First?
What happens to an early buyer if the condo developer becomes delinquent or goes BK? Does the HB have to complete the project? Do they have to complete it to the original specs, quality of construction, etc.?
They're doing the right thing to keep building. Everyone knows that the price of RE only goes up. I'm forecasting 20% per year into the foreseeable future.
What is really sad is the cyclical claims of pro urbanist planner types who point to the inevitable spike in expressed demand for condo type living at the end of every cycle as evidence that the urban diaspora of the last century is waning. Non-SFR housing only gets popular when there are imbalances in the traditional suburban SFR market.
Condos: own the air between the walls, rent everything else. Some "American Dream."
Fannie Mae's SIFMA index-linked notes are debt securities that allow investors to structure a note that will earn a floating rate of interest that is linked, in part, to the Securities Industry and Financial Markets Association Municipal Swap Index. The amount of interest payable on these notes will depend on the spread between 3-month LIBOR and the SIFMA index. For more information, please see the SIFMA Index-Linked Notes Pricing Supplements provided below:
This is certainly the case in Seattle. There are as many new condos coming online in the next 18 months in the downtown area as currently exist in downtown.
I'll bet condos, new and used, are a part of the 120,000 inventory shown in Miami on the "resale" market, which includes almost anything listed by real estate agents.
I am glad that san francisco is different.I just love that 50 plus story condo tower on rincon hill! and after the hayward fault blows you will be able to skate on broken glass from the 5th floor to the Bay!! talk about tourist attractions!!! Oakland and berkeley may eat it but sf is different,it only lost about 29% in inflation adjusted dollars in the last bust.I'm gonna use my Beanie Baby collection as collateral at the fed and buy 2 of these sweet puppies,only $8 or $900K for a 2 BR unless you want a view...
Condos in certain areas (San Diego, Seattle) are the new hot thing. Of course, I'm partial because I live in a downtown San Diego condo, but I wasn't stupid enough to buy one - not when I can rent a (declining) million dollar one for 35% of what the PITI is..
I love living downtown though.. the condos I'm living in should be rock bottom in about two years - I'm going to snap up one of the sub-penthouses. =)
However the vast majority of housing was multi story apartments. The construction, especially inside Rome proper, was abysmal. Many would simply collapse a few years after being built. Fires were quite common. Unit size was tiny, and entrance to upper floors was likely a wooden ladder tacked to the side of the building with door less openings at each floor, and no landing.
All this overbuilding of condos has made me a happy condo renter. Ive got an oceanfront place for 5 months in sunny south FL for what it cost me to go to Hawaii for 10 days. I love it! Pool is 85; Jacuzzi 102 year round, what Im paying doesnt even cover the yearly taxes. Ill be commenting from there in two weeks. Life is good.
PS I did a background check on the owner all taxes and mortgage payments are up to date. Elderly couple bought the penthouse two floors up.
"It also makes this telescope a real waste of cash."
LOL.
BTW, I'm noticing that as condo towers, such as towers are in SoCal, come on line, they are almost immediately becoming luxury apartments. Don't know if the builder is becoming a lessor, or if some dumb ass is buying them and renting them. Haven't had a chance to look.
While Rob's point on condos being owning the space and renting everything else is valid, it should be pointed out that there is a certain demand for that. It allows the condo owner to build up equity, without having to worry about grounds, security, parking, common areas, etc. It also allows those of us who prefer to live in the urban center (yes, Rob, we exist!) to do so without being permanent renters.
And, of course, they can be a more affordable stepping stone into the housing market for previous renters--in many cases a better option than buying a fixer-upper on the bad side of town. And it shouldn't be surprising that that stepping stone appeal should become more important during a speculative housing bubble.
I won't argue with the overstock of condos, it is very real, especially here in the D.C. metro area. But condos are much more fungible, so to speak, as they can be converted to and from rentals, as they occupy roughly the same demand niche that rentals do. Of course, that may not help speculators who bought them at prices too high to profitably rent them; or the builders who built at prices too high to convert to rentals; or the lenders who lent to either the speculators or the builders . . .
CR, to show how absurdly low the $42 billion number would be for condo construction loans, it would mean that one medium-size bank, Corus Bankshares, has 20% of that sorry market.
