Condo Stats and Negative Externalities
Submitted by
CalculatedRisk on Wed, 05/14/2008 - 1:29pm (74 comments)
Shopping at Amazon?
Wait! If you click on the Amazon banner link at the top of the page first, HCN will get a percentage of anything you purchase for 24 hours!
Open predictions
Our local book authors
User login
Who's online
There are currently 32 members and 169 guests online.
Currently online
- Tom Stone
- Bad Dawg Bobby
- josap
- Citizen AllenM
- MattFea
- Lobbyist Ben Dover
- Blackhalo
- Spatch
- Rajesh
- dryfly
- sporkfed
- dreamer
- picosec
- sdtfs
- CalculatedRisk
- Mike in Long Island
- Jonathan
- Gubbmint Cheese
- shill
- nova
- comrade mike
- BarleyReturns
- t r orwell
- Speed
- MaryAnn
- Skittles the Unicorn
- Why Me
- steelhead
- Mr Slippery
- 1 currency now -yogi
- curious
- ResistanceIsFeudal
Recent Recommendations
totally first
Today's condos- half of the benefits of apartment renting at just twice the cost!
Comes down to it, who really wants to live in a condo as first choice?
Some retirees, maybe, but everybody else is 1) settling for what they can afford in the area, or 2) planning on the thing will appreciate so they can sell and buy a real home, or 3) both. And this doesn't even count flippers.
In areas where single-family values are dropping by a large percentage, expect the percentage drop in condo prices to be much larger.
hopeinsd, very funny! "Half the benefit, twice the cost"
And these guys get unpaid jobs to fill their spare time ... the joy of foreclosures next door.
Best Wishes.
There's no shortage in Chicago:
Record condo numbers to saturate downtown - Chicago Tribune
as a rental condo owner in Calif i can assure you this market is HUGE. i'm of the opinion that it was the main RRE investment vehicle of at least the last couple yrs of the boom since they fell into a more affordable price range.
i sold off 2 of them in 2004 and 2006 but still own one that i won't dare increase the rent on this coming Jan. have a great tenant that's been there for 5 yrs.
can't for the life of me understand why they aren't included in the stats.
Condos don't count b/c they are condos. Bandos and vandos aren't counted either.
There was a trend in hi-rise condo development to offer a lot of "urban chic" amenities to get upscale people to buy.
Here's a typical menu from Novare Group's 3630 Peachtree hi-rise:
24-hour, full service concierge
Valet parking
18th floor amenity deck
Pool and spa retreat adjacent to an expansive rooftop garden
Outdoor entertaining area featuring a dining area, fireplace, plasma TV and Viking® kitchen
Private clubroom with theatre-style screening room, wine cellar with personal wine lockers, full catering kitchen and dining area
Designer-decorated guest suites
Housekeeping
Dry cleaning services with home
delivery
Pet care available
Personal shopper
What they didn't say in the literature is that none of these services are free or built into the purchase price. Condo buyers have to pay for their operating expenses from dues, pro rata, forever.
So, what are the chances these things will ever actually happen now?
It shows how much hype and how little substance there is in condos.
And how the whole urban chic thing was just fancy advertising aimed at gullible rich fools or wannabes.
Sickening, isn't it?
Looked into buying a foreclosed condo a few blocks away from the bay in SD.
~$100k. Monthly payments plus interest on a terrible 100k loan is ~$1000/m. You can barely rent an apartment for $1000/m in SD.
If you can get a few people to move in with you and sleep in a crowded condo while paying dirt cheap rent...
then again you could wait another 6 months and only need to take out $50k.
Condos in Vancouver BC dropped 65% in the early 80's even with Expo '86 on the way. History sure does rhyme.
I second Bob Dobbs comment. In the boom tons of small condos were sold to young people as their way to get into the market and to wanna-be real estate barons fresh from the "Rich Dad, Poor Dad" seminar.
What are the odds a young person will want to live in a one bed condo for more than a few years? How long will an investor hang on to negative cash flow and negative equity?
