Some Condo’s ‘Little More Than A Picture On A Sign’
The Arizona Republic reports on a bill to back-up condo escrows. “Ken Cheuvront thought he saw his $20,000 deposit going out a high-rise window when ownership of a condominium project changed hands. Fortunately, the new owner honored the deposit. But his jitters over the fate of the got Cheuvront, a state lawmaker, thinking.”
“Cheuvront said the cooling real estate market, and the tenuous status of many projects, create a situation ripe for buyers to lose their down payments. ‘I assume there’s going to be a situation where it’s (the deposit) not going to be honored,’ he said.”
“He is pushing legislation that would create a recovery fund for any would-be buyer of a new multifamily project, such as the high-rise condo and loft projects proliferating in the central city. Originally, the Phoenix Democrat set out to create an escrow fund where a neutral party could hold deposits, as is done with existing-home sales.”
“But developers opposed the idea, which put his legislation in jeopardy. So Cheuvront began to work with builders and developers and came up with the recovery-fund concept. With a recovery fund, the industry, not a specific developer, would cover losses incurred by failed projects. Developers, Cheuvront said, don’t want money tied up in escrow accounts, where they can’t touch it. They need access to buyers’ earnest money to fuel their projects.”
“Developers would pay $10 per unit into the fund. Buyers who lost their earnest money could collect up to 20 percent of the base price of the unit they intended to buy. However, payouts from the fund would be capped at $1 million per project.”
“Attorney J. Robert Eckley said at the hearing that a change in state real estate rules enacted more than 15 years ago gives condo builders, and home builders, the chance to opt out of escrow requirements. And they do, using the argument that they need the funds to build their projects.”
“Eckley, who has represented clients who have lost their earnest money, said the argument should be a warning bell to anyone looking to buy. ‘If you need my $5,000 to operate, before you even perform, well..the restaurant makes you pay after the meal,’ he said.”
“The need for some relief is clear, and getting more pronounced as many high-rise projects remain little more than a picture on a sign. ‘I see a burst coming to the real estate bubble,’ Eckley said.”
And from the LA Times. “Just when investors thought they knew everything about vacation home purchases, along comes a brand-new way to spend lots more money. Hybrid condo-hotels..are on their way to California, with 22 projects already announced and more planned. Nationwide, 228 U.S. condo-hotels are in the pipeline.”
“The hotel owns and maintains the common spaces, such as pools, restaurants and spas, to which condo owners have full access. Unit owners pay monthly fees, which vary according to the number and quality of amenities. Under most condo-hotel plans, rents are split 50-50 with the hotel owners, who often, but not always, manage the rentals.”
“San Diego’s Hard Rock Hotel began taking deposits Thursday. This spring, when units hit the market, real estate-investment consultant Jeff Gregersen said he will select a condo in the $600,000-to-$800,000 range.”
“‘I’m buying a good investment and a lifestyle.’ He projects a 13% annual appreciation on his purchase and expects to break even from rental revenue. ‘I view this as a long-term investment,’ he added. ‘I think I can’t go wrong in San Diego.’”
You’ve got to be kidding! Where do they get these idiots? This is the best evidence yet of the Bell Curve.
Idiots is right! He expects 13% annual appreciation in San Diego? There are already plenty of signs that SD has peaked and is about to fall. It could take years before his property is worth what he paid for it. I hope he has deep pockets.
My trusty Rule of 72 calculator says that in 11 years, he expects his $800,000 ‘cond-tel’ to fetch a cool 3.2 million. Tad over the top, don’t you think?
