‘Condos Are The First To Go When There’s A Slowdown’
The Virginia Pilot has this report on a condo project in Norfolk. “The city may provide tax incentives to Granby Tower, a 34-story condominium project that would be downtown’s tallest building, said two city officials who asked not to be identified. A performance-based grant would rebate a portion of taxes, the officials said.”
“Such grants have routinely been used by the city to attract businesses but have rarely, if ever, been used for residential projects.”
The Baltimore Sun. “Five months after registering to convert the building at 3900 N. Charles St to condos, the owner is abandoning the conversion because of slow sales. DSF Group of Boston plans to market the units it had offered for $185,000 to $300,000 as luxury rentals.”
“‘It’s really what the market wants, and it’s as straightforward as that,’ said Art Solomon, CEO of DSF, which bought the 232-unit building. DSF has taken 35 to 40 reservations since starting the marketing campaign in April, Solomon said.”
“The abrupt switch, the first halting of a condo conversion in the state in at least three years, was made at a time when the once red-hot housing market is losing steam. Home sales in Baltimore and the five surrounding counties have fallen each month since October from year-earlier levels, and the number of unsold properties has been piling up: The number for sale in June was more than twice the number a year earlier.”
“At the end of June, about 13,300 condos, 3,800 of them conversions, were for sale in Northern Virginia, up from 9,600 a year earlier.”
“Barbara Ruland and her husband moved across 39th Street to the Ambassador on July 12. ‘They were expensive, and they weren’t fixing any major systems,’ said Ruland. They put a lot of money in stuff on the first floor we’d never use, a bar/lounge, billiard rooms and a little projection room.’”
“Residents and city officials said it may have more to do with the company’s inability to sell the 243 units. In a letter to tenants July 24, DSF said, ‘During the past several months, the overall community has voiced its opinion and we have therefore decided to maintain the property as a rental community.’”
“In a letter to residents who weren’t eligible for extensions of their leases, DSF said that it considered those leases as being month to month and that they could negotiate a new, one-year lease at their current rents. ‘What it really means is that they were not able to complete one sale’ of an apartment as a condo, tenant Ann Murray said. Tessa Hill-Aston, housing coordinator for the city and city councilwoman Pat Clarke, said that’s their understanding, too.”
The Providence Journal. “Sales of condominiums in Rhode Island this spring fell sharply, as the pace of condo construction picked up with no sign of abating. During April, May and June, condo sales declined 22.6 percent compared with the same three months last year. Condo listings statewide jumped 76 percent from a year ago, to 1,784 units.”
“Nationally, the condo market is showing signs of weakness, with inventory running at its highest level since the early 1990s. In South Florida and Las Vegas, some developers have scrapped their condo construction plans because they can’t sell enough units to get financing.”
“In Rhode Island, 16 out of 27 cities and towns which recorded second-quarter condo sales, including Providence’s East Side, reported, on average, price declines from a year earlier.”
“In the Providence metro area, which includes parts of Massachusetts, more than 900 new condominium/townhouse units are currently under construction. That’s 900 new units in a market that historically absorbs 500 to 600 condo units per year, said economist Gleb Nechayev in Boston. And another 2,500 more condo/townhouse units are planned, he said. ‘Condos are the first to go when there’s a slowdown,’ he said.”
“‘I haven’t sold any condos this quarter, actually,’ said Bob Del Deo, a real estate agent on Providence’s East Side. And if all those condos don’t sell, what then? Del Deo, of Coleman, said some of the condo plans could be converted to satisfy another demand in the housing market: rentals.”
I predict a general outcry for affordable housing assistance to working families who are unable to discharge that post-foreclosure remainder of their debt. Handy thing that there will already be a ready supply of unoccupied condos.
pols will forever offer to cahnge the value of things
(affordable health-housing etc) and fools will forever believe them
I know it has been too long….but I got a new post up.
http://www.housingbubblecasualty.com
SoCalMtgGuy
Welcome back!
condos for foreclosed debtors ???
maybe not such a bad idea. we’re talking about a sausage machine here: deadbeat properties go in one end and something comes out the other end. how long does it take to make this sausage — whatever it looks like, is the essential question of how long will it take for prices to drop a full 50%+. affordable rental condos for deadbeat borrowers may be a very efficient use of these otherwise worthless properties, and will contribute to keeping the economy afloat.
Whoo-hoo! Section 8 housing for everyone!
they’ll be doing a great service just by keeping the heat on and mowing all those lawns….
it’s still 50%-off sausage, any way you slice it!
Spicy Italian Sausage, Hearty Bratwurst, or just regular old Jimmy Dean’s?
Will we have 10 people per 1 bedroom condo in San Diego and Miami?
Will we have 10 people per 1 bedroom condo in San Diego and Miami?
