Richmond Follows ‘National Condo-Bubble Trend’
Style weekly has this rare report from Richmond, Virginia. “Richmonders are supposedly lining up to buy new condos. So why are some buildings dark and parking lots half empty? Drive by the buildings just after dusk and look for cars and lights in the windows.”
“Case in point is Riverside on the James. One of the city’s highest-profile condo projects, the 122-unit tower on Brown’s Island was draped in darkness on a recent weeknight, about a quarter of the lights were on.”
“But wait. Didn’t all of these 122 condos sell within months of hitting the market in early 2005? Yes, but many were purchased by investors looking to make a quick profit by selling, or flipping, to empty-nesters and young professionals.”
“Local developer Sam McDonald was one such investor. He bought two units and sold the smaller one earlier this year. ‘I was able to get my asking price,’ he says. The larger condo is still on the market.”
“No one has lost money on their investment, says (developer) Bill White. But the dark nights on the James offer a tempered look at the region’s oft-reported condo boom. ‘People who bought looking for a quick flip may have missed that frenzy by about six months,’ says McDonald, who is developing 25 new condos in Jackson Ward. ‘Now you’ve got to find buyers. That takes time.’”
“It’s too early to declare a bubble in Richmond, but real estate observers say the condo market is quickly reaching a point of saturation. Some of them worry that the market, following the national condo-bubble trend, is already overbuilt. Sam R. Worley says as a region Richmond is overdone. He counts more than 2,000 new condos and townhouses on the way along a three-mile stretch of West Broad Street, engulfing Short Pump. That’s too many, he says.”
“‘Basically, you are seeing a glut coming onto the market, nationally and local,’ Worley says. He recently considered buying a condo for his retirement, he adds, but decided against it: ‘Quite candidly, I don’t feel like buying into a bubble.’”
“According to Integra Realty Resources, the condo market is the only real estate segment in Richmond that didn’t see prices increase from March 2005 to March 2006. ‘It doesn’t mean the condo market is overbuilt,’ says Robert E. Coles, of Integra’s Richmond office. ‘But it’s certainly an area of concern.’”
“Flat prices are an ominous sign. But Integra measures only actual closings and doesn’t account for soon-to-be-built condos under contract. White says Richmond, with its diverse economy, is faring far better than Northern Virginia, Atlanta and other large cities across the country that are experiencing a massive oversupply. ‘It’s not a runaway market,’ he says, ‘but there is not a bubble.’”
“Local developer Robin Miller concurs. He is, however, starting to see an oversupply in the upper end of the condo market, where units are priced $450,000 and up. ‘In the past couple of years the demand has exceeded the supply of condominiums and that ended probably six months ago,’ Miller says, adding that the market has leveled out. ‘There might even be an oversupply for the moment.’”
“Richmond’s market is stable, for now, says David H. Downs, a real estate professor at Virginia Commonwealth University. Nationally, higher interest rates and a glut of condos are creating massive headaches for many larger cities overinvested in condos. ‘Still, I don’t think we are as anywhere as far out on the crazy curve as we see in some other cities,’ Downs says.”
White says Richmond, with its diverse economy, is faring far better than Northern Virginia, Atlanta and other large cities across the country that are experiencing a massive oversupply.
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Thanks White - just added your town to the list of - “Everyone else is f’d except my town”
Just exactly how diverse is Richmond’s economy? Other than cigarettes and confederate idiots, what does it produce?
Subkommander Dred
It never fails that when a mid-sized city is listed as a topic on this blog, someone comments on how that respective city’s economy is limited. (and how that town’s residents are morons)
So FWIW, Richmond’s economy actually is fairly diverse with banking / finance providing the most jobs. There’s a federal reserve bank in Richmond (check your dollar bills). Thus many banks have large regional offices in Richmond. The largest private employer is Capital One. Besides finance Richmond has a large medical contigent driven by the Medical College of Viriginia and Wyeth Pharmaceuticals. Then you’ve got:
semiconductors (Infineon)
chemicals - DuPont
retail (Circuit City and Carmax headquarters)
and of course cigarettes (Phillip Morris)
Richmond also has the state government.
Having said that, downtown Richmond is not the safest place around. I’m not surprised that James Island condos are empty, especially @ $500K.
“No one has lost money on their investment, says (developer) Bill White.”…
The good news: No one has lost money
The bad news: Condo YOY March - March - no one has made money
The good news: In order to not lose money your mortage is neg-am
The bad news: I’d say it’s a pretty save bet appreciation isn’t starting anytime soon, and especially not enough for transaction costs.
Kind of hard to lose money if you can’t sell the damn condo eh Bill ?