Phoenix
7/20/2005 10748
7/21/2005 10968
7/22/2005 11122
7/23/2005 11424
7/24/2005 11338
7/25/2005 11112
7/26/2005 11315
7/27/2005 11353
7/28/2005 11390
7/29/2005 11471
7/30/2005 11656
7/31/2005 11609
8/1/2005 11599
8/2/2005 11590
8/3/2005 11635
8/4/2005 11714
8/5/2005 11710
8/6/2005 12196
8/7/2005 12658
8/8/2005 12919
8/9/2005 13244
8/10/2005 13099
8/11/2005 13245
8/12/2005 13389
8/13/2005 13846
8/14/2005 13801
8/15/2005 13607
8/16/2005 13779
8/17/2005 13992
8/18/2005 14087
8/19/2005 14279
8/20/2005 14321
8/21/2005 14457
8/22/2005 14336
8/23/2005 14391
8/24/2005 14529
8/25/2005 14617
8/26/2005 14792
8/27/2005 15011
8/28/2005 14984
8/29/2005 14803
8/30/2005 15042
8/31/2005 15099
9/1/2005 15063
9/2/2005 15159
9/3/2005 15404
9/4/2005 15699
9/5/2005 15621
9/6/2005 15513
9/7/2005 15913
9/8/2005 16106
9/9/2005 16489
9/10/2005 16716
9/11/2005 16609
9/12/2005 16697
9/13/2005 16538
9/14/2005 16900
9/15/2005 16952
9/16/2005 17419
9/17/2005 17583
9/18/2005 17577
9/19/2005 17636
9/20/2005 17516
9/21/2005 17664
9/22/2005 17883
9/23/2005 18226
9/24/2005 18204
9/25/2005 18196
9/26/2005 18435
9/27/2005 18483
9/28/2005 18605
9/29/2005 18604
9/30/2005 19192
10/1/2005 19333
10/2/2005 19316
10/3/2005 19362
10/4/2005 19463
10/5/2005 19562
10/6/2005 19670
10/7/2005 20052
10/8/2005 20219
10/9/2005 20153
10/10/2005 20324
10/11/2005 20470
10/12/2005 20668
10/13/2005 20850
10/14/2005 21238
10/15/2005 21446
10/16/2005 21463
10/17/2005 21527
10/18/2005 21588
10/19/2005 21795
10/20/2005 21806
10/21/2005 22302
10/22/2005 22719
10/23/2005 22769
10/24/2005 22806
10/25/2005 22976
10/26/2005 23132
10/27/2005 23293
10/28/2005 23681
10/29/2005 23805
10/30/2005 23816
10/31/2005 23790
11/1/2005 23601
11/2/2005 23665
11/3/2005 24193
11/4/2005 24579
11/5/2005 24786
11/6/2005 24717
11/7/2005 24937
11/8/2005 25244
11/9/2005 25333
11/10/2005 25387
11/11/2005 25700
11/12/2005 25685
11/13/2005 25773
11/14/2005 25945
11/15/2005 25913
11/16/2005 25884
11/17/2005 26261
11/18/2005 26098
11/19/2005 26662
11/20/2005 26688
11/21/2005 26684
11/22/2005 26488
11/23/2005 26776
11/24/2005 26819
11/25/2005 26855
11/26/2005 26871
11/27/2005 26890
11/28/2005 26979
11/29/2005 26811
11/30/2005 26797
12/1/2005 26792
12/2/2005 26915
12/3/2005 27238
12/4/2005 27295
12/5/2005 27356
12/6/2005 27387
12/7/2005 27403
12/8/2005 27367
12/9/2005 27649
12/10/2005 27706
12/11/2005 27664
12/12/2005 27512
12/13/2005 27411
12/14/2005 27566
12/15/2005 27517
12/16/2005 27603
12/17/2005 27791
12/18/2005 27776
12/19/2005 27722
12/20/2005 27604
12/21/2005 27554
12/22/2005 27516
12/23/2005 27486
12/24/2005 27311
12/25/2005 27014
12/26/2005 26810
12/27/2005 26822
12/28/2005 26687
12/29/2005 26649
12/30/2005 26547
12/31/2005 26497
1/1/2006 26462
1/2/2006 26401
1/3/2006 26751
1/4/2006 27403
1/5/2006 27564
1/6/2006 28224
1/7/2006 28337
1/8/2006 28542
1/9/2006 28595
1/10/2006 28786
1/11/2006 29222
1/12/2006 29507
1/13/2006 29689
1/14/2006 29899
1/15/2006 30415
1/16/2006 30391
1/17/2006 30707
1/18/2006 30817
1/19/2006 31085
1/20/2006 31457
1/21/2006 31463
1/22/2006 31497
1/23/2006 31607
1/24/2006 31766
1/25/2006 31830
1/26/2006 32142
1/27/2006 32002
1/28/2006 32477
1/29/2006 32458
1/30/2006 32512
1/31/2006 32563
2/1/2006 32684
2/2/2006 33087
2/3/2006 33145
2/4/2006 32953
2/5/2006 33368
2/6/2006 33576
2/7/2006 33550
2/8/2006 33684
2/9/2006 33844
2/10/2006 34234
2/11/2006 34588
2/12/2006 34753
2/13/2006 34815
2/14/2006 34815
2/15/2006 34816
2/16/2006 34816
2/17/2006 35144
2/18/2006 35427
2/19/2006 36260
2/20/2006 35443
2/21/2006 35642
2/22/2006 35503
2/23/2006 35324
2/24/2006 35178
2/25/2006 36388
2/26/2006 36524
2/27/2006 36639
2/28/2006 36174
3/1/2006 36389
3/2/2006 36283
3/3/2006 36811
3/4/2006 36900
3/5/2006 37064
3/6/2006 37217
3/7/2006 36953
3/8/2006 37487
3/9/2006 37626
3/10/2006 37531
3/11/2006 38011
3/12/2006 38184
50K by this summer.
by may
Man the lifeboats!
The increase is almost linear, except for a platue in winter…break 50K on June 4, 2006. Remember, I called it.
In regard to the Phoenix area, I specifically started tracking zip code 85086 back on 2 Feb, Realtor.com (Anthem & far north side of Phoenix [Tramanto development]). I was shocked when I checked this morning. Here is how it has looked (I won’t do a day by day):
2/02/06 - 644
2/09/06 - 682
2/14/06 - 704
2/21/06 - 714
2/27/06 - 730
3/09/06 - 742
…drum roll please:
3/13/06 - 791!
