Posted on 01/16/2007 12:59:04 PM PST by overtaxed_canadian
By VIKAS BAJAJ
WASHINGTON — David Franco’s illuminated model of a proposed 10-story condominium tower dominates a sales center that, in spite of the “Now Selling” banner still fluttering outside, is conspicuously closed for business.
“We could have waited it out and kept pushing and pushing,” Mr. Franco said about the decision to abandon plans to sell 180 luxury condominiums with floor-to-ceiling windows offering views of the Washington Monument and Capitol Hill. “But it would have taken significantly longer.”
After six weeks of failing to lure more than a couple of dozen buyers, Mr. Franco and his partner, Jeff Blum, joined the builders of nearly 6,000 condominium units in the Washington metropolitan area who have decided in the last three months to recast their projects as rental apartment buildings.
Since the middle of 2006, the frenzied condominium market here and in several other big cities like Las Vegas, Miami and Boston has collapsed. Once roaring sales have slowed to a trickle, sparse inventory has mushroomed into a glut and soaring prices have flattened out and started falling.
In many cities, banks have significantly scaled back loans to condominium builders. Some have demanded that developers sell half or more of the units in a building before even beginning construction.
(Excerpt) Read more at nytimes.com ...
We live in Bullhead City, directly across from the Casinos in Laughlin, right on the Colorado River. In 2003, we bought a condo in phase I for a fair price. All of them were sold before the developer broke ground. Now Phase II is being built, the price has doubled and only half the units have been sold and the phase is nearly complete. It's still not too bad all things considered. Like anything, it's location. We bought on the river because there will always be people who want to live on the water. Most of the units are used as second homes. At least, that's what we think!
Of course, but it takes a long time, a lot of opportunity cost on your money, and a lot of interest paid on a mortgage in the interim. If you bought at the peak of Vancouver's housing bubble in 1981, you didn't break even at inflation-adjusted prices until 2005.
'Good. I'll be looking to buy next year.'
...Or if rental prices keep declining...
the old man use to swear that he'd never buy anything he could rent---or lease.
Price it right and it will sell (or rent, as the case may be). Real estate investors tend to forget that their market can move in either direction.
"And it all came tumbling down...the housing mania, like all manias, will end badly."
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Housing mania? Beenie Babies were a mania.
Housing demand and pricing is cyclical and self-correcting - because everyone has to live somewhere.
Supply and demand - capitalism - freedom of choice - good stuff.
>>And then it will go back up, like it always has.<<
Yup.
On a side note, the stock market returned to it's 1929 peak in about 1954. ;)
"because everyone has to live somewhere"
These discussions always seem to tickle me because I agree with you. However, everyone can't afford to pay 300,000 plus for living accomodations. When developers start building dwellings that people can afford, I bet they won't have a problem selling them. Supply and demand always will win out.
"building dwellings that people can afford",
You are exactly right - and the reason for the decline in high end demand is the increase in interest rates.
300K @ 4% is $1200 a month
300K @ 7% is $2100 a month
Depending on the condo facilities, the HOA fee can add another $100 to $500 a month.
On a side note, the stock market returned to it's 1929 peak in about 1954.
All this after a worldwide depression and a world war. Not bad, in fact, pretty good.
Excerpt:
# 14. "If and when the market goes south, you can walk away."
FALSE. If you have a single loan with just the house as collateral, it may be a "non-recourse" loan, meaning you could indeed walk and not lose anything other than your house and any equity in it (along with your credit record).
But if you refinance or take a "home equity loan," the new loan is probably a recourse loan, and the bank can get very aggressive, not to mention what the IRS can do. A reader who lived through the 1989 housing crash in LA pointed out the following nasty situation that can happen:
* Let's say you buy a house for $600,000, with a $500,000 mortgage.
* Then the house drops in value to $400,000, you lose your job, or otherwise must move.
* If you can't make your payments, the bank forecloses on you and nets $350,000 on the sale of your house.
* The bank's $150,000 loss on the mortgage is "forgiveness of debt" in the eyes of the IRS, and effectively becomes $150,000 of reportable income you must pay tax on.
>>All this after a worldwide depression and a world war. Not bad, in fact, pretty good.<<
Yep.
I would not be surprised if the whole scenario repeats itself in the next 25 years.
Not sure whether it was the same one, but there was a fraud ring in Riverside county, down near Murietta. It's going to be ugly....
Yikes!
The older I get, the more I see that "what goes around, comes around". Scary thought, but true.
Damn true!
What cost $1000 in 1929 would cost $1564.82 in 1954. http://www.westegg.com/inflation/infl.cgi
btt
I remember in the first 'Rocky' movie, after Rocky had become famous, a reporter asked him if he was going to invest his newfound riches in condominiums. After a brief, puzzled look, Rocky replied, "No, I don't use them."
There is STILL no bargains to be had in my area, in fact the expect a modest rise in prices over the next year. Hmmm.
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