Yeah, they’re all only “paper” losses right now.
I suspect Mr White interprets ‘loss’ as selling for less than purchase price.
No mention of the 12 month’s and counting HOA and mortgage interest, plus the origination fees and agent’s commission on sale.
I’ll bet any specuvestor who hasn’t found a tenant feels like they’ve lost money at the moment.
Most Dangerous Cities in the United States
http://www.morganquitno.com/cit06pop.htm#25
1. Camden, NJ
2. Detroit, MI
3. St. Louis, MO
4. Flint, MI
5. Richmond, VA
6. Baltimore, MD
7. Atlanta, GA
8. New Orleans, LA
9. Gary, IN
10. Birmingham, AL
Boo! Flipper don’t come here. It’s really really dangerous here. Yup, sure is. People will hurt you Kalifornian and Northern Virginian speculator trash. We are 90 min south of DC and because our real estate is 1/3 the cost of northern VA real estate, our taxes are low and our schools are good and the quality of life is good. If you come here to screw it up for us we will hurt you.
Boo! Stay the hell away.
Who would have thought Richmond is more dangerous than DC.
I know, off topic… but I bet there is a Bulls board somewhere where they are complaining about the RPT… Rise Prevention Team that intervened at the end today to sell stocks and harm the economy.
Not that I don’t believe a PPT is possible, I just feel I can’t know and it is therefore irrelevant. Like having a potentially fatal illness (which I have had). It is irrelevant whether it is the real deal or not… you take the same precautions anyway.
There is a PPT, and it is called everyone using the same technical analysis/tools. “Buy when it hits this technical floor, sell when it hits this resistance”. Very similar to the reason folks are on a housing bubble blog. Everyone doing the same. Unfortunately, it doesn’t produce things to put “faith” in our monetary system, which is what it’s based on. Folks need to realize this sooner rather than later. We need to start using our brains for more productive means. I think folks worldwide are beginning to figure this out (unfortunately, the rest of the world before us), and that is the uneasiness people are feeling. Everything else is just more “technical” analysis.
“Not that I don’t believe a PPT is possible, I just feel I can’t know and it is therefore irrelevant.”
I agree with you to a point — especially regarding the similar issues of fatal diseases and religion. But it is worth recalling the case of Enron around early 2000 or so. Anyone who had suggested the possibility of them using off-shore subsidiaries to hide losses and overstate earnings would have been instantly called out as a member of the tinfoil hat crowd.
It may be next-to-impossible to verify whether the govt is manipulating the stock market, but it is a serious question, as if this is happening on a large scale and it comes to light at some point, all those dependent on the US economy will suffer for it…
http://en.wikipedia.org/wiki/Plunge_Protection_Team
Goldman Sach propped up FNM, and is now the US Treasury.
Clearly, the PPT and the RPT have offices across the hall from each other, and they flip a coin at the beginning of the trading day to see which of them gets the day off. See, they don’t really care which way it goes, because they’re in league with the Reptilians, who just enjoy watching us scurry back and forth like ants.
“But wait. Didn’t all of these 122 condos sell within months of hitting the market in early 2005? Yes, but many were purchased by investors looking to make a quick profit by selling, or flipping, to empty-nesters and young professionals.”
If you just isolate those two sentences, there is no way to tell whether the writer is discussing San Diego, Miami, Vancouver, Sarasota, Minneapolis, Chicago, or …
This is no national bubble … there is only localized froth … there are no American tanks in Baghdad…er… sorry got sidetracked there for a bit.
Seriously, though, it’s absolutely ludicrous to talk about this as some local bubble problem when everywhere from Boise, ID to Richmond, VA is seeing the same ridiculous pattern. In fact, the NY Times today had a story about how the slums of South Africa are even in the midst of a real estate boom/bubble. And so it goes …
Yes, Virginia, there IS a limit on how many people can afford to pay a half-million dollars for a stinking condo. And there IS a limit on how many people who have the half-million dollars would choose to live in a condo instead of a palatial spread elsewhere.
Enjoy your tulip bulbs, “investors.”
Homeowners feel the pinch
http://tinyurl.com/qnkbe
I sold my last proprety here in September right before the market started to tank. For them to say it is now worse than it was in the 90’s when IBM had a masive lay off is significant. The entire area went wild with development after 9/11 and easy money.
this is why rents won’t rise much. speculators who can’t unload their homes/condos and used to not rent them out(so they could say they’ve never been lived in) will eventually have to rent them out.
Let me be the first to say:
“Richmond condos for everyone!”
No Thank You!