Does anyone have any idea why such a huge inventory spike in this area over the weekend? Boy, shit must really be hitting the fan with the flippers.
yes anthem is getting slaughtered… it is nice up there, but it is void of culture, and should cost 40% of what it does.
Just a guess: if “spring” (March 20 this year) is the start of the selling season, maybe realtors and sellers are all trying to “beat the rush”…? If that 3/13 number looks like a discontinuity a month from now, that’d be my explanation.
“I think I can’t go wrong in San Diego.”
It seems that in the world of “RE Experts” supply and demand only works to raise prices.
I get the feeling the Times was salting the mine with this RE consultant.
‘The hotel owns and maintains the common spaces, such as pools, restaurants and spas, to which condo owners have full access.’
This is a joke. I remember one resort that made a killing selling and re-selling ‘hotel’ units to suckers and then cleaning out their wallets at the nightclub, dining table and pool-bar.
I agree. They do not explain the benefit of owning a condo in a hotel. If the maid, restaurant and entertainment services were less expensive than hiring them out on our own, I could see the benefit. However, they do not mention this as a benefit. They use the word “lifestyle” instead. This to me seems like a misnomer for “overpriced.”
In other words, owners may expect to pay high “condo fees” to maintain services they may or may not need.
Also, this 50/50 rental concept is very fishy. If someone owns a condo, shouldn’t they recieve the whole rental income? It seems the real owners want to not only sell their hotel, but create income from unnocupied units. They want to have their cake and eat it too.
But, in the end, who would want to live in a hotel. Can you imagine trying to hit it off with a woman and having to say, “You want to know where I live? Well, uuuhhhh, I live in hotel ?????” She’s gonna think you’re married, homeless or a criminal. Nice move!
They tried to auction 14 units in a 74 unit ‘hotel’ on the ocean in Pismo Beach and it was a disaster. Prices were $1000 or more per ft, They wouldn’t let you control the rent on your unit, the management got 50%, you still paid over $500/mo for condo fee plus taxes, if you wanted in the rental pool you had to buy their furniture (100k) You couldn’t rent or lease yourself for less than 2 mos at a time.They got their d-cks chopped off and the developer stopped the auction in the middle.
Pismobear,
Do you know how much they bid for them?
I’ll find out and report back later this week.
love it
Live in it??? Hey this is an investment, you don’t need to live in it! 13% annual return AND break even on the rent/costs. What a great deal. “THIS IS A NO-BRAINER” as they say on the radio. I’m going to call real estate-investment consultant Jeff Gregersen and sign up for 10 of these units. Heck, at break even and 13% annual return I should buy the whole building. Man, making money is so easy! I’m glad there are smart folks like Jeff to help stupid guys like me who have wasted their time actually studying finance, economics trends, etc. And to think my money is tied up in CD’s earning only 5%…man am I stupid.
SOUNDS LIKE A NEW FORM OF TIME-SHARE, ONLY MORE EXPENSIVE…IDIOTS WILL BUY ANYTHING
I don’t get it.
I am taking my family for a week to Hawaii next month (Spring Break). It is apparently the only 5 star hotel there at $600.00 a night-Great Service, view of the ocean, Etc.
However, I would not want to own a condo there. Over the long run, the nerve, head-aches, payments, etc. would take away from any appreciation.
Different story if it was a rental property and I lived in the area.
By the way, appreciation is just an assumption-not a rule.
assumption a lot of times is=mother of all f#ck up’s
“I can’t go wrong in San Diego”? Why, what makes SD immune from losing money? Didn’t anyone look at the tens of thousands of empty condos downtown that could compete with this looney idea? What about the city ready to go broke? How about the market there ready to go down the ###***$&&&#? Or illegals overrunning the border? Or a good quake? Yes, the beach and weather can be nice amenties, but isn’t immune from dumb people.
This thread reminds me of my favorite genre of SD real estate ads — the La Jolla listings at $1m+ which only show a beautiful shot of the beach (do I get a house with that ocean???).
Tsunami?
We don’t have them here; no subduction zone, no tsunami.
Sorry-no earthquakes in S.D.-The just shake when it earthquakes happen in Mexico
Correction: Illegals running *under* the border.
When I visit downtown San Diego, I notice increasing numbers of potholes. And these are in streets with skyscrapers, but where no construction is going on. All likely due to San Diego verging on bankruptcy.
I use to think that, living in Del Mar, that this wouldn’t affect me. Alas, I live just adjacent to Del Mar (1/2 block), and wouldn’t you know my “San Diego” streets are showing large potholes.
Is it too late to declare secession from my goofy San Diego overlords?
San Diego is immune, just like Miami, because of all the HOT BABES that will be hanging out at the condo pool. Just look at the full page condo ads and you will understand this little known factor. I haven’t seen the adds for the new Hard Rock…but I bet the girls there will easily justify the high prices. This factor alone is probably worth an extra $300K per unit and easily justifies the expected 13% annual return.