They won't. People will soon remember why condos have never before been a good short term investment.
Oh yeah, that was over an 18 month time frame they dropped 65%.
Another problem with the new hi-rise condos is that they now try to jack up the profits by putting restaurants and retail shops on the ground floor.
But in a lot of condos, there's not much natural traffic flow for these shops except condo residents, employees and visitors. There's the expectation that the condo will attract such rich people that they will sorta anchor the ground-floor retail/restaurants.
But if the condos fail as residences, they probably also will fail on the ground floor. And the shops that go in there will get left holding a big empty bag.
I spoke last week with a senior person in the Miami operations of a large bank. I asked about the condo market there. He said the condo market there is weakening further and said by way of explanation that if there are more than 5 units that have been foreclosed on in a building, no banks will lend for purchases in that building, for fear that the condo assoc. will go broke and won't be able to maintain building and pay for casualty insurance. He mentioned that with hurricanes a possibility there, insurance matters even more than it does elsewhere. Sounds really bad.
"But in a lot of condos, there's not much natural traffic flow for these shops except condo residents, employees and visitors. There's the expectation that the condo will attract such rich people that they will sorta anchor the ground-floor retail/restaurants."
About two blocks from me are two empty condo complexes (one finished, one nearly) facing each other across a seconardy commercial street, each with a row of cave-like commercial spaces on the bottom floor that no one is interested in.
The foot traffic in the area is largely from under-the-table laborers walking to the nearby lumberyard parking lot to get work.
God knows what they were thinking.
Semi-on-topic:
As penance for my rumor-mongering about condo lenders a couple of weeks ago, I am going to spend some time this weekend looking at condo docs to identify some of the creative ways the lenders and developers can screw the individual unit owners in troubled projects.
Can anyone point me to a large-scale project or two, preferably in a Florida bubble community, with complex financing obtained in 2006 or 2007?
I've already obtained the public documents of a litigious, oval-shaped project in Miami that shall remain nameless, but the financing was obtained in 2005 and appears to be relatively ordinary.
Baron? Liz?
: O)
We considered a condo when we were just starting out years ago. Know what we found? Atrociously poor quality construction. I don't know if that's across the board, but I wouldn't be surprised.
Albrt,
It ain't exactly what you're looking for, but it's in a bubble, got wacky financing and for a bonus has stopped work because it's out of money(a hiccup, they call it.)
Centerpoint condos
I just drove by Centerpoint (my company owns some debt on a multi in Tempe).
Word on the street is that they are still trying to keep it condo - not going rental yet.
Located smack dab on ASU's campus.
Paulie "you know, endorsements. This one guy wants you to endorse his condominiums. Tell how you like them".
Rocky "I never use em".
You GO albrt!
It's kind of weird here in Seattle, like we're a year-and-a-half behind San Diego and other condo boom areas. Some are just about finished, like the one behind my apartment bldg. Some are just breaking ground.
I wonder if being later will help us .. more projects will fail early on due to the credit crunch and slowing in-migration. Almost across from the Pike Place Market, a condotel project appears to have failed, and has been nothing but a hole in the ground for the past six months.
Unfortunately Centerpoint is too close to home.
wonder how rrealtwhores will explain this away???
Bitter Renter
LOL!
Here is a chart with condos under construction in Vancouver.
Over the past 6 weeks, inventories in Vancouver have started to accumulate. We're about 2 years behind the California timetable, but by jove we'll get there soon!
Average SFH price in Vancouver is around 750K. No mortgage interest deduction. Average family income around 50K. You do the math.
Condos, last to fly, first to die.
Nothing changes in the real estate cycle, except for the eternal belief that "This time is different!"
It is different, a whole new set of suckers has bought into a glorified apartment with amateur management.
I searching for some sympathy, and finding none today.
There are going to be some ripsnorting deals soon, and some huge alligators that need to be fed. I would suggest that any association facing a large shortfall get themselves a shark of a lawyer and start foreclosing on all those banks not paying a dime. Let the mortgage holder get blown out at a big zero, and folks will be willing to buy to get in at a reasonable price and association fees.