“No one has lost money on their investment, says (developer) Bill White.”….“According to Integra Realty Resources, the condo market is the only real estate segment in Richmond that didn’t see prices increase from March 2005 to March 2006.”
Let’s see, market has been flat since last year and nobody has lost money on their investment, which means that when they do sell and pay the sales commission they will have lost money. In the mean time how can units sit vacant and not be loosing money?
Richmond is different!
Yeah, Richmond was toast before the bubble.
OT
As I’ve been reading these posts, it occurs to me that I’ve never seen a housing market with this little cushion.
1. American’s have a negative savings rate. Traditionally those savings help cushion our economy in the downturn.
Look at slide 6. Our “financial” net worth is stuck.
http://www.senate.gov/~finance/hearings/testimony/2005test/040606ajttest.pdf
2. As has been noted by others, too many people have little to no equity in their house. In the last downturn, prices went down slowly as no one with 20%+ equity in their house wanted to back out with large losses. Now? What do they have to lose (at least for ~29% of them).
Make sure you look at slide 19. Scary eh? 27%+24%=51% of our incomes go to paying the mortgage. Do I really believe people have that much equity though?
3. So many of the jobs created were construction or real estate transaction related (mortgage brokers, appraisers, realtors, etc.) Maybe I’m biased as I’m in Cali
4. We have incredible inventory *before* layoffs. IIRC, the peak inventory normally happens during the recession…
Did anyone catch The News Hour on PBS last night?
They did a piece on foreclosures in Denver. The amazing thing to me was that most of the foreclosures were on owners who had owned the house from 12 to 18 months, and some of the owners never made ANY payments on their mortgage…not even one!!
Now, take this info and overlay it on ‘investors/speculators’ who have been buying multiple grossly overpriced condos, and who can’t/haven’t rented them out. NO income and huge payments. How many of THOSE owners do you think will end up NEVER having made even ONE mortage payment?
Here’s the url for the NewsHour video (gotta love PBS — they put everything online):
http://www.pbs.org/newshour/video/#
It’s toward the bottom of the page.
They did a piece on foreclosures in Denver. The amazing thing to me was that most of the foreclosures were on owners who had owned the house from 12 to 18 months, and some of the owners never made ANY payments on their mortgage…not even one!!
So what; these “owners” were merely exercising their neg-am-option-arms. You NEVER make any payments and the principal increases adinfinitum.
It’s a new paridigm!
nothing there but smokey voters
What magical genie does this woman in RIchmond want to pull out of her A$$? I guess she is expecting the PPT to come and rescue her, or Bushie and his buddies? Maybe Jesse Jackson, the biggest idiot around, might come to her rescue? Or Useless Ted Kennedy?
Laura Burns said she and her husband were grateful they had been able to weather their financial storm without losing their house. But she said the experience had left her somewhat bitter.
“I have no faith in the American dream anymore,” she said. “You bust your hump year after year, going to work and paying your taxes. Then you get in a hole, and there’s no one there to help you out of it. The government doesn’t help you, the bank doesn’t care.
“If someone legitimately can’t pay their bills — not won’t, but can’t — there should be some type of help for you. We found out there wasn’t.”
I’m very familiar with Richmond, living in DC. Richmond is in the category of late to the bubble cities. Their market is somewhat over-valued, but not nearly as much as Northern Va or DC. However, their market has gone through some rapid appreciation as of late.
This condo thing doesn’t surprise me. I was in downtown Richmond recently and saw those condos. They were deserted looking then. And unlike DC, which has a bustling nightlife, Richmond is a ghost town once all the office workers go home to the suburbs. Except for a few bars and the hotels, there is no one in downtown after 5pm.
I’m from Richmond originally, and it is actually a very nice city to live in (have lived in LA for last 10 years for job reasons). Would go back in a heartbeat. I like it better than NOVA (lived there for 15-years). The numbers are typically skewed for older east coast cities like this. Numbers only count inside incorporated city limits….most of the population of Richmond live in suburbs outside city limits. Inside city limits, city is predominately black (~50%) and fairly poor. A lot of the condo building is inside city limits…..I spent my twenties living in the “Fan” area of the city and it is a great place to live with plenty of restaraunts, live music, all within walking distance….I lived there for many years without owning a car.
My brother still lives in Richmond and does new contrsuction all over state of VA. Talked to him about 3 weeks ago and he says all the national builders in NOVA are cutting back operations there and moving to Richmond……I guess NOVA has popped. One superintendent that he spoke with recently of a national company (I have forgotten which one) told him that they had not sold a single house to data this year IN THE ENTIRE US!! They are planning on shutting down all operations for 1 calender year to preserve capital if all goes well.