The Bright Side Is ‘The Bargains Are Coming’
Another Fortune piece on the housing bubble. “The most troubled sector of the housing market, the one that will fall first and fastest, is the condominium market. Typically cheaper than houses and easier to buy, sell or rent out, condos are catnip for investors. ‘I estimate that 80 percent of the sales in Miami went to investors at the peak of the market,’ says Lewis Goodkin, a consultant to condo developers.”
“Gary Bahadur, who owns a computer networking company in Los Angeles, bought six condos in California over the past few years. Now he’s putting them all up for sale. ‘I’m getting out of California because it’s topped out,’ he says, ‘The prices are so high that investors can no longer buy a condo and rent it to cover the mortgage.’”
“Yet even as speculators flee, developers keep throwing up condos at a breakneck pace, in part because if they have already bought the land and poured the foundation, they have no choice but to finish the project. In the Miami area 25,000 new units are under construction, and another 25,000 are approved. Yet the Miami market absorbed only 10,500 new condos in the past decade.”
“Tanya Wagner is caught in the squeeze. She paid $335,000 for a two-bedroom condo when she moved to Miami in 2004. In November she put her unit on the market for $485,000, the price that apartments in her building had sold for a few months earlier. But Wagner missed the peak. She’s now dropped her price to $415,000, and she still hasn’t had an offer. ‘My belief is that prices will drop even more,’ she says.”
“Builders don’t have the luxury of waiting out a slump; they need to sell for what they can get. At first they hold the line on base prices by offering incentives. Then, as unsold units collect, they move merchandise with huge discounts.”
“Builders also pitch in when potential customers are having trouble unloading their current home. Pedro Kritselis had to sell his house to afford to buy a new one in Bristow, Va. But the market is so soft that he couldn’t get the price he needed, so he told the builder he’d have to walk away. To keep the sale, the developer shaved $25,000 from the price of the new house. That enabled Kritselis to sell his house for $25,000 less and still afford the new home.’
“Delinquencies are already rising rapidly. Since early 2005, delinquency rates have jumped almost 14 percent, to 2.5 percent for prime mortgage loans. ‘The banks will be forced to take back a lot of properties and sell them for the amount of the loan,’ says (economist) Mark Zandi. ‘That will add to the already huge supply on the market.’”
“As painful as it will be for many people, the looming correction may turn out to be welcome news for young couples now priced out of the market will once again be able to buy a ranch or colonial without forking over half their income for mortgage payments. Lauris Lambergs and his wife, Ginta, want to move from a condo in South Boston to a single family home.”
“‘Now the buyers have some leverage. When we go to open houses, we’re the only ones all day!’ exults Lauris. It’s the bright side of our gloomy outlook: The bargains are coming.”
first post
‘Who will be hurt most?’
An interesting title for a story more or less pushing home sales. Still, more HB press.
“the bargains ar coming” but they are not here het!
Yet!
I keep going back to this website for a chuckle. Only 25,000 new units to compete with.. LOL
Oh.. the humanity….
http://www.condoflip.com
That’s a great site! Very Gatsbyesque!
“As painful as it will be for many people, the looming correction may turn out to be welcome news for young couples now priced out of the market will once again be able to buy a ranch or colonial without forking over half their income for mortgage payments.”
What happened to “priced out forever”?
“Priced out forever” is horribly passe — it reeks of 2004. “Wait for the bottom” is the new black — it goes with everything. Trust me, I’m a fashion professional.
Yes, black does go with everything, even red!
The lending standards increases and the overall credit tightening that will accompany this bust will make many people ineligible for home ownership, regardless of house prices. This, coupled with the psychology of owning a depreciating asset will make any RE recovery elusive for the next 8-10 years.
Realtwhores always think in terms of how best to position RE so that sales can happen. Can’t say I blame them for that. But for years it was buy now or be priced out forever and now its the coming bust will make it a great buyer’s market. I’m not that optimistic. It will take a long time for the market to digest all of the foreclosures and bad debt and many young people will know to avoid RE for a long time as it has become a trap to be avoided.
Sorry but I couldn’t resist.. This is TOO funny.. I am waiting for LEVEL 10- buy this POS back from the bank as a REO for 30 cents on the dollar.
“Condo Flip™ introduces the market to its patent-pending pricing technology. We’ve been watching condo flips and resales for the past several years, and we’ve noticed that there are three types of sellers out there:
1. The seller who is trying to make a profit
2. The seller who is trying to get out of his or her contract
3. The seller who can’t close, and needs to be bailed out
We are pleased to offer our buyers and sellers the Condo Pricing Demoter™. This technology will automatically alert you when a seller who is trying to make a profit suddenly drops his price for a fast sale. When he still cannot find a buyer, we drop the price, one more time to “below cost.” As a buyer you will have an opporutnity to receive an automatic alert each time a condo’s price gets demoted.