Call the sharks, they will blast out that dead meat, and refresh the system;-P
Someday this war's gonna end...
There are a number of reasons people purchase high-rise condos, chiefly:
[a] it is a seasonal residence
[b] they travel frequently - their 30th floor box of air is secure in their absence
[c] they maintain a city flat when working late/early has become too frequent, to avoid a long commute
[d] they prefer urban to suburban life
[e] they prefer to live on the beach
Our company owned a few apartments at Museum Tower because we had business in NYC so frequently it made more sense than paying out to hotels.
Not everyone who buys a condo is confused.
CR, thanks for the numbers - they're the first and only I've seen!
albrt
Here's a whole list to check out:
FDIC Bank Closing Information for Corus Bank, N.A., Chicago, IL
Sort by state for FL.
Bob Nobbs, outside the US, owning a sectional title flat (aka condo) is a good way to buy a property.
The concept of having sectional title flats up top and shops on the bottom works quite well in urban areas. Not so well in condos that popped up in the suburbs.
Our company owned a few apartments at Museum Tower because we had business in NYC so frequently it made more sense than paying out to hotels.
Now imagine most of the tenants in the building are also absentee. Would you buy there if you were actually going to live there? Nothing creepier than an empty high rise apartment building.
Hey Bitter Renter, you need to sign our petition
! The Senate Finance Committee is getting ready to mark-up the FHA bailout bill tomorrow and I spoke to a staffer today-- the legislation permits FHA loans to second homes or condos. It's crazy that taxpayers may soon be wading into this market.
Did anyone else see the changes to how Freddie Mac values analyst opinions in the Bloomberg article CR had up? It seems that FRE has now started to do Level III accounting for financial analysts as well!
"Freddie Mac spokesman Michael Cosgrove said, ``clearly, based on the comments and reports this morning by the real, substantive analysts who follow this company, the Street is comfortable with our accounting and reporting, and encouraged by the results we presented today."
There you have, brand new Level III Market Observation criteria. You can't make this stuff up anymore.
Bob,
I'm with Burnside. I am certain there are people out there whose first choice is a condo, which they want because they prefer not having to worry about exterior maintenance and upkeep, security, etc., etc. [I concede that whether they receive that service is questionable, particularly in today's market, but that's beside the point of their initial motivation.] Or they want a location where a SFH with a white picket fence is not really an option. E.g., Manhattan. Or they are disabled and don't want stairs.
How many of these people are there, I don't know. Not as many condos as are being built, I'll wager. But all condo buyers aren't suckers and SFH-aspirants.
FT Woods,
If you've ever been to MOMA, just look up. Plenty of lights on.
Thanks Rich!
$288,115,000 loan to finance Jade Ocean luxury condos in Sunny Isles, F-L-A.
From the Dec. 28 2006 press release:
"Corus and iStar Financial acted as co-lenders and closed the loan just six weeks after receiving the executed application letter."
"In order to meet the borrower's capital needs, Corus and iStar provided a relatively high leverage loan facility without a mezzanine loan. The lenders were able to find comfort in this due to their familiarity with the South Florida condominium market and the high level of pre-sales."
Nice work if you can get it.
HOAs are my version of hell. Nuff said
Even better:
216,000,000 for Parmount Bay, Miami.
Dec. 8, 2006
"Corus Bank and iStar Financial acted as co-lenders on this very large transaction, while an affiliate of Babcock and Brown provided the mezzanine loan. Corus was able to secure a commitment from the co-lender and successfully close the loan notwithstanding the complexity of the transaction and the changes in the perception of the Miami condominium market during the Bank's underwriting process."
Ladies and gentlemen of the jury, please turn to Exhibit A. The defendant was actually bragging to the newspapers that it managed to jam this loan through, even though it knew about the changes in the Miami condo market.
albrt,
Too close to home financially or spatially?