….update to my previous post regarding hot babes at the pool. The Hard Rock Condo-Hotel web site advertisement offers an even better enticement…the ad shows a guy in bed with TWO girls. How can you beat that. That is why San Diego condos will only to continue appreciating, “Two girls for every boy!” Check it out at http://www.hardrockcondos.com/index.html
If you go to the link you may get the page with “only” the picture of a naked babe. You need to click a few of the options to get to the page with the two girls/one guy in the rack.
It’s (always) a good time to buy a home.”
Um, let us look at similar statements from other occupations to determine how accurate that babble is…..
Cardiologist: It’s always a good time to have open heart surgery.
Mechanic: It’s always a good time to put in a new transmission.
Hair stylist: It’s always a good time to cut more of your hair.
It’s bad enough that the ‘New Paradigm’ is entrenched in housing but if I ever see it spread, well I be running the other way fast…..
It’s always a good time to rent a home…
…unless the market overcorrects.
Polestar, you always haven’t been to any of those professions in LA. It is *always* a good time.
Hence my east coast roots…… otherwise I guess I’d be out there….. just one more bald person, driving a revved up car with a nasty scar down the middle of my chest…. LOL
It’s always a good time to pay my big, fat commission so I can party like a rockstar
You forgot the dentist: It is always a good time to have a root canal.
Thanks Hoz!
That does it! I’ll start keeping track of all these corollary statements and periodically repost them for a laugh
Wasn’t it just recently that I read here about “investors” in Las Vegas and Florida suing condo developers because they GOT their deposits back? Is nobody ever happy? LOL
Americans: “It’s always a good time to sue somebody.”
Hey, if condotels take the heat out of true residential market by providing a new craps table for the floppers — great news!!
Condotels and condocruiseships … what’ll this brilliant RE industry throw up next for investors to feast on?
“Ken Cheuvront thought he saw his $20,000 deposit going out a high-rise window when ownership of a condominium project changed hands. Fortunately, the new owner honored the deposit. But his jitters over the fate of the got Cheuvront, a state lawmaker, thinking.”
State lawmakers in bed with Condo marketers? That explains a few things.
Got to keep the dough rolling in so the lawmakers can take some more nice trips.
The LA Times article really (at least to me) sounded like an advertisement. It just wasn’t marked as such. I mean read that piece and tell me from what angle it looks like “objective” journalism.
Golly. This Jeff Gregersen lies baldly. No one in his position could be so clueless. Notice that he has not said that he has purchased one of these units, only that he plans to buy one. Needs some deniability in the future.
Its like the Emperor’s foodtaster planning to sample the dish of mushrooms, but being conveniently away from the kitchen as the dish passes. Caveat Emperor!!
“‘I’m buying a good investment and a lifestyle.’ He projects a 13% annual appreciation on his purchase and expects to break even from rental revenue. ‘I view this as a long-term investment,’ he added. ‘I think I can’t go wrong in San Diego.’”
I’m speechless.
Why are you so speechless.
The average IQ of the human population is about 100.
I don’t know you, but since you’re reading this blog I’ll assume you’re smarter than average. Let’s say that your IQ is 125.
To make up for you, there’s got to be someone with an IQ of 75.
Now, you know who he is!
“I’m buying a lifestyle”
try “I’m buying a financial sinkhole”
another big mouth idiot with a credit line and a pulse
No, people with high IQ can sucker themselves as thoroughly as those who test less well. And differently-enabled-thinkers can appreciate that 2+2 isnt 5 if they take the time.
When you focus on the short term instead of the long term, darkness can follow. Think about all the brainpower that is being lavished on computer codes that trigger hedge-fund trades, all trying to outsmart the computer codes of competing hedge funds. Split-second assessments of market trends are key. Who cares about the long term trend of the economy? Is this a wise use of human capital?
I guess so, if it makes me money! See how easy it is to justify being a flipper?
All these financial gurus will be living in tree forts 2 years from now!! LMFAO!!!
Intelligence vs. Wisdom is the ticket here.
Born with intelligence. (2+2=4)
Acquire wisdom. (Oops, THAT was a mistake)
Some of these poor sonsabitches are gonna get real wise, real quick.
And, of course, some aren’t.
Sidney –
I totally agree with you. The correlation between financial market stupidity and IQ score is likely rather low. Some of the most financially clueless folks I have ever met were professors in a big-name university whose IQ scores would probably test in the 140+ range; they simply had never bothered to pay any attention to personal finance, and were making enough dough to get away with their will to stupidity.
There is also another group of flippers out there who are very bright, and completely clued in to the mania, but choose to gamble. A college friend of mine has two professional degrees, one of which gives him a real skill that would enable him to earn six figures, but he is nonetheless a flipper, as the mania has tempted him to jump on board and temporarily make seven figures instead of six. This is one of the hidden costs to society of the bubble — the misallocation of productive human resources into the housing sector. After all the air has hissed out of the bubble, I predict my old pal will resume doing something socially useful.