I would bet the number is closer to $100-150 billion.
If gas gets too expensive, we could see an migration of people from the exurbs to the cities. But that ain't gonna happen any time soon (unless there are some huge incentives - and I'm not talking flat panel TVs).
Hey Lawrence Yun, congrats on being named one of the top economists in the US by USA Today. Shows what I know, I thought you were a shill! Good work. . . I think.
You know, since the article quotes 3% down for a presale, that wasn't a bad price for what was effectively a call option for a condo in Miami circa 2004.
Keep an eye on Chicago. We've got an incredible supply of condos and lofts in the South Loop.....can anyone say "collapse of market"?
Am out in the west suburbs--not many condos around here, more overpriced townhouses. Nice to have trees and yet still be able to jump on the L to get downtown.
Locally, a developer who was unable to find buyers for his condo development ended up renting about 15% of the units under Section 8 Housing; this allowed them to recoup costs, while killing buyers' ability to resell their units.
In DC area, I can actually see four large complexes just starting. In addition, I can see at least one more where the land has been cleared and one more where the CVS will move from in sixth months. The current supply is huge already and the foreclosure rate is increasing on the condos. I read last year that around 20,000 units were suppose to come online in the next few years. It will take quite a bit of time to consume this supply as the federal government moves jobs outside of the immediate DC area.
Rob Dawg wrote: What is really sad is the cyclical claims of pro urbanist planner types who point to the inevitable spike in expressed demand for condo type living at the end of every cycle as evidence that the urban diaspora of the last century is waning.
Call me pro urbanist. Some cities are more livable than others. Some have geographic constraints keeping them from expanding cheaply in all directions. But I really think that retiring older boomers will like heating/cooling 1 or 2 walls instead of five, not having to stare at the zeroscaped slag where they imagined the lawn would be before the water ran out, not having to deal with stairs, worrying less about crime 20 storeys up.
Seriously, if energy stays high and water gets scarcer, the attraction of the suburbs wanes.
I don't know what happens when condos get 60-80 years old, and I'm not saying they aren't crazy overbuilt now in many places, but I do think that a lot fewer people, going forward, are going to be able to afford the whole detached SFR near amenities lifestyle.
What happens to an early buyer if the condo developer becomes delinquent or goes BK?
Last year I rented a place where the developer had gone bankrupt. I don't have many specifics, but my impression is that the condo assc was just finally resolving the financial issues (13 years and tens or maybe even hundreds of thousands of dollars later) - and in my estimation, just in time for another round of chaos due to the current upcoming slump. And the place was even more of a financial Byzantium because it was a mixed commercial/residential building(with a partly city owned parking garage); so it had essentially had five different sub-associations to the main owners associations.
And to catch up with the financial and physical issues, my landlord was hit with a special condo assc assessment for a year that made the total fee three times the nominal fee, or almost 1000 dollars. (for context, my rent was 3000)
Kill three birds with one stone:
Move the Katrina refugees from trailers to surplus condos, and put them to work in low wage manufacturing jobs to compete with asia.
The DC market is pretty insane. My wife and I were checking out the new places at White Flint about a year ago (just for laughs). They wanted right around $500k for a 2bd/2ba - all with a view of the Rockville Pike. The best part, though, was the construction. Uneven floors, baseboard moldings as much as 1/2" off, cracked granite counters... Forget 80 years, these won't last 20 before they need major renovations.
And we were driving by Grosvenor Park recently and there was a guy with a sign advertising $50k discounts on the new condos at 10101. Ouch.
I won't even consider buying anything built in the recent boom. It's all garbage.
On the exurban 'American dream', my family have been divided about half and half - one set buying the Jefferson era country house/historic renovator in the Shenandoah w/kitchen garden and dependencies. Cistern. Root cellar. No neighbors. Occasional whif of barnyard or hayrick.
The other faction has opted for the 52nd floor harbor view pergraniteel flat w/ Murano glass and track lighting, and Whole Foods and an 'Arts District' right around the corner. Wine bars. Cafes. Galleries. Foreign cinema. Uncountable zillions of Audis.
