Failed Condo Towers ‘More Hype Than Reality’
A pair of reports on condos. “Prominent Florida economist Henry H. Fishkind said referred to the controversy about whether a housing bubble exists in Florida as a given. ‘There’s definitely some over-building,’ Fishkind said. ‘But it’s concentrated in condominiums and in Miami and Fort Lauderdale.’”
“Walchle Lear Multifamily Advisors expect apartment occupancy to reach 96 percent this year and the J. Turner Butler Boulevard corridor to see more new rental units as the per month cost for a two-bedroom apartment has dropped $600 lower than the $1,700 average mortgage payment for a condominium or townhome in that area of the Southside.”
“‘The Jacksonville area isn’t exempt from a surplus of housing starts as compared to population increases, Fishkind said.”
The Las Vegas Sun has this breaking news. “Sales have been suspended at another luxury condominium project in Las Vegas, as analysts said interest had dwindled in properties that were not close to the Strip. Letters were sent to nearly 100 buyers at the Curve project, located in southwest Las Vegas, offering to refund their deposits or extend their contracts by 150 days, said vice president Paula James.”
“Developers had set a 180-day period to sell 75 percent of the units before beginning construction, but the first tower of the project sold only 53 percent, or 97 units, James said.”
“‘We’re looking forward to building the project,’ she said. ‘We just need to regroup. We ran out of time .’”
“At least seven projects have now publicly folded or stalled in a little more than a year, a fraction of the more than 100 once proposed. Sheila and Bob Joseph, business owners from California, bought into the project soon after it was announced last year and canceled their contract in January when they didn’t see construction beginning as scheduled at the 45-acre site.”
“Construction of the $300 million first phase of the Curve, which would include two 18-story luxury condo towers and 12 commercial buildings, was supposed to start late last year. ‘We were just reading a lot about real estate in that area and taking a look while we were there at what wasn’t moving,’ Sheila Joseph said. ‘Not only reading, but the gut feeling we got about the project.’”
“(Realtor) Bruce Hiatt said his clients had little interest in the Curve because of its location. ‘It was quite expensive. What could you sell it for later? My clients decided they’d have better appreciation on the Strip.’”
“Paul Murad, a condo developer and author of ‘Manhattanizing Las Vegas,’ said the city was not ready for a high-rise project in the suburbs. ‘You can’t blame it on construction, you can’t blame it on architecture,’ he said. ‘We’re finding that people who like the suburbs like the suburban lifestyle and that means a single-family home. A high-rise in a suburban family setting is a bit premature.’”
“It’s much tougher to convince developers about projects in the suburban market, said (developer) Tim Sullivan. ‘My thought is if we had the Curve developed, it would be highly successful,’ he said. ‘But they’ve got to prove it. Right now, there’s a lot more hype than reality.’”
10 year now at 4.77.
It seems stuck really, really close to 4.75; in fact, it has been stuck there for the whole month of March. So your point was???
Peter Thiel interivew BW Nov. 8, 2004
The way Thiel sees it, the tech bubble of the 1990s never completely popped. It simply mutated into a finance bubble. “Half the profits in the Standard & Poor’s 500 come from financial services today,” he says. “That’s clearly unsustainable.” For three years, consumer spending has propped up the U.S. economy, thanks to low interest rates and ever more creative forms of borrowing, he says. He believes that the trend reached an absurd apex with the recent rise of credit cards linked to home-equity lines of credit. Now, with outsize consumer debt and a housing market that’s a bubble, he thinks a major market correction is at hand……..That’s not all. Once the housing bubble bursts, he argues, consumer spending will plunge, leading to deflation. That will affect investments beyond financial stocks…………Last winter, Thiel almost plunged into one of the nation’s hottest housing markets. He was negotiating to buy Martha Stewart’s Manhattan duplex condo, priced at around $7 million. In the end, he backed out. “I’m constantly talking about a real estate bubble. I shouldn’t be buying a place,” he says. In San Francisco, Thiel, who is single, owns a downtown penthouse where he regularly hosts salons featuring such guests as Nobel economist Milton Friedman.
Today he said he has sold out, was a happy renter and urging his friends to do the same. IHO, housing is going down very hard. For those who don’t know who he is he manages Clarium Capital Management LLC Hedge Fund.
Theil is foolish for even suggesting the S&P500 is overvalued. There never has been and never will be a better time to buy stocks, ever!
Companies are sitting on a cash pile like nobody can imagine, and this guy is simply trying to trick people into shunning stocks so that hedge fund managers and analysts can share the spoils.
Don’t be fooled! Go buy yourself some stocks right away, because they aren’t making any more shares…
[How come sometimes you are "GetStucco" and other times "Getstucco"? In any case ...]