GS
Greenlander wrote: “to make up for you, there’s got to be someone with an IQ of 75″
Or even worse… 5 people with an IQ of 95 (more dangerous since they are just smart enough to read, but just dumb enough to sign on the dotted line).
It scares the daylights out of me that the median and average IQ is around 100. Think of how dumb the average person is…1/2 the people out there are even dumber than that. 25% of the population has a IQ of less than 90. Almost 10% is less than 80.
I have the following words of comfort to offer:
1) No matter how smart the population gets, the median and average IQ will remain at 100, by definition of the scores.
2) A person with an IQ of 100 may actually be much smarter than average in his or her area of specialized skill, but just not as good at taking IQ tests as the 3/1000 individuals who score over 130.
That said, I am afraid that IQ scores matter little when it comes to the collective stupidity that is manifest in the current real estate market. Some people with very high IQ scores are going to look really dumb real soon, because they did not bother to turn on their thinking caps before making bad financial decisions. (I could have been one of these guys, but I have learned through the years to turn on my thinking cap before acting…)
i linked to that hardrockcafe san diego condotel, and appeal to your intelligence is not what this is about friends. getting laid is what this is about…or, to put it less bluntly, “lifestyles”. there’s an element of this I think in many many of these ‘bad financial decisions’ ..for some it’s whitepicket fence dreams (have you seen the latest ad from lowe’s? it shows a young couple cruising the aisles for paint and crap and the woman is imagining her children yet unborn painting doghouses and blowing out birthday candles at the picnic tables they’re trying to sell her now, years before! ) and for some it’s hotbabes by the hardrock pool, but appealing to fantasies hopes and desires is an effective tool for overcoming any last vestiges of consumer will to be ‘intelligent’ in this domain…
cheers!
babes never go for the accountant types you know…and that picnic table is only going to get more expensive;-)
LMAO Green,
Anyway, the Jeff Gregersen guy is possibly plenty smart. He hasnt bought a hotel-condo yet and possibly wont, but he is suckering others to buy in.
I guess he gets his condo for free if enough suckers buy his story …
“‘I’m buying a good investment and a lifestyle.’ He projects a 13% annual appreciation on his purchase and expects to break even from rental revenue.”
Lets see,
$800,000/365=$2191/day.
I havent been to SanD. in years, but isn’t $2,000 for a room kinda high?
Hell I took my wife and two kids to a great resort in Jamaicia (Wyndham Rose) for two weeks with airfare, all meals and booze included for less than $6,000.
I think this guy is rather delusional to think the rents will pay for his “investment”, long term or otherwise. This doesn’t include that the hotel is gonna take 50% of the rents and charge him a bunch of stupid fees =).
This might possibly be the worst investment ever, other than just giving your money to known crack fiends and hoping for the best.
Wait, the crack fiends might actually be a better risk, after all there is a small chance the fiend might return you something or not cost you further in the future, not so with this condotell or whatever the hell they are calling it.
Simply amazing!!!!!!!!!
The math should look more like this:
Mortgage on $8000, with 0% down (of course!) plus taxes, insurance, and “member fee” would maybe close to $8000 a month. 8000/30 = 267. Multiply by 2 because the “management” is taking 50%, and we get 533/night. You can get a pretty swank hotel room for that. And that assumes it is rented out every single day of the year. Wanna make a bet they rent out the rooms they get 100% of the rent first?
Do I we get free B&W TVs for listening to this pitch?
I think there should be RE regulation. Just like SEC does with stocks. Licensed professionals (”licensed professionals” I just made myself laugh) who state that a property will appreciate should be fined/regulated/monitored just like stock brokers and financial planners.
There is no difference between a stock broker saying that IBM “will” appreciate and a RE agent saying that this condo “will” appreciate. I don’t care if they make them take tests, courses, training. I just think they should be held accountable for their statements.
To say that RE will appreciate 10% per year is immoral because it is factually innacurate. It should be a crime to do so. This whole caveat emptor nonsense is not ok. If it were then we would not need the SEC would we?
People have tried sueing-however-courts have called it “puffing”
exactly…
And the greatest fool award goes to…
Try selling the condo/hotel share when you want to get out
RE bubble sitters:
One more storm cloud on the horizon.
http://news.yahoo.com/s/ap/20060312/ap_on_bi_ge/credit_cards_payment
Increased minimum monthly payments are going to increase chargeoffs at Citigroup and JP Morgan.
Tell me about that robust economy again.
I just read that article. Nice. This might just be the nidus that will turn the tides. JF
Wow, I knew this was happening but to see this in actual print is amazing
Weren’t these the same banks that were pushing for the changes in the bankruptcy laws?
I guess they’ve never heard of the expression, hoist in your own petard, because that would require learning French.
Actually, it would require reading Shakespeare. But same idea.