The article mentions a building with 50% rental units. Rental unit owners probably will want to skimp on upkeep. Building insurance may also be higher because of the high percentage of renters. Also renters frequently are responsible for more wear and tear on the common areas.
What an unpleasant surprise for new unit owners!
Non-SFR housing only gets popular when there are imbalances in the traditional suburban SFR market.
The bolded qualifier makes your overall statement UNTRUE IMO.
you are combining 2 different arguments:
1) SFHs are more desireable in general than condos
2) exurban/suburban living is more desireable than city life.
While your statement is incorrect, the following is correct IMO.
"Non-SFR housing only gets popular when there are imbalances in the traditional SFR market."
The condo building in NYC is still ridiculous. There just aren't enough people with income levels with home prices at 3X to 4X income (making it economically viable) to buy $mil+ 2 bdrm condos in Manhattan and $500K+ condos in Queens.
And as Wall Street tanks.....
Yes, Sam, Rome INVENTED condos. They had oodles of poorly build 5 and 6 story apt type structures. I think they were called insulae. From island, maybe. Otherwise they could never have squashed so many people into such a small space.
"Call me pro urbanist. Some cities are more livable than others. Some have geographic constraints keeping them from expanding cheaply in all directions."
Japan is mainly an island with very limited room for expansion. That didn't stop their real estate from deflating. Some Manhattanites think "it's different here" and our real estate can't go down because we're on an island.
trader walt writes:
The article mentions a building with 50% rental units. Rental unit owners probably will want to skimp on upkeep.
wait to when early buyers look to sell in a building that is more than 50% rental. good luck getting conforming financing for the new buyer. also, will the builders or holders of the rental units be able to fund their HOA fees. if not, an underfunded HOA is major negative selling point. way better for these people to walk away from their deposits.
I think the Bear Stearns collapse and forecasted layoffs at Sachs, JP Morgan, Merrill and Lehman Brothers is going to decrease the supply of overpaid $500,000 and up residents of Manhattan.
On the other hand, New York (like London and perhaps Paris???) is that if anything, as more and more Chinese and Arabs become wealthier and wealthier as the global wealth imbalance works its magic, is that Manhattan will likely be a place they will seek to buy a place in. Now, that is not good news for America in general (typically selling of your most desired assets to foreigners is not a sign of strength, but, hey, our trade policies got us here, now we must pay the piper).
However - it will help out Manhattan's current condo owners by minimizing the decline in prices.
Speaking of trade - I love it that Brad Delong now is writes that Free Trade is beneficial because it will keep 1 billion Chinamen from hating us for keeping them poor....
Can someone, anyone find this argument being bandied about by free-traders back in the 80's and early 90's??? Anyone??? Back then, thier arguments were how it would make us all better off. Now they are telling us that yeah, we suffer, but the alternative was an angry 3rd World...Hey Delong, better hope you can contain the angry first world, no??
First?
What happens to an early buyer if the condo developer becomes delinquent or goes BK? Does the HB have to complete the project? Do they have to complete it to the original specs, quality of construction, etc.?
They're doing the right thing to keep building. Everyone knows that the price of RE only goes up. I'm forecasting 20% per year into the foreseeable future.
Regards,
Larry
Better go look at this kids!!!! Tanta...wake up, CR, Easter can wait!
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What is really sad is the cyclical claims of pro urbanist planner types who point to the inevitable spike in expressed demand for condo type living at the end of every cycle as evidence that the urban diaspora of the last century is waning. Non-SFR housing only gets popular when there are imbalances in the traditional suburban SFR market.
Condos: own the air between the walls, rent everything else. Some "American Dream."
Fannie Mae's SIFMA index-linked notes are debt securities that allow investors to structure a note that will earn a floating rate of interest that is linked, in part, to the Securities Industry and Financial Markets Association Municipal Swap Index. The amount of interest payable on these notes will depend on the spread between 3-month LIBOR and the SIFMA index. For more information, please see the SIFMA Index-Linked Notes Pricing Supplements provided below:
SIFMA, back in business!
every day some other news just makes me sicker an sicker. AMerica is subprime now
Is scotty a bot?
Cheers,
This is certainly the case in Seattle. There are as many new condos coming online in the next 18 months in the downtown area as currently exist in downtown.