Yes, the S&P is a “bargain” right now!
My Shift Key Sometimes GetsStucco:-)
Ha!
Does anyone know how quick companies will go through the cash they are sitting on if the economy tanks bad??? any idea’s or thoughts???
The reason i ask is that many economist state that capital spending will be the savior of the consumer..
GetStucco, someone is going to think you’re serious.
Realators maybe?
S&P 500 a bargain? Its dividend return is lower then the 1973 top and the Dow’s dividend 20% more overvalued then 1929’s top. With 50% of income based on financial games, how can the market be a bargain? If the Dow dividend returned to its 100 year historic average of 4.5% the market would have too fall almost 50%. That kind of Dow decline would wreck all stocks. The danger here is that stocks, realestate, and raw materials all tank.
Kudos to Thiel for saying the obvious - all the techies will get the message!
He co-founded PayPal and has a Stanford (libertarian) intellectual background.
Thiel even stated on CNBC, with excitement, its cheaper for him to rent now than it was to own.
He’s probaby doing what many are doing here in SF.
Paying half or less in rent than a monthly mortgage and taxes.
And I just realize these are Thiel’s remarks from many months ago and not from today’s CNBC interview.
What he says will resonate now - whereas then no one here wanted to listen.
Great that he’s relishing being a renter.
How’s Thiel’s hedge fund doing?
A little OT, but I think you’d enjoy reading this clown - in the same few sentences she says “price escalations have simmered to a normal pace” only to be then followed by her statement that for sellers “it’s time to price ahead of the market (that means get ahead of the price reduction curve).”
Does this joker honestly listen to the words that come out of her lips?
Funny reading:
http://realtytimes.com/88/MonikaKumar
A little OT, but I think you’d enjoy reading this clown - in the same few sentences she says “price escalations have simmered to a normal pace” only to be then followed by her statement that for sellers “it’s time to price ahead of the market (that means get ahead of the price reduction curve).”
Does this joker honestly listen to the words that come out of her lips?
Did you see this that she wrote (”balanced” and “fair” must be the new NAR buzzwords)?:
“Personally, I feel market has caught up
HOLD ON Sellers! You may know by now prices are not going to go up like last 2 crazy years so it’s time to get practical. But most of you did!! Good Job.
NO MORE LOW BALLING Buyers! You rolled your dices as well; some got lucky in January by getting below market price from exhausted sellers. It’s not working ANYMORE and it won’t work. Sorry!
We are into a balanced market now”
Good luck with that!
If I understand after reading ….she is for advicing seller to price ahead of the market, meaning, pricing LOWER than others.
She is also saying buyer to offer lower than the asking price and negotiate.
I do not see the contradiction, may be I missed the point? Thank you for the link.
Ben - can you delete my comment dated 2006-03-28 13:03:02 (and also this one).
pizza pizza ;-D
How is housing doing in Vegas? How are existing home sales doing? New Construction?
What has inventory done?
I hear a lot about AZ, CA, and FL but not so much lately about NV.
Gene — I don’t know. I should know because I live here, and I’m invested heavily, but the market is murky and hard to see. By some measures, prices are going down (a little bit). But not all neighborhoods and price ranges are behaving the same way.
Things were a lot clearer 18 months ago when we had hyper inflation, and then a year ago when we had our “soft landing”, but right now we are in a kind of wait-and-see state. Things could go either direction from here.
Good question. Wish I knew the answer.
I’m in Northern Nevada…It’s hard to read. The MLS is up, but from about 6500, to 7100. There was a ‘news’ stoy about how builders have gone from waiting lists, to being able to buy and move in right away, but then they said they were holding their own, and there was no over supply. BUT the only interview I saw was the prez of the builders association (No bias there). So, my take on Northern Nevada is a big fat WHO KNOWS.
who would want to live near “the strip” a cultural wasteland
the Donald
From the update:
‘Paul Murad, a condo developer and author of ‘Manhattanizing Las Vegas,’ said the city was not ready for a high-rise project in the suburbs. ‘You can’t blame it on construction, you can’t blame it on architecture,’ he said. ‘We’re finding that people who like the suburbs like the suburban lifestyle and that means a single-family home. A high-rise in a suburban family setting is a bit premature.’
For some reason, this reminds me of the time Jim Clark (Stanford faculty, Netscape, WebMD, etc.) said that office towers replace the ubiquitous office parks in the Valley and, in particular, the Sand Hill Road (nexus of the venture idiot community) area.
He didn’t specify a timeframe, but I think he forgot about the NIMBY-ist culture of the SF Bay Area.