Level 1 Listings
Good Value
Level 2 Listings
Reduced Prices
Level 3 Listings
“Fire Sale” Prices
These listings make up the regular Condo Flip™ marketplace. Sellers are typically selling their Condo Flips™ at a profit.
Your price is the seller’s original contract price plus a markup.
A Level 2 Listing is made by a seller who wishes to simply walk away from his condo purchase at a break-even point.
Your price is the seller’s original contract price plus 8% (less any developer administrative fee).
Level 3 listings offer the buyer the chance to “bail out” a seller who cannot close on his condo purchase. These will be heavily discounted condos.
Your price is the seller’s original price less 6% (plus any developer administrative fee).
Sellers have the option of having their Condo Flip™ demote from Level 1 to Level 2 at a certain time, and then from Level 2 to Level 3 at a certain time. So, some listings may become less expensive for you to buy as time moves forward and as the completion of the condo and the closing date gets nearer.”
All I can say is WOW, I have seen it all. The arrogance of some folks simply amazes me at times.
I think it’s a great site, and it keeps up with times. Why is it arrogant to track desperate flippers, but not arrogant for the flippers to expect double-digit appreciation from other fools?
A little more, and they will introduce other levels, including the mentioned by bigdaddy REO sales, and other fun things. The may also introduce “whole sale”, or buy-two-get-one-free schemes, to help move the incredible condo glut.
Maybe I misread or the sellers themselves making these listings and determining what level the condo’s are on or the authors of the site.
Or level 12, where the seller actually becomes your personal property to serve you for life.
>the seller actually becomes your personal property
Good. Then *they* can feed the squirrels.
hey a 20 year supply of condo’s,now THAT is long term planning…..wish they did it that well here(they don”t)
“In the Miami area 25,000 new units are under construction, and another 25,000 are approved. Yet the Miami market absorbed only 10,500 new condos in the past decade.”
Absolutely f**king unbelevable.
I wonder, what really will happen to those extra units-will there be “ghost neighborhoods” that will look like a movie set, all new construction sitting there with an occasional stray cat the only life? Turned to office space? Or-most likely-will become new slums?
Hopefully they might become rentals rather than become ghost town projects .The decay is fast on abandoned projects . The wildlife knows the structures are without humans and they start moving in .Squatters could move in also .
In many Southeast Asian cities (Bangkok, Kuala Lumpur, etc) you can still see concrete skeletons of highrises on which construction was abandoned after the 1997 financial collapse.
This is Miami’s future.
I just had a vision of a movie called “Miami 2011″ it’s about the only condo buyer in 20 sq blocks who believes that humanity has come to some sort of demise , a variation on some B movie about someone abandoned on a desert island or isolated planet or post-apocalypse urban center. A repo agent wanders into the neighborhood on accident, and all of a sudden this owner occupier comes scrambling out of a condo with 5 years beard growth, clutching at the clothes of the person and asking for news of the outside world. “I thought all of humanity had been destroyed in a cataclysm! You are the first man I have seen in five….years…..”
Or how about a movie about a big wave that hits the Florida coast wiping out all the SFR. So the government decides to finish the condo projects because they were the only structures that survived the BIG WAVE. I’m nuts today .
won’t all those half-finished highrises become a public health threat once hurricane season starts? I mean, all that construction debris hanging around to be blown in the wind…i’m hearin’ dylan now…the condos are blowin’ in the wind…
I think they will fill up with illegal immigrants from cuba and mexico with a rent subsidy paid by the taxpayer. Some buildings are all studios and may be purchased for pennies on the dollar by a hotel chain.
What happened in CA in 90-93 was that a bunch of homes were indeed abandoned. This is how 90’s-style skateboarding began, with guys skating in abandoned pools. Also, a bunch of people, often homeless or nomads, lived in those houses for very low rents. Sometimes, a guy would just be allowed to live there as soon as he kinda-sorta keeps the property in decent shape. It was brutal, and that was just a whimpy 80’s speculation, not in the same league as today.
Interesting thought - I live in a new neighborhood in an exurb of Washington DC, and of the 25 new homes on my street, only 3 of them have people living in them. It does feel like a ghost town. I sold my house and rent in this neighborhood. Man, does it feel good to be off the hook when it comes to overexposure in the RE market.
Now if we just knew how many COMPLETED condos were for sale in Miami, we would have a decent picture of the glut it faces. We won’t bother with the completed condos that aren’t on the market yet but soon will be when the ARMs re-set.
Looks there will be some half built condo towers in Miami as the bank pulls the financing in the middle of the project and has to take over the project.
Guaranteed 50% discount on condos coming up in 3 to 5 years. Get them while they are cold.