Yahoo’s on a roll this afternoon:
http://news.yahoo.com/s/nm/20060312/bs_nm/economy_g10_dc;_ylt=AgfnU6vcBziUTdTKfNLFyXVv24cA;_ylu=X3oDMTA3bGI2aDNqBHNlYwM3NDk-
Higher interest rates coming
I will borrow another bloggers phrase. The world’s biggest I told you so is coming.
How did this guy come up with 13%? With such a precise number like that, it seems like he sat down in his office with a calculator and did some serious figuring. I would love to see the formula he used.
He was getting 13% off the price for “consulting” with the condtel’s developer and agreeing to push this junk in print?
Who hires a real estate consultant and how much do you pay him?
Anyonw catch CNN Business Traveler an hour ago? Talking about buying a 2nd home in South Africa, Bulgaria, or United Arab Emirates. Typical insane talk, with buyers admitting they’re doing it in great part to sell at a higher price later. One very interesting thing was the development of “The World” in U.A.E. They’re making artificial sand islands just off the coast, and the islands form a map of the world. Each continent is, I think, about 5-10 acres. You can buy a continent for around $100 million. And THEN you have to build the mansion. Yup, $100 million for a big bucket of sand off the coast of U.A.E. And they already have buyers. I think Australia sold for $200 million, and someone bought England for $47 million. They showed a picture of the project from a helicopter, it does look very cool, all must be said. Maybe someone could find a satellite image of it and post the link? This just might be the most insane over-the-top global housing bubble story of all!
I agree. On top of everything I think the ocean is going to wash the land away with time ….. there goes the mansion . I did not get the impression that the land was really solid .The developer is a madman
The World
Gee, I was all set to buy….and then the windows media player crapped out on me.
Good thing there’s nothing to global warming, else as noted above this “World” would just wash away.
There’s been some stuff appearing on UK sites indicating that foreign buyers can get into serious problems with the legal systems in places like Bulgaria.
A bit like some of the US horror stories about Mexico.
South Africa is just plain scary.
An English friend of mine tried to get me to buy into Bulgaria about 3 years ago. Perhaps I could have made some money, but what do I know about the economy and politics of Bulgaria? I certainly cannot read cyrillic. What’s more, I do not know a thing about squatter rights there. What if I found my lovely Bulgarian villa occupied by the local Gypsies? Who will the police side with, me and my dollars or the locals?
Too risky for me…
what you pay is what you get …
The Travel Channel had an hour-long documentary on these. You’re not even buying land per say, you’re buying a great big mound of dredged up sand. Apparently, the builders are struggling with the fact that sand likes to move around in the water, so the folks who purchase these things could find themselves having to constantly replenish the eroded sand. Oh, and there aren’t any bridges linking the mounds, so I guess you’ll have to boat it to and from the mainland (navigating around all the rest of the mini continents, of course).
“The World” is nothing compared to the “Palms” (also in Dubai)
I bought several of these islands, they are good investments; after all, they aren’t making any more land! Hey, wait a minute…
Anyways, I’m raising an army for a few errr, ummm, “hostile takeovers” of some of the surrounding islands…anyone want to join? Think of it as the world’s biggest game of Risk(tm).
it’s not insane, this developer is using the worldwide housing mania to make huge amounts of money. They have nearly total control over the islands, so there are many opportunities to make huge profits. Apparently most of the Palm island is already sold out (and many homes have been flipped so that the price is now far higher than the original price).
Regarding the risk of these islands being washed away: I don’t think so. There are some Dutch companies involved in making these islands; they have plenty of experience with this kind of work and flooding is certainly not a major risk in this area. I think getting underwater with the mortgage is far more likely.
I think it should be just plain illegal to lend someone money to build a house on sand shaped like australia. Just plain outlaw it. If you want to pay cash, fine, but you can’t get it from a bank period.
this is just so insane…no wonder the end-times people are getting excited. Are they real estate bears, generally, by the way? or are they buying up holy land right now?
I drove through downtown San Diego today. Condo projects going up all over the place. Also, I hadn’t noticed before but the San Diego Reader has lots of full page condo ads. MP Condos has 14 locations, condos for sale at each, most with 1 year free HOA fees. The glut is amazing and growing rapidly.
The watchword that I have been seeing in the Reader is “incentives”…lots and lots of “incentives”. One recent ad has a couple jumping to the sky (like they’ve won the lottery), with the banner proclaiming $10K in ‘incentives’.
Should there be a high vacancy rate, the monthly HOA fee could really skyrocket. In some of these units, I’ve seen HOA fees >$500 per month, although admittedly these probably defray the cost of a ‘doorman’ (shades of Manhattan co-ops). Still, a year of HOA fees might be really, bit ‘incentive’, depending on how sales go.
I know it is true, but I don’t understand why a high vacancy raises the HOA. Someone must own all the units (even if it is the builder or bank). If the building management requires $10,000/mo on a building with 200 units. Why wouldn’t the HOA fee always be $50?
Thanks, I’m young and have only rented.