Dunham,
I know Mayor Hallman is spooking ome folks by asking devs to halp pay for infrastructure, hear anything? Is anything except the bandersnatch hotel actually gonna break ground?
I've been out all day. Can someone tell me what happened at 3PM EST?
Talk about cliff diving!
ades,
I sold.
ha hahahah.... good stuff!
"Ministry of Truth writes:
"Condos in Vancouver BC dropped 65% in the early 80's even with Expo '86 on the way."
And, oh, one or two more towers have been built since ...
I have encountered a surprising number of otherwise regular joes who own an extra condo or three.
Another problem with the new hi-rise condos is rich said: that they now try to jack up the profits by putting restaurants and retail shops on the ground floor.
But in a lot of condos, there's not much natural traffic flow for these shops except condo residents, employees and visitors. There's the expectation that the condo will attract such rich people that they will sorta anchor the ground-floor retail/restaurants.
That's true of a beach club my family had a membership in. Just a yearly rental scheme with clam cakes and burgers and fries at a grungy snack bar and everyone was fine with it. Then they condo-ized it and put all sorts of fascist limits on who could come and go and use passes when. I visited mom (sitting with 3 out of her 4 free passes unused) but had to pay to get in due to their draconian registration, fingerprinting, criminal-record and DNA-testing regime. Then they switched over to newer (even greedier) management who spent megabucks to put in a "fine dining" type restaurant in a place where people were used to wandering around 1/2 naked in flip-flops, covered in sand. Who's going to even conceivably go there unless on Sat,. or Sun. night anyway? So the fine dining was a bust, but to maintain this white elephant they put a huge surcharge (many hundreds of dollars) on all the "condo" owners (and we are talking changing stalls here) to subsidize the empty restaurant!! I don't know what's happening now, since I have not been there in several years.
I am in Arizona and I am not commenting on any particular projects here because the chance is too great that somebody could be a past, present or future client.
Now imagine most of the tenants in the building are also absentee. Would you buy there if you were actually going to live there? Nothing creepier than an empty high rise apartment building.
Half of Manhattan is absentee. Trophy "pieds-à-terre" for the international mogul set. Uniformed staff in grand-luxe, pre-war buildings polish the brass and mahogany while waiting for their seldom-seen masters. Welcome to the necropolis . . .
Oh, yeah, NYC does have a big pile of unsold and unfinished condos.
Long Island City, I'm looking at you.
"How many of these people are there, I don't know. Not as many condos as are being built, I'll wager. But all condo buyers aren't suckers and SFH-aspirants.
FatalException | 05.14.08 - 7"
Never said they were. Lot of retirees move to condos in desirable locations -- on the beach, in a culture-rich inner city -- because they want the amenities in their old age, without the hassle.
And you don't have to be old to feel that way, if you've got the cash and just want a stable place to live right in the middle of a location you enjoy.
But you are making a trade -- I'll live in this choice location, but I'll forgo the full amenities of a real house.
If that's what you want, great. But if you're really thinking, I'll buy this now and later upgrade to something better with the equity, maybe even move to the burbs to start a family eventually -- not so great.
And there's a lot the latter going on in the states -- much more than the community of happy flat-dwellers, I'd wager.
Schwarzenegger urges lottery bonds for budget
| Markets
| US Markets
| Reuters
Not so OT. That Arnold is one sharp cookie. He knows that half of Calif. isn't paying their mortgage, so that means they have tons of "descresionary" money to play the lottery.
Lottery bonds to balance the budget. Who would have thunk it?
albrt,
without commenting on any specific projects or properties, what is your take on the apartment (rental) market in the Tempe area?
Is ASU enough to prop up rents/values, or are there enough Centerpoints in progress that they're due for a major correction?
My opinion is that multis should be able to slog through - occupancy rates in tempe are holding up, as are rental rates - are you seeing anything different?
Looking out from my terrace in Chicago's South Loop, I see a recent condo-loft conversion, a 20-story concrete tower under construction, a 5-story, mostly empty new construction, and a cleared/guarded empty lot 'awaiting' a new building underwritten by MB Financial.