This could end up being a horrible social experiment. I don’t think many formerly upwardly mobile middle class folks are ready to live alongside of people who have long experienced the danger and despair of living in lower class neighborhoods and public housing. Many middle class on their way down will be like sitting ducks. What’re they gonna do? Complain to the condo board when their next door neighbor starts blasting gangsta rap at three AM? Knock on the door and say “Excuse me, but would you mind turning it down?” Or call the police, who will ask them if they want to file a complaint? This could get ugly beyond belief.
they’ll be trading their in weber grills for uzis
….
The thing is, America’s real wealth has declined. Those formerly upwardly mobile middle class folks should have been living working and lower class lifestyles long ago. Its only this crediting system employed by the government to keep the economy afloat that has allowed them to keep up their traditional lifestyle. Thats the sad fact of a “post-industrial” economy, the rich get really richer, the poor get poorer, and the middle class get poor. This wont be a “social experiment”, it will be the system correcting itself to its natural state.
until “this” tribe decides to go to war with “that” tribe, thereby reducing demand for scarce resources… the natural state, indeed.
unless we’re saved by plague, pestilence, or disease.
It’s worth clicking through to the Virginian-PIlot story, just to check out the comments by readers!
BTW, the ersatz condo tower is only about 6 blocks away from a homeless shelter. Says a lot about priorities.
As a renting resident of Norfolk, I hope that they build this tower. Much of Norfolk is an eyesore, if it it not an outright slum. The city has done some nice things with downtown over the past few years and I hope they continue.
Having said that, I also look forward to having more housing available to get prices to drop that much further in the future. I would like to own someday. This market seems to be a year or so behind the rest of the country, but I am looking forward really watching the bottom fall out starting in 2008.
In 2008, the Ford plant here will officially close [~3,000 jobs] and a carrier group will be permanently relocating to San Diego [~10,000 jobs]. Now, if FL can get their act together and convince the Navy to move their operations currently at Oceana [thousands more jobs], we can make some real progress in getting those housing prices in line!
Some of the new 2 and 3 story condos downtown look really nice (very inviting, but not at the price!). I fear a condo skyscraper in Norfook will turn into a largely unoccupied, very visible white elephant, however.
Also, I don’t think you’re going to have to wait until 2008 — unless you’re really holding out for near rock-bottom.
Condoflip still thinks that there are 1000 of buyers looking for these POSs. And bubbles are for bathtubs. Have these folks been drinking (straight Vodka) or smoking some of the funny stuff? Or probably, both. Also, they get their information directly from In The Bag and Li-liar and LAY. Nothing from reality.
how come nobody can connect the dots to the housing bubble. at least RR comes close.
“Asset ownership is now the driving force behind income inequality,” says Robert Reich, former U.S. secretary of labor and now a professor at the University of California in Berkeley. “People with education and connections are doing better and better and accumulating extraordinary assets.”
Hourglass Economy’ Divides Americans, Defines U.S. Politics
he’s a classic short !
man
worried someone might be making some profit
your sarcasm is noted! i guess it depends on how you define “ownership.” he really means “debtorship” — and this may turn his hourglass on its head, with the so-called “owners” in BK and the renters holding all the cards.
‘Condos are the first to go when there’s a slowdown,’
Congress should pass a law requiring that everyone who purchased a condo and went bankrupt have this sentence tattooed on their foreheads as a warning to the next generation of would-be real estate moguls. My god — it has been known for decades that condos are the first to fall and the last to recover in a RE downturn. They also fall further than SFH.
I think that this condo collapse is going to be much greater than anything we’ve seen in the past because it got so far out of hand. We just moved out of our rented townhouse in NoVA and the owners have had it listed for rent for 2 months with not a single phone call.
By the way, we moved because we just bought a beautiful house in Atlanta. It is a spectacular house on a golf course, 5800sf (which we actually saw as a slight negative but it doesn’t look like a McMansion), and it is in one of the best school districts in Cobb County. The price? $470K — $200K less than the price of the Loudoun County townhouse we just vacated. And yes, it has granite countertops
By the way, I’m going to have to change my monniker to “John in GA”
I tried to talk my mom out of buying a condo last summer. She bought right at the peak in a Chicago suburb. She lost her ass on a condo purchase in the 90s and once again repeated the EXACT same mistake. She told me she only plans to live there until 2008.
NEW YORK (Reuters) - Time Warner Inc.’s AOL online division on Thursday said about 5,000, or about 26 percent of its 19,000 employees, will not be employed by the company within six months as a result of its retructuring. 8/3/2006 12:28 PM
Kodak announced earlier this week that it will be moving its digital camera manufacturing plant to Singapore. 27k employees could be laid off in (unspecified) future
Wow, that is terrible
In a letter to tenants July 24, DSF said, “During the past several months, the overall community has voiced its opinion and we have therefore decided to maintain the property as a rental community.”