A truly responsive answer would depend on how the CC&R’s are written up for a given condominium complex, and what the relevant state laws are.
However, your general liabilities are described in a piece written by Richard Russell, that was cited by Dawnal in the above post on the dialogue with the OC Register columinist. Here is a brief extract:
“…My father was in real estate all his life, which allowed me to see the good and the bad side of real estate. I grew up During the Great Depression. During the 1930s many condo owners were hit by the bad times. Consider this — you buy a condo in a building with nine other condo-owners. Hard times hit, and three of the condo owners can’t make their payments. They leave, and the landlord can’t sell those three condos. One finally sells at a frighteningly reduced price, lowering the value of all the other condos in the compound. Two months later the landlord goes bust, and two other condo owners leave. The cost of upkeep rises dramatically, and suddenly the condo that you bought is worth half of what you paid for it. And you’re upkeep costs again rises sharply. Now you’re thinking that it’s far cheaper to rent. You make plans to leave, but you’re liable….”
OT but interesting……
Here is what Robert Chapman of International Forecaster has to say in his latest letter:
“A slowdown in real estate will be injurious to all of us. Last year consumers removed about $630 to $650 billion in home equity, representing 7.0% of their after-tax income. In 1989, the year that began the last housing collapse, only $82 billion was removed, or 2% of after-tax income. If prices level off and interest rates rise another point, the extraction of home equity could drop precipitously. If prices of homes fall, which is what they have already started to do, consumer spending could take a big drop, especially as consumers lose their jobs. In the first nine months of 2005, the appreciation in the value of residential real estate accounted for 58% of the increase in household net worth. In contrast, back in 1989, real estate appreciation accounted for only 24% of the increase in household net worth. A 30% to 60% correction in housing prices with today’s leverage would be fatal. Without the leverage California fell 40% in the 1989-92 timeframe. The results will be the same or worse this time. Over the next three years about 50% of all mortgages come due. About half of those loans are sub-prime or they are speculators. In either case, they probably have little equity in their homes. We have $600 billion of those loans coming due over the next two years. The glut of homes on the market should be overwhelming. It should also be noted that 62% of bank earning assets are mortgage related. A real estate bust could do substantial damage to the banking industry and perhaps take banks down and maybe even the system.
The BIS says the expansion of new types of home loans in the US means mortgage bondholders may be exposed to bigger than expected losses. The BIS says 75% of new loans issued by private lenders are sub-prime loans. They also said the common practice of using average credit scores to price mortgage pools could lead to a systemic under prediction of default risks and leave investors exposed if housing prices turned down.
House builders in Dallas are facing large inventories of unsold houses and have begun discounting. Centex advertised $25,000 off on select homes in both Dallas and California.
The median price of a single-family home has declined since peaking at $219,700 in July to $210,500 in January.”
*****************************************************************************************************************
He missed Centex discounts of $150,000 in some markets but he got the thrust of it.
Great post. Thanks.
This Dubai project isn’t quite as mad as it sounds. Having your island is likely to appeal to a lot of people. Imagine if there were no problems with hurricanes off Florida, and imagine that the water off the Florida coast was as shallow as the water off Dubai. Then I can easily imagine rich people wanting to have a private island just a few miles from Miami. The only problem with this Dubai idea is there is no shortage of potential building spots for more islands in the Persian Gulf.
Well, another problem with Dubai is it is miserably hot. It is a different kind of hot than you find in Florida. That, and the fact that it is smack-dab in a part of the world that isn’t exactly stable.
Well, I personally have no desire to live in the Middle East, but there are some very rich people living in that part of the world, hot summers or no hot summers, and I can easily see them wanting an island of their own precisely because of the lack of stability. And when you most of the world’s oil and gas supply is next door, energy for running the A/C is no problem. And by the time they run out of oil and gas, then we’ll presumably have solar power and that have lots of sunlight there too.
So, again, the project doesn’t seem entirely mad, to the extent that it’s being targeted to rich middle-easterners. My question is why are Brits buying in this god-forsaken place? If they want sunshine and beaches, why not Australia?
I heard that most of the buyers are NOT from the middle-east, but from Europe and Down Under.
They are in the part of the middle east that is stable. Dubai is a really nice place and the muslims there are moderate and a very nice people. The leadership is not a bunch of nutjobs like over in Iran.
Oh no …Than we will get a island glut on the market …
no shortage of terrorists wanting to blow you ass up either
Right next to where I worked for a defense contractor in San Pedro, CA, there are 3 large high-rise condo projects in planning, or under construction. One of them on 6th St. should be finished early next year and it looks like the construction workers are trying to do everything possible to speed up construction. There is another one on 7th St. with a large facade billboard showing an artist rendering of the exterior, but it’s just starting to break ground. Also there will be a new high-rise popping up on 5th St. with units priced between 300K and 1.5 million.
What I find strange is that these huge condo units are being built when San Pedro is not like New York City. You can’t just walk somewhere and take care of all your daily business in urban style. On one side, there are container ships from China, on the other side, a run-down neighborhood. There is no beach anywhere nearby, just commercial container ports.
