect it could take five to seven years until the demand-supply ratio comes into equilibrium. In markets like Sarasota or Fort Myers, we expect the turnaround within a three-year time frame.

What makes you think the market could recover so quickly? Technology. Previously, information about falling sales prices was controlled by realtors and lenders. In this correction cycle, 70 percent of buyers do Internet research prior to their purchases. We have Web sites where people can list their properties for sale. Some have been set up strictly to handle condo sales in a very similar fashion to eBay. Speculators and potential purchasers can see prices immediately online, 24 hours a day, seven days a week. You can go to a Web site and see how a speculator who owns units in your condo has just lowered his price by $20,000 to get under your price for the one end-user that's out there.

So there's a commoditization of the condo market. Real estate is being traded more like commodities than like real property.

Who are these condo commodity traders? The vast majority of speculators fall into two categories. The first one is the previous stock speculator. The other is people who have actually never bought any property as an investment before. Now we have taxi drivers and dentists investing in condos. Many own portfolios of condo units.

How many buyers these days are short-term speculators, how many are well-endowed and sophisticated long-term investors, and how many are actual users? A lot of it is very anecdotal. Most developers don't like to reveal the percentage of potential speculator-buyers. We've sent our researchers to grand opening events, doing straw polls of the potential buyers. We also check the school enrollment in different counties. And we check with Florida Power & Light to see if their hookups are increasing at a correlative rate with condo sales.

What did you find? In all cases, we've been able to determine that not only are school populations not increasing, they're actually decreasing. FPL hookups have increased at a steady pace. But it hasn't been any different in the last three years compared to what it was in the previous 10. So it's our best opinion that 70 percent to 80 percent of condo sales have been made to speculators planning on quick flips. Only 20 percent to 30 percent of sales were to buyers whom we would consider primary or secondary homeowners. The vast majority of condo investors haven't been active in the past year and a half because prices have gone so high there was no way to rent the properties out for a break-even or positive cash flow. Of the new condo towers that are being completed, 50 percent or more of the units are immediately being listed on the MLS.