I agree that this story is basically pushing buying, but at least they don’t try to say ‘the bargains are here now’ exactly! And the more press out there showing that these sellers are expecting their condos to appreciate 40% in 2 years the better. Tanya should consider herself lucky to get rid of it without having to bring money to the table.
And sellers should consider just beginning their asking prices at what things sold for in 2004. I think their only hope now is to just fish for people desperate to buy and willing to do so even with a price on the very edge of affordability for them.
Don’t *any* of them realize that if their own salaries haven’t shot up 40% or so in the last couple years, and interest rates are higher, then the pool of potential buyers at their fantasy-appreciated price is approaching zero?
THe condo-owner in the story exemplifies the problem to some degree too, buying a condo they didn’t even really want to live in presumably so that they could ‘own’ *something*. Gloomy though it looks for the condo market they’d bought into, at least they can get a ‘bargain’ now on the SF home they *really* want! I guess they can afford to lose on the condo, or they plan to rent it out…I hope for their sake the inventory stays so high they aren’t tempted to pick up one of those bargains before they sell their current place!
There’s no *might* about a bubble burst being a good thing…it might be painful, but it’ll be important for it all to get cleared out and overwith. Delinquency rates rising rapidly on even *prime* loans is a good sign for the process moving I guess. I just hate the thought of the specuvestors moving out of CA and maybe staying addicted to RE play, moving it all elsewhere and screwing other places. I can’t wait til RE is considered utterly toxic for specuvesting…
Exactly…..this girl sounds pretty greedy. She decided to sell after the peak and it’s going to be a long slide down. I know lots of people in this scenario who bought at peak or are still waiting for a buyer.
Speaking of greedy girls, has anyone got an update on Nina Smith, the Palm Springs (would-be) house flipper? Her and four friends “invested” (cough) in a $475K house, put in $67K or so in cheesy upgrades, and tried to gouge someone to the tune of around $670K or so, though the last I read, they’d come down to $629K and were looking at a razor-thin profit or an actual loss. I was wondering how their get-flip scheme is working out for them.
Delinquency rates rising rapidly on even *prime* loans is a good sign for the process moving I guess.
I guess they weren’t so “prime” after all!
OT: Las Vegas inventory hits 20,000
Bubble Markets Inventory Tracking
Don’t tell LV Landlord. He thinks he is going to raise rents this year.
You haven’t been reading HER posts very thoroughly.
OT:
Honey, I Shrunk the District
“Shiny condos and a flashy marketing campaign haven’t solved the District’s epic population problem.”
“You’re a young professional; you’ve got a good job in the District, maybe a young professional spouse, too. But you’re sick of the hourlong commute from Fairfax or Rockville—and you’ve heard about all these sweet condos going up in the city…
“In a round of long-term projections released that April, the Census Bureau foresaw the District losing another 20,000 residents by the end of the decade. The figures have the population down to fewer than 435,000 residents by 2030—uncomfortably close to halving the District’s historical peak, 802,178 in 1950, and even more uncomfortably close to the current population of Mesa, Ariz.”
you get a 5K$ credit , thats credit not deduction to move to DC
they may make it 10K$
why not ,the sheople never compalin
condos sck= socialised housing
you do it once and move on
I started a food fight over at David’s BubbleMeter blog this morning, so I better be careful how I ask the question, but, does anyone know what Fannie and Freddie’s requirements are for minimum owner-occupancy with respect to “conforming” loans?
I seem to recall in the 90’s that a high “investor-owned” ratio in a given condo project made it very difficult to get a mortgage loan, even for a qualifying borrower looking for a primary residence. Has anyone thought about mortgage money drying up for these condo buildings, because so few owners actually live in them?
“Gary Bahadur, who owns a computer networking company in Los Angeles, bought six condos in California over the past few years. Now he’s putting them all up for sale. ‘I’m getting out of California because it’s topped out,’ he says
Is it just me, or is anyone else angered by oblivious statements like this? Guy is calling top and wants to get out, but fully expects someone to come in, pay him his price, then suffer losses themselves.
The ignorance/arrogance is just befuddling..
Gary is six months too late and $600K short
Gary will be just fine.
dontbuyyet…..The flipper has no regard for the greater fool ,they just want to find one . The flipper does not care if the next person suffers a loss . Get rich quick was the name of the game . Gold fever they call it , it wasn’t ignorance in most cases .
i hear you, but the strategy employed here is just so unbeliavably ignorant!
If you want to sell your properties b/c you think the market is tanking, you don’t grant interviews to the press in which you state “yes, I am selling b/c I think things are tanking”. You quietly try to slip out the back-door un-noticed and once you are free and clear, then you can talk about how things are crashing.