Non-SFR housing only gets popular when there are imbalances in the traditional suburban SFR market.
Um, no.
I'll bet condos, new and used, are a part of the 120,000 inventory shown in Miami on the "resale" market, which includes almost anything listed by real estate agents.
did Rome have condos?
I am glad that san francisco is different.I just love that 50 plus story condo tower on rincon hill! and after the hayward fault blows you will be able to skate on broken glass from the 5th floor to the Bay!! talk about tourist attractions!!! Oakland and berkeley may eat it but sf is different,it only lost about 29% in inflation adjusted dollars in the last bust.I'm gonna use my Beanie Baby collection as collateral at the fed and buy 2 of these sweet puppies,only $8 or $900K for a 2 BR unless you want a view...
Condos in certain areas (San Diego, Seattle) are the new hot thing. Of course, I'm partial because I live in a downtown San Diego condo, but I wasn't stupid enough to buy one - not when I can rent a (declining) million dollar one for 35% of what the PITI is..
I love living downtown though.. the condos I'm living in should be rock bottom in about two years - I'm going to snap up one of the sub-penthouses. =)
Sam,yes.
sam,
Yes, to a certain extent they did.
However the vast majority of housing was multi story apartments. The construction, especially inside Rome proper, was abysmal. Many would simply collapse a few years after being built. Fires were quite common. Unit size was tiny, and entrance to upper floors was likely a wooden ladder tacked to the side of the building with door less openings at each floor, and no landing.
I'll see if I can pull up a few articles.
Cheers,
All this overbuilding of condos has made me a happy condo renter. Ive got an oceanfront place for 5 months in sunny south FL for what it cost me to go to Hawaii for 10 days. I love it! Pool is 85; Jacuzzi 102 year round, what Im paying doesnt even cover the yearly taxes. Ill be commenting from there in two weeks. Life is good.
PS I did a background check on the owner all taxes and mortgage payments are up to date. Elderly couple bought the penthouse two floors up.
sam,
A bit of backup. I'm really not in the mood to delve deeply.
Roman Apartments
Cheers,
As prices become less affordable more people look at condos, so I suspect condo numbers are higher than what historical data would suggest...
I notice about two units have lights on in the tower condo across the street from me.
I guess it's hard for a speculator to live in five places at once.
It also makes this telescope a real waste of cash.
Oh and I just got the notice from the IRS today about my reward for screwing up the economy.
ac,
"It also makes this telescope a real waste of cash."
LOL.
BTW, I'm noticing that as condo towers, such as towers are in SoCal, come on line, they are almost immediately becoming luxury apartments. Don't know if the builder is becoming a lessor, or if some dumb ass is buying them and renting them. Haven't had a chance to look.
Cheers,
BTW, I'm noticing that as condo towers, such as towers are in SoCal, come on line, they are almost immediately becoming luxury apartments.
Well it sucks for this particular condo developer that I happen to be looking at it from a half-empty luxury apartment building.
They're actually talking about renting out the rooms like hotels.
I guess that's how the food chain of living arrangements works?
For life. By the year. By the day. By the hour.
While Rob's point on condos being owning the space and renting everything else is valid, it should be pointed out that there is a certain demand for that. It allows the condo owner to build up equity, without having to worry about grounds, security, parking, common areas, etc. It also allows those of us who prefer to live in the urban center (yes, Rob, we exist!) to do so without being permanent renters.
And, of course, they can be a more affordable stepping stone into the housing market for previous renters--in many cases a better option than buying a fixer-upper on the bad side of town. And it shouldn't be surprising that that stepping stone appeal should become more important during a speculative housing bubble.
I won't argue with the overstock of condos, it is very real, especially here in the D.C. metro area. But condos are much more fungible, so to speak, as they can be converted to and from rentals, as they occupy roughly the same demand niche that rentals do. Of course, that may not help speculators who bought them at prices too high to profitably rent them; or the builders who built at prices too high to convert to rentals; or the lenders who lent to either the speculators or the builders . . .
ac,
Sardonic, witty, and funny as always.