__________________________________________________________
Should read:
In a letter to tenants July 24, DSF said, ‘During the past several months, the overall community has refused to purchase our overpriced shitboxes and we have therefore decided to try and cover our asses and maintain the property as a rental community.”
what happpens to the few buyers- complete refund w interest ?
That is the big question.
Who would want to live in a place where people were renting an identical unit for less than what your mortgage / taxes / maintenance fees add up to ?
Imagine having bought said shitbox, only to find out 3-4months later that you were stuck paying a $1800 /mo mortgage on a depreciating condo while surrounded by renters who were paying $ 800 / mo rent for the same identical unit ?
It makes me laugh so hard I almost spewed coffee all over my keyboard here at work.
The pain train is a-comin’ folks. Watch out.
I guess it’s just the nature of speculative excess, but I wonder how seasoned RE people could look at the run up in prices and not know that something was grossly wrong.
The only answer I can think of is they started to believe their own propaganda. Gotta convert now or we will never be able to do it.
I’ve always felt, and still do, that the real undoing of this housing market would be the unfettered downtown condo development that went on across this country.
is starbucks in the middle ? brother can you refi for coffee……
sbx down the shtter
How about a little plunge protection over there for purveyors of fine coffee?
http://tinyurl.com/fzeuw
(I’ve always felt, and still do, that the real undoing of this housing market would be the unfettered downtown condo development that went on across this country. )
Everyplace wants to be NYC. Will anyplace make it, or will the bust pull the rug out first?
If every palce wants to be NYC tehn they’re going to have the opportunity. Cause NYC is f’ed too!
Just returned from lunch and saw a sign that made my day. A local apartment complex opened in 2004, there was nothing special about the location (it’s kind of crappy), and they went LUXURY CONDO this January. HUGE BANNER signs at the entrance saying “APARTMENTS AVAILABLE, NOW LEASING” right besire a small sign that says “Gateway luxury condos available now”. I will take some pictures and post them. This is the first reversion in the area which is great news for us renters.
re: Moman
There is a “gateway luxury condo project” in Harlem NYC, are you referring to that one
No; Pinellas Park, FL
sounds like ‘repartmentation’ sausage. and there’ll be plenty of foreclosure and auction sausage, and 20-house lots at 90%-off sausage, and pay-the-model-sales-family-to-rent-and-show-some-life-in-the-neighborhood sausage…. and EVENTUALLY, in about 2 or 3 years, you’ll see retail 50%-off! reduced sausage. but that sausage takes a long time to cure!
Mmmmm! Gimme some of that Jimmy Dean’s.
I don’t think rentals will be quite the salvation people think. For example, there are a bunch of condos in Fairfax near Route 66 which have been for sale for almost a year at $269,000.00. A standard 30-year mortgage of that size would have P+I of $1,612.79. Taxes, insurance, maintenance, etc. is more. Apartments and condos in the Fairfax area appear to be renting at $1,300 to $1,750.00 per month. Even if a buyer of these condos was prudent in their purchasing and used a 30-year conventional, they could not realistically hope to rent that unit out at a profit. They will be lucky indeed to get a break-even proposition, all things considered.
We will see lots of spare bedrooms being rented out and lots of foreclosures. Once the REO inventories get full, those properties will be dumped. Prices will reset at more reasonable levels.
I have been watching a condo conversion near me in Tampa. The condo converter started the conversion in Sept. and they way overpaid for the property. I just took their purchase price and divided it by the number of units and could not believe they could sell them even at that base price, even before they would add on to recoup any of their costs of upgrading the units, advertising or any kind of a profit.
Anyway I read a teeny weeny article in the paper that said they have not paid their county taxes to the tune of 1 MILLION $$$. So an Alabama investor bought the tax certificate. The property will be sold at auction in 3 years if the taxes are not paid. Oh and they are starting a rent to own program.
So I guess if the taxes are not paid the individual condo owners will have to come up with it? Or if they cannot they will lose their property?? Anyone know about this kind of situation?
With this whole condo bust, all I have to say, is one word: MIAMI.
I currently reside overseas, but was looking for a condo in Reno to establish a Nevada “tax-home”–(no state income tax). Found nice brand new Condo development in downtown (one of the casinos converted). Got list prices from the builder who told me 1000 times if he told me once that there were only 16 units left and that he wouldn’t budge on price (340sqft studio for $250k + $300/mo. in dues). BUT if I bought NOW he would pay my homeowners dues for a month.
Had some friends go check the place out while they were in town. Turns out it is a nice development, and that the builder really won’t budge on price. On their walk back, they saw a FSBO flier…the guy was selling for $179,900. Then another FSBO flier for $149,900.
Found a listing on Realtor.com last week for $129,900.
Looks like a 50% drop has already occured in Reno…look for more soon.