I think these condos will be filled by people from out of town, such as transplants from the East Coast, who see the brochures of the ocean ports, but don’t really know what it’s like to live in an industrial zone.
San Pedro?!! OMG I thought they were out of their minds building those monstrosities in OC. Course, guess the gangbangers gotta have a ‘crib’.
If I choose to make a speculative investment, I don’t expect someone to be there to bail me out if it turns out I actually bought something worthless. Why should flippers be protected for their condo speculation? Anyone putting a down payment on “real estate” they can’t see and touch is a fool.
What if building islands does something weird like upset the water patterns . Didnt they build a Japan Airport on water that started sinking ?
Goggle world seems to have old satellite photos, no continetal islands around Dubai. But, as a youth I swam in waters around islands just north of the UAE on the Iranian side - clear blue waters, great beaches. It’s the 120 degree summers that were a killer.
The question is have these Iranian island propertys appreciated? This may be the next great bonanza, hopefully they will not be radioactive by the time to buy.
Im laughing so hard
Read about ‘Automatic Millionaire Homeowner’.
“It’s cheaper to rent
“There are certain markets where it may be cheaper to rent. Long-term, it’s never going to be cheaper to rent your home,” he says. “If you rent right now in this country at $1,500 a month, over the next 30 years, you will actually spend over $540,000 on rent. That’s assuming your landlord was nice and didn’t raise the rent. If they raise it by 5 percent, you’ll spend over $1.2 million on rent over the next 30 years. And guess what? You’ve got zero to show for it. If you buy a $200,000 home, the mortgage payment would be the same. However, at the end of 30 years, you would, in fact, own your home free and clear, the home would be worth $1.2 million. If you backed out the mortgage payments, you’re ahead by $740,000.”
If this was already posted…. sorry
Nonsense, because it’s flawed to count your primary residence as part of your net worth. If you sell it, you have to live elsewhere, and unless you lived in a very unusual spot, the prices elsewhere have simply risen the same amounts.
Of course, you can buy a home with leveraged money, and tax-deductable interest, so it is a way to keep in step with inflation.
But if you’re in an area where you can rent for 1/2 of what it costs to own, you’re probably better off renting, and putting the balance in TIPS (inflation-protected Treasury bonds). After 30 years, you’ll probably be betteroff rending
Read about Real Estate: Salaries .
“Pay in real estate depends greatly on what you do. Some of the wealthiest people in the world have made it in the world of real estate. But, for most of us, salaries are lower. In a recent survey the median salary of property and real estate managers was $29,000 a year. However, many made more than $50,000 a year. This is a business where you can make good money with hard work and a little luck. Your responsibility matters too. For example, the median salary of property managers responsible for shopping malls is close to $80,000 and the median salary of those who manage office buildings was $95,000. Salaries in real estate sales are very difficult to characterize. It is said that one in thirteen Californians has a real estate sales license; but most do not make any money in a given year. That said, full-time, hard working sales people in real estate can make $70,000 a year after being in business long enough to build up a client base.”
Wasn’t is 1 of 50?
Am I wrong?
My previous post is = it
My previous post
Read about A BULL, A BEAR AND THE BUBBLE
What’s ahead for the real estate market? Two respected analysts — and now authors — hold markedly different views.
“David Lereah says he isn’t worried about the real estate bubble bursting for one simple reason: There is no real estate bubble, so it can’t burst.”
“Sales have also slipped a bit, he says, but that’s due to affordability, and to investors…pulling out of the market.”
“Demographic trends, Lereah says, will assure strong demand. Baby Boomers remain in their peak earning years. Their children, the so-called Echo Boomers, are primed as first-time home buyers. A record number of established immigrants are financially equipped to buy property and start building wealth for their families.”
OK, if sales have “dipped” because of affordability, how can these freshly minted buyers (echo boomers and immigrants) prevent a bubble pop? By definition, very few of them can AFFORD a house in the bubble areas. So, are exotic loans going to keep houses “affordable”, so that the new buyers can keep bidding up prices into infinity? Or are these loan products going to delay the pain, making for an even worse mess when people realize that their loan to value ratios are preventing them from refinancing when their loans reset?
so who were the two respected analysts?
The editor pulled the bear’s comments in order to avoid offending real estate advertisers.
I would predict that Lereah’s reputation would go down in flames after the air finishes leaking out of this balloon, but he made enough precautionary statements last year to cover his butt. He will harken back to these six years from now to show everyone that he offered fair warning that the market was turning.
SD bikini babes will save that Hard Rock project, and let that fool make his 13% - (NOT). Dubai would be a better bet. I wouldn’t touch either. Good reading for a laugh.
An update on the condo high-rise tower that is starting ground-breaking in San Pedro: The banners on the chain link fence with the nice photos of happy people swimming in the pool already have graffiti on them. That’s after the banners were just unveiled a couple days ago.
This is the high-rise with units up to $1.5 million.