Cheers,
Thread music: When My Blue Moon Turns to Gold Again / Tex Williams
YouTube -
The condos in downtown LA list for around 600-700 sq/ft. Way too expensive for an area with little to no infrastructure for families with children.
CR, to show how absurdly low the $42 billion number would be for condo construction loans, it would mean that one medium-size bank, Corus Bankshares, has 20% of that sorry market.
I would bet the number is closer to $100-150 billion.
This is getting too easy.
The bank takes the bad debt to the discount window where it mysteriously disappears never to be seen or heard of again.
Said building is now demolished.
Bank now funds new construction loan to construct new building over demolished property.
Wash.
Rinse.
Repeat.
If gas gets too expensive, we could see an migration of people from the exurbs to the cities. But that ain't gonna happen any time soon (unless there are some huge incentives - and I'm not talking flat panel TVs).
Hey Lawrence Yun, congrats on being named one of the top economists in the US by USA Today. Shows what I know, I thought you were a shill! Good work. . . I think.
FT Woods,
I was talking San Fernando valley units. The ones near skid row are even more ridiculous.
Cheers,
You know, since the article quotes 3% down for a presale, that wasn't a bad price for what was effectively a call option for a condo in Miami circa 2004.
Keep an eye on Chicago. We've got an incredible supply of condos and lofts in the South Loop.....can anyone say "collapse of market"?
Am out in the west suburbs--not many condos around here, more overpriced townhouses. Nice to have trees and yet still be able to jump on the L to get downtown.
They're actually talking about renting out the rooms like hotels.
Second Chance Towers govt. program for foreclosed buyers. That's what I'm thinking.
Locally, a developer who was unable to find buyers for his condo development ended up renting about 15% of the units under Section 8 Housing; this allowed them to recoup costs, while killing buyers' ability to resell their units.
In DC area, I can actually see four large complexes just starting. In addition, I can see at least one more where the land has been cleared and one more where the CVS will move from in sixth months. The current supply is huge already and the foreclosure rate is increasing on the condos. I read last year that around 20,000 units were suppose to come online in the next few years. It will take quite a bit of time to consume this supply as the federal government moves jobs outside of the immediate DC area.
Rob Dawg wrote:
What is really sad is the cyclical claims of pro urbanist planner types who point to the inevitable spike in expressed demand for condo type living at the end of every cycle as evidence that the urban diaspora of the last century is waning.
Call me pro urbanist. Some cities are more livable than others. Some have geographic constraints keeping them from expanding cheaply in all directions. But I really think that retiring older boomers will like heating/cooling 1 or 2 walls instead of five, not having to stare at the zeroscaped slag where they imagined the lawn would be before the water ran out, not having to deal with stairs, worrying less about crime 20 storeys up.
Seriously, if energy stays high and water gets scarcer, the attraction of the suburbs wanes.
I don't know what happens when condos get 60-80 years old, and I'm not saying they aren't crazy overbuilt now in many places, but I do think that a lot fewer people, going forward, are going to be able to afford the whole detached SFR near amenities lifestyle.
What happens to an early buyer if the condo developer becomes delinquent or goes BK?
Last year I rented a place where the developer had gone bankrupt. I don't have many specifics, but my impression is that the condo assc was just finally resolving the financial issues (13 years and tens or maybe even hundreds of thousands of dollars later) - and in my estimation, just in time for another round of chaos due to the current upcoming slump. And the place was even more of a financial Byzantium because it was a mixed commercial/residential building(with a partly city owned parking garage); so it had essentially had five different sub-associations to the main owners associations.
And to catch up with the financial and physical issues, my landlord was hit with a special condo assc assessment for a year that made the total fee three times the nominal fee, or almost 1000 dollars. (for context, my rent was 3000)
I still can't afford to buy...I rent from a guy who is upside down on an option ARM. And now my govt is using my tax dollars to bail out my landlord.
Kill two birds with one stone. Move the Katrina refugees from trailers to surplus condos.
Kill three birds with one stone:
Move the Katrina refugees from trailers to surplus condos, and put them to work in low wage manufacturing jobs to compete with asia.
It also makes this telescope a real waste of cash.
Ohh, that's funny!
Now we're all Fawlty Towers.
