Condo conversions are hot, but nowhere are they hotter than on south Florida’s east coast. Over the past 19 months alone, developers have converted 31,000 south Florida apartments into condos. And that pales next to the flood of new units that should hit the market in the near term. McCabe Research and Consulting projects that an additional 48,000 new condo units will be delivered to south Florida over the next two years.

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“This is out of control. We’re seeing accountants and electricians become condo speculators, and a lot of people will get burned when this market cools off,” warns Jack McCabe, CEO at Deerfield Beach, Fla.-based McCabe Research & Consulting.

According to McCabe, there are thousands of new condo units for sale on downtown Miami’s hip Collins Avenue. Most are conversions of former apartment buildings, but other property types are also being targeted by converters.

Hotelier Ian Schrager, for example, is converting a former hotel into a luxury hotel-condo property at 1901 Collins Ave. When the 240-unit conversion is completed, Schrager expects to sell the units anywhere between $400,000 and $20 million — a price that, if achieved, would be a record for hotel-condo units. The property will blend luxury condo units with hotel rooms, and both uses will tap into the hotel’s services.

McCabe, who says that his outspoken stance hasn’t won him many admirers among south Florida’s speculator community, is all but certain that the south Florida condo market will collapse in the next few years.

Speculators are employing a host of volatile debt instruments, ranging from adjustable-rate mortgages (ARMs) to interest-only loans in their quest to tap into the condo craze. This is risky business, of course, if some scenarios unfold: A spike in long-term interest rates combined with far weaker demand, or one of those trends, could throw everything out of whack.

One cause for alarm is the flood of unsophisticated investors with little real estate knowledge, who see the quick flip as a safe play. McCabe even says that buyers in the Northeast are calling brokers in Miami and investing in properties without ever having viewed the site. What’s worse, says McCabe, many of these properties haven’t even been built yet — and in his view many of those on the drawing board will never be completed.

“We definitely expect to see many of these new condo units come back to the market as rental apartments,” says Rob LaQuaglia, a real estate economist at Boston-based real estate consulting firm Property & Portfolio Research.

The numbers suggest that LaQuaglia is right. Manhattan-based research firm Real Capital Analytics reports that condo converters bought some $931 million worth of property nationwide in June. That was well above the $704 million they spent in June 2004, and the year-to-date numbers are no less staggering. Converters bought $3.09 billion worth of properties for conversion during the first six months of 2004. Yet this year, the same stretch saw roughly $8.2 billion worth of activity — or more than double the same period in 2004.

“We’re advising our clients to stay away from the south Florida condo market,” says LaQuaglia of Property & Portfolio Research. “You have so many speculators in that market now, and they are really pushing the limits of this trend.”