For all the talk of how Chicago and other cities avoided the bubble of Miami/Vegas/San Diego, one fact remains: Even if credit were back to the NINJA loan days, THEY OVER-BUILT by an enormous margin. And, whatever the NAR or NAHB idiots say, this supply glut is not getting worked off for YEARS. The math is simple: supply mushrooms, as credit contracts, the pool of potential of buyers shrivels, and demand dives along with prices.
Obviously, the readership of CR are not a bunch of bottom-callers, but from where I stand, in a market with a decent economy, we're no where near the makings of a recovery.
Alec,
I only have one deal there, so my knowledge is very limited - I don't expect anything new to get built, condos or hotels. PHX has enough of both IMO.
nades writes:
I've been out all day. Can someone tell me what happened at 3PM EST?
Talk about cliff diving!
Sometimes the reporting by the media on the stock market is so laughable I wonder if it's done for the comic relief. Take this excerpt from Business Week:
"The tech-heavy Nasdaq composite index inched up 1.58 points, or 0.06%, to close at 2,496.70."
Since when is gaining 1.33% and giving it all back the last 90 minutes "inching"? People are beginning to treat these volatile daily moves of more than 1% in the major indices as normal rather than the anomolies that they are. How can anyone say we're close to a bottom?
An exam question inspired by Burnside's above comment.
Multiple Choice:
Which one of the following reasons require purchasing a condo and cannot be accomplished by renting:
[a] it is a seasonal residence
[b] they travel frequently - their 30th floor box of air is secure in their absence
[c] they maintain a city flat when working late/early has become too frequent, to avoid a long commute
[d] they prefer urban to suburban life
[e] they prefer to live on the beach
--
On earlier thread of forclosure fillings...
California Foreclosure Filings at 19.5% Annual Rate of Homes With Meaningful Mortgages
The number of California foreclosure filings [during April 2008] has more than doubled since April 2007 to almost 65,000.
Area ranks No. 4 on foreclosure list - DailyBulletin.com
Holy Pig! With some 4M mortgages with meaningful mortgage(s) in CA (34M nationwide) that is 1.625% a month, or 19.5% Annual Rate. And the rate has been going up month after month.
Jas
dunham:
I have no special inside knowledge on this, but I am not expecting stability when it comes to ASU and its environs. If the downtown Phoenix campus and the light rail are successful it could seriously cannibalize the traditional captive market in Tempe. Enrollment could go up or down, depending on the state budget and whether kids respond to a tough job market by going to school (or staying in school). If enrollment goes up and the downtown Phoenix campus fizzles, rents in Tempe could actually rise. I don't think I'd make a big bet on that right now, though.
I would expect the high end market to be seriously affected by the failed condos.
foo | 05.14.08 - 8:26 pm | #
Thank you - foo. I was thinking the exact same thing, especially concerning the point where the company buys the pad so the 'employees' can use it when they stay in town - how considerate & compassionate. More like so the boss can shag his 'favorite employee(s)' and not leave a paper trail maybe... but even that could just as easily be accomplished in a rental (with maybe a rental employee to boot!)...
Okay - I'm hopelessly cynical but still - no reason to buy for any of those reasons.
Dunham,
The demographics suggest after 4 years the ASU portion of the Tempe market will trend down, but the current dilemma is how much people getting out of FC and looking to save $ on commutes is queering out the market.
Centerpoint is not going to come online in the next 18 monyhs IMO, while the stuff close to the town lake either has or is about to. They hae a chance to stay above water unless the general economy sinks, as is apparetly happening.
Unless they've already put in the subterranean parking garage, nothing's going forward. Devs are looking to back out of parking agreements.
If it was like last time then I'd say a decade before these projects go forward, but between demographics, the sweetheart 20/30 deals the city gave up, securitization and the addition of light rail I'd say 5-7 years before that construction resumes.