I mean, come on! Talk up your position a little bit! These morons are unwittingly hurting themselves with interviews like this (of which I have seen many in the past 2-3 months)..
dontbuyyet… I see what you mean . Total retards . Yes your right ,they must be suffering from some sort of self centered blind spot . I think its a personality disorder myself .
“i hear you, but the strategy employed here is just so unbeliavably ignorant!”
What else would you expect but ignorance from the average flipper?
dontbuyyet-
You could put it in evey media outlet and shout it from the rafters that the bubble is busting and you’d still find a buyer who thought his situation was different
The flippers really believe they are smarter than everyone else, and everything will work out. I have a vision in my head of flippers as Homer Simpson dancing around singing “I am so smart, S-M-R-T).”
“Gary Bahadur bought six condos in California over the past few years. Now he’s putting them all up for sale. ‘The prices are so high that investors can no longer buy a condo and rent it to cover the mortgage.’”
Hey Gar, that’s been true in Calif since the early 1980s. Didja just figger that out? Clever boy.
AKA Zero Sum Game
AND the game is over. Time to see who were winners and who were losers.
I’m not angered. If you’re investing you buy low, sell high. He’s probably making a killing depending on when he bought. Free markets aren’t kind to the greater fool but I wouldn’t have it any other way.
you are not the only one. My first thought is… don’t buy a place if the rent won’t cover the mortgage dipshit!
“NEW YORK (FORTUNE) - The most troubled sector of the housing market, the one that will fall first and fastest, is the condominium market. Typically cheaper than houses and easier to buy, sell or rent out, condos are catnip for investors.”
Here, kitty kitty… Too bad this catnip is laced with strychnine!
foreclosure in Seattle area.
http://seattle.craigslist.org/rfs/157584869.html
This got to the funniest line.
“Specializing in FIXERS, FORECLOSURES, SHORT SALES, ESTATE SALES to capture potential equity for my clients”
OT. Why is it that those who are willing to pay only reasonable prices are referred to now as “vultures? ABC has an article out on the wisdom of flipping real estate and South Florida residents now being forced to sell at lower prices.
http://www.abcnews.go.com/2020/story?id=1923550&page=1
I take pride in being a vulture, but I don’t usually pay reasonable prices (half off reasonable is a better starting point). Best get to practicing those elbow jabs, you are going to have to fight a lot of nasty forces to get a good place and keep it from getting turned into section 8 or abandoned.
OMG Mark Zilbert as in Condoflip.com Mark Zilbert.
exactly.. what a tool…read on…
“he preconstruction market in Miami has seen some of the highest investor returns in the United States. “People are seeing 2, 3, 400 percent returns on what they invest in a construction condo — over about a year,” Mark Zilbert, a Miami real estate broker, said last year.
“What kind of drives the desirability in the Miami area is where the waterfront locations are,” Zilbert said.
Zilbert estimates that at one point, up to 80 percent of condo purchases were purely speculative investments, made by people with no plans to ever live in one of the tens of thousands of new condos transforming the Miami skyline.”
Correct me if I’m wrong, but I thing that “vulture” was originally a clever play on “venture”. In other words, “venture capitalists” funded start-ups, but “vulture capitalists” feasted on the dead remains (i.e. waited for the companies to tank to buy their assets at pennies on the dollar). There are actually quite a few “vulture capital” funds.
In a very small sense, ‘I are one’.
‘The banks will be forced to take back a lot of properties and sell them for the amount of the loan,’
Wrong, try again.
If the bank could sell the property for the amount of the loan, why wouldn’t the “owner” sell (even at a loss) to avoid foreclosure and just pay off the loan? Many of the houses the banks foreclose on will be under water. The banks will sell for what they can get and write-off the rest.
Especially since a ton of these will have HELOCs, 2nd/3rd morts etc the “amount of the loan” wouldn’t be covered even with flat prices.
There will be a flood of 1099’s sent out to the losers that walk away from these condos and houses. I feel sorry for the mailmen.. they will need trusses.
Thank you for spelling losers correctly.
Not only that, but the bank must sell the property immediately to get it off its books. It can’t wait 6-12 months to get a “fair” price. In addition, a lot of foreclosures have problems with them so they typically sell at 30-50 cents on the dollar.
The banks will be forced to take back a lot of properties and sell them for the amount of the loan
Wishful thinking
Level 12 service - owing the FSer. They better be female and attractive. And what servicing will they be doing?
A lot of 1099s will be sent to the old address, and no forwarding address listed. IRS will track the FBers down, and give them their due. BEND OVER, it is coming.
The POS is Seattle (craigslist) has a granite countertop. But it sure was an UGLY color. It gave me a headache looking at it for 2 sec. Couldn’t imagine waking up to it every morning for breakfast. The first thing to go. I would wish the unlucky new homedebtor a triumph in a flipping try.