The DC market is pretty insane. My wife and I were checking out the new places at White Flint about a year ago (just for laughs). They wanted right around $500k for a 2bd/2ba - all with a view of the Rockville Pike. The best part, though, was the construction. Uneven floors, baseboard moldings as much as 1/2" off, cracked granite counters... Forget 80 years, these won't last 20 before they need major renovations.
And we were driving by Grosvenor Park recently and there was a guy with a sign advertising $50k discounts on the new condos at 10101. Ouch.
I won't even consider buying anything built in the recent boom. It's all garbage.
js, take a look at Garret Park. Not far from White Flint/Rockville Pike. You'll like it, might be pricey but worth it.
On the exurban 'American dream', my family have been divided about half and half - one set buying the Jefferson era country house/historic renovator in the Shenandoah w/kitchen garden and dependencies. Cistern. Root cellar. No neighbors. Occasional whif of barnyard or hayrick.
The other faction has opted for the 52nd floor harbor view pergraniteel flat w/ Murano glass and track lighting, and Whole Foods and an 'Arts District' right around the corner. Wine bars. Cafes. Galleries. Foreign cinema. Uncountable zillions of Audis.
I myself don't have to decide anytime soon.
The article mentions a building with 50% rental units. Rental unit owners probably will want to skimp on upkeep. Building insurance may also be higher because of the high percentage of renters. Also renters frequently are responsible for more wear and tear on the common areas.
What an unpleasant surprise for new unit owners!
Non-SFR housing only gets popular when there are imbalances in the traditional suburban SFR market.
The bolded qualifier makes your overall statement UNTRUE IMO.
you are combining 2 different arguments:
1) SFHs are more desireable in general than condos
2) exurban/suburban living is more desireable than city life.
While your statement is incorrect, the following is correct IMO.
"Non-SFR housing only gets popular when there are imbalances in the traditional SFR market."
Happy Easter all, church tomorrow - around the corner. I'd better do confession today so I don't end up in Suburb.
The condo building in NYC is still ridiculous. There just aren't enough people with income levels with home prices at 3X to 4X income (making it economically viable) to buy $mil+ 2 bdrm condos in Manhattan and $500K+ condos in Queens.
And as Wall Street tanks.....
Yes, Sam, Rome INVENTED condos. They had oodles of poorly build 5 and 6 story apt type structures. I think they were called insulae. From island, maybe. Otherwise they could never have squashed so many people into such a small space.
"Call me pro urbanist. Some cities are more livable than others. Some have geographic constraints keeping them from expanding cheaply in all directions."
Japan is mainly an island with very limited room for expansion. That didn't stop their real estate from deflating. Some Manhattanites think "it's different here" and our real estate can't go down because we're on an island.
kolohe,
thanks for the info.
trader walt writes:
The article mentions a building with 50% rental units. Rental unit owners probably will want to skimp on upkeep.
wait to when early buyers look to sell in a building that is more than 50% rental. good luck getting conforming financing for the new buyer. also, will the builders or holders of the rental units be able to fund their HOA fees. if not, an underfunded HOA is major negative selling point. way better for these people to walk away from their deposits.
Well,
I think the Bear Stearns collapse and forecasted layoffs at Sachs, JP Morgan, Merrill and Lehman Brothers is going to decrease the supply of overpaid $500,000 and up residents of Manhattan.
On the other hand, New York (like London and perhaps Paris???) is that if anything, as more and more Chinese and Arabs become wealthier and wealthier as the global wealth imbalance works its magic, is that Manhattan will likely be a place they will seek to buy a place in. Now, that is not good news for America in general (typically selling of your most desired assets to foreigners is not a sign of strength, but, hey, our trade policies got us here, now we must pay the piper).
However - it will help out Manhattan's current condo owners by minimizing the decline in prices.
Speaking of trade - I love it that Brad Delong now is writes that Free Trade is beneficial because it will keep 1 billion Chinamen from hating us for keeping them poor....
Can someone, anyone find this argument being bandied about by free-traders back in the 80's and early 90's??? Anyone??? Back then, thier arguments were how it would make us all better off. Now they are telling us that yeah, we suffer, but the alternative was an angry 3rd World...Hey Delong, better hope you can contain the angry first world, no??