"Those who fear a downturn remember that Manhattan coop prices suffered so much during the housing downturn of 1989 to 1993 that such buildings had a hard time luring buyers. This financial instability hurt New Yorkers at all economic levels. Some New Yorkers recall neighbors handing over their Fifth Avenue apartments for $1 because they could not afford the maintenance fees."
And to think that that was was situation as recently as 1990, not 1929! But no worries, RE always goes up.
Condo living! All the advantages of apartment living, with the disadvantages of owning a home!
I just drove by Centerpoint (my company owns some debt on a multi in Tempe).
Word on the street is that they are still trying to keep it condo - not going rental yet.
Located smack dab on ASU's campus.
Is that sucker ever going to get done? Aren't we nearing the 3 year mark? I don't really know anything about high rise construction, but these seem to be taking a long time.
Starting at $300,000 for 400 square feet. Jesus Christ on a Popsicle Stick.
High gas prices might save it as rentals. There are a lot of ASU students who commute from home. Of course, if the student loan machine blows up a lot are going to be hitting the community colleges.
"Which one of the following reasons require purchasing a condo and cannot be accomplished by renting:"
It's a silly argument. The fact that the place is an apartment rather than a house has nothing to do with the stupidity of buying.
Buying a house in 2007 was dumb because you could rent one so much cheaper that it was obviously a poor investment. Condo's had exactly the same problem.
They also have the some of the same upsides: you can do pretty much whatever you want to the place (both have some limitations on that), it is a hard asset with actual utility (you can live in it whatever the price is), the situations which could force you to move are far less common, there is prestige associated with owning rather than renting.
So why would some high end business buy condo's rather than rent apartments for its traveling employees or customers? Mainly prestige. It is a marketing thing and a perk for employees. It's rather stupid, but it is reality, and it is the same reason why most people buy houses, particularly when they are overpriced.
foo writes:
An exam question inspired by Burnside's above comment.
Multiple Choice:
Which one of the following reasons require purchasing a condo and cannot be accomplished by renting:
Actually I would change the exam question to "which of the following reasons makes purchasing a condo more affordable then renting/leasing the same equivalent property?"
In any case the answer is F, none of the above.
daveNYC writes:
Oh, yeah, NYC does have a big pile of unsold and unfinished condos.
Long Island City, I'm looking at you.
I lived in Astoria for four years, up until last August (moved to DC - we rent...). Every morning on the N train, as we stopped at QBP, my wife and I would look out at the condo buildings, look at each other, and laugh.
Seriously, who on earth would buy a "luxury" condo right next to the largest public housing project in America? Even if it is five minutes to Manhattan, there's not a grocery store or restaurant within ten minutes, unless Western Beef counts.
RE: CA lottery bonds
BWAHAHAHAHA!!
"State Treasurer Bill Lockyer in a statement said he had concerns about the lottery proposal because it is a "sizable bet that Californians will double their current level of lottery participation within a few years."
Bet you can't read that with a straight face...what kind of rating will be assigned to bonds backed by gambling revenues? Californians are losing their homes/investments left and right and they'll have to double their lottery gambling to pay off these bonds. Let's face it, Arnold really is a cyborg from the future; he's just here to decimate us financially:)
Is the situation being aggravated by the tendency among builders to provide unrealistic degrees of "luxury" in the appointments of these condos?
As somebody mentioned above, the condo-owners will have to pay for upkeep of these items, e.g. pools, in perpetuity.
It seems that the builders made the same mistake as the lenders. The lenders peddled unaffordable mortgages of overpriced homes to maximize their fees NOW, as they could off-load the unaffordability onto the borrowers and the buyers of mortgage-backed securities.
Similarly, the builders included ridiculously overblown amenities so as to maximize prices, off-loading the unaffordable upkeep onto the buyers.
The only thing I can think may save these buildings is for large investors to buy up all the foreclosed units in a given building at a dime on the dollar, then retool the buildings as hybrid condo/rental towers. Current owners in the building will not like it, but it will save the buildings from total implosion.
Nouveau math: don't like the numbers just make some sh*t up, invite some Hollywood stars to the press conference and pretend it's a religious miracle.