Sorta OT…
Has anyone used the OFHEO HPI house price calculator, and how accurate is it? (OFHEO HPI = Office of Federal Housing Enterprice Oversight House Price Index)
http://www.ofheo.gov/HPI.asp
BayQT~
HO, HO, WATCH OUT, hell is probably starting to break loose
BREAKING
NEWS GMAC says it uncovered accounting irregularities and some financial statements no longer reliable. Reuters reports. More soon.
From money.cnn.com
This will cause GMAC debt to fall & bloodbath on streets!!! Anybody has some insight - hedgefundanalyst, getstucco ???
FYI
http://biz.yahoo.com/rb/060328/markets_autos_gm.html?.v=1
vstan..This news had to come soon or later. Several Banks looked at the GMAC such as Citi.,Wachovia and a foriegn bank I beleive..they all descretely walked due to the GM parents non arms length interest rate support…this came to light when GM announced the extra $2 billion in losses 10 days ago….Now that the KKR (cutthroats) are bidding, they must want OUT or are jockey-ing for a lower price…
AS for the debt SWAPS..I just never understand who the heck can take the hit to their books and it NEVER seems to come out? (get reported) If you sell a $10 million SWAP for $5,000.00 for 5yrs of default protection, and last summer it begins to trade in the secondary market at $175,000..Then BY February, 2006 those same swaps are trading @ $375,000 plus another $50,000 every six months….Someone has some major hurt going on….given that GM & Ford are 2 of the largest corporate debtors in the World!(excluding Fannie & Freddie)..
All the Wall street boys made Billions this quarter…. Who the H— is getting fleeced..it certainly isnt the little guy they dont even know about these esoteric default swaps, and couldn’t swim with these fish if they wanted to….?
very intersting post. I’d like to know who is losing out too.
The Vegas condo market more than any other market seems to be only about flipping and trying to capture appreciation. Is anybody ever going live in these units or just trade them back and forth. I remember along time ago reading a very appropriate quote, it said”in the long run, a house is only worth what the value of living there is”.
Actually, there are many parts of the world where people do live in high-rise apartments. Like Chicago, for example, or Hong Kong. It happens when you run out of horizontal space, and you have to build vertically.
That time will come to Las Vegas. There is a limit to lateral growth in the valley. There are physical barriers, like mountains, Lake Mead, national park land, air force bombing range, etc. Just looking around, you can see we are approaching the limit in every direction.
But we aren’t quite there yet. It is still possible to buy a new SFH with a yard at a reasonable price. Looking 5 years ahead, I think the situation will be different. People will be living vertically because they have to.
The condo tower situation in Las Vegas got a little ahead of itself. We didn’t need 150 of them all at once. What we need is 15 per year for 10 years. That’s probably what we’ll get.
You are very optomistic.
In 5 years the flippers will be gone and there will plenty of empty houses in vegas. And they will be much cheaper than they are now.
Five years from now all those flippers will probably be living in tent cities or boxcars.
Gene, I have a friend moving there very soon. It took some doing but he has decided to keep his wallet in his pocket for now! So many projects have been cancelled and the listings on Craigslist have been there since last July. The “rent to own” and lease w/option programs seem to grow by the day. Every time I call I wonder if I’ve spoke to that person before. With all of the distressed inventory I can’t see anyone jumping through hoops to buy at these levels. B/c the “deposit” is the amount of the arrears why wouldn’t I just let it slide into foreclosure and then buy it? Look, I’m sorry you got your boo-boo in a wringer Mr. Speculator, but it really isn’t my problem! When we get back to pre-bubble prices then we can begin to look in earnest.
A little ahead of itself? Vegas had enough condo towers for the next twenty years when Turnberry IV was completed.
Who’s supposed to buy all these new half-million-plus skyboxes? Casino workers?? Get real.
What is it with condos? The city here (Pittsburgh) is THRILLED with condos. They even declared an area blighted to help in the process (and it WAS NOT in the least blighted - a stretch of Shadyside, for those Pitt/CMU grads). They are everywhere here too, often 2-3 times the price of an average home. I don’t get it.
EEK - I noticed the ticker about news release on GM, then something came up. Forgot all about it. Not good, esp since its GMAC… Will affect may other areas, IMO.
Still trying to get this to work. Go to this link: and click on both articles.
Top Ten Millionaire Counties
The number of millionaires rose to a record level in 2005, and more than 1.1 million of them can be found in just 10 counties.
A Rich Market for Decadent Digs
By Janie Ho
BusinessWeek Online
Wealthy buyers are snapping up trophy homes at a record pace — and now, they’re looking beyond the sunny states