In relative terms, yes some properties are undervalued at this time (August 2010). Short sales and REO distort the market. This is a temporary condition, once the short sales and REOs sell out, the values will stabilize at their "normal" values.
In some buildings, such as the Waverly at South Beach, the price tendency now is up despite the REOs and Short sales and decreasing prices in other areas. I am the President of the Condo Association at the Waverly and we do feel that there are some under valued units at this time. Especially in view of the excellent financial position of the Association and the lifestyle offered by the building.
However, ultimately the buyers set the price and that is the market value at any one time.
Regarding Flamingo... it has been a gravely mismanaged project and has not sold out due to various other reasons aside from price.
You'd have to remember that there aren't really any new, luxury buildings in that neighborhood. Capri is the only one--and that will be the most expensive of them all.
If the market feels that West Ave are is undervalued then the Flamingo would be totally sold out.