Bob Dobbs writes:
Comes down to it, who really wants to live in a condo as first choice?
There are many of us who like apartment life, as pointed out by burnside. I have lived only in apartments since leaving my parent's home 30 years ago. These apartments have all been in cities with several million people (currently in London). For all the advantages pointed out by burnside, apartment living is great. If I want to take off for a month of skiing I just lock the door behind me and don't worry. I live with two children and feel much safer in an apartment. I never cut grass, shovel snow, or collect drycleaning. The list goes on. Right now I am on the board of our apartment block and so am involved in all the decisions of managing the building, which I enjoy.
Now whether I should have rented instead of buying, that is a whole other conversation. As an owner, I don't have to worry about the dreaded six month notice letter. But I think your assumption that apartment living is second class is way off. And it is not only apartments that have HOA - there are some pretty scary gated communities out there too.
I asked about the condo market there. He said the condo market there is weakening further and said by way of explanation that if there are more than 5 units that have been foreclosed on in a building, no banks will lend for purchases in that building, for fear that the condo assoc. will go broke and won't be able to maintain building and pay for casualty insurance.
--So banks won't lend because banks don't pay condo fees? Talk about people who want their umbrella back 'cause it's raining.
Is the situation being aggravated by the tendency among builders to provide unrealistic degrees of "luxury" in the appointments of these condos?
There's not a doubt in my mind.
Think about the segmentation of cars, or clothing lines, or what have you 20 years ago vs. today.
"Near luxury" or "aspirational luxury" didn't exist. The notion of taking a Nissan, slapping $1,500 worth of upgrades onto it, calling it "Infiniti" and selling it for $10,000 more would have been laughable. If you could afford a BMW or a Jaguar, you bought one; otherwise you bought a Ford or a Nissan.
Soon, "feature creep" took over, to the point where even the buyers of entry-level Fords and Nissans are demanding leather trim, and Bluetooth, and 225-hp engines.
Ditto the housing market. "How can we compete with all the other condos in the neighborhood without granite counters / hot tubs / 4-piece bathrooms / Italian tile?! Our prospective renters are expecting it!"
Add in a market where construction loans were being made for high LTV's at interest rates in the mid-single digits ... Sure, back up the truck! Where do we sign?
I always wondered if this kind of mindset would be an early casualty of the next serious recession. Guess we're in the process of finding out!
Comes down to it, who really wants to live in a condo as first choice?
Unlikely so many people on this blog, I like the concept of high-density living. When you consider the cost per unit area of land in the city, it seems a shame to waste it on a lawn. Moreover, I like being in biking distance of work, family, friends, parks, groceries, etc. The other option is to keep paving over farmland and building houses that require a car to get anywhere.
I owned a condo from 2000 til I moved in 2004. The condo doubled in price in 4 years b/c of the bubble. Since my 2004 move, we've been renting, waiting for purchasing prices to fall into parity with rents.
I totally agree condos (at least here in Madison, WI) are overpriced. My family looks forward to buying a nice one for half what they cost today. Until then we're enjoying the low rents, which in Madison haven't kept pace with inflation.
Of course in a RE bubble, most of the new supply of housing is either greenfields exurban developments or Condos. There's also some rehabs and gentrification, but proportionately that's generally more modest. So the most of the increase in SUPPLY only occurs in certain market segments. Not say, in established close in neighborhoods. It's not that condo's or exurban developments are more or less desirable post boom. The DEMAND for those market segments doesn't change that much but the SUPPLY has been doubled in many areas. So condos and exurban developments are often the worst hit when the downturn comes.
The difference between the exurbs and the urban condo developments is that exurbs don't work when cheap gas goes away. All the people living there, will have to live somewhere else closer to work.
Now where would that be???
Albrt:
How about checking on this Hi-Rise Luxury Condo Welcome to VUE Living . The City of Los Angeles is trying to revitalize the Port of Los Angeles area. Does revialize actually mean that it was vital at one point? This particular area has been a troubled economic area for as long as I can recall.