December 23, 2005

Aw, I'll sure miss 'em: Condo flippers may be in too deep


Wasn't it just a few days ago when the NASDAQ "day traders" got wiped out? Another generation of get-rich-quicks just a few years behind the last. And the same lessons to be learned.

Hat-tip to Boston HP reader David for the link

The Hub’s jittery condominium market faces another storm cloud: hundreds of unsold units in new condo towers that brokers and mom-and-pop investors had bought early on in hopes of flipping for quick profits.

Some have exited, as planned, with thousands in windfall profits. But others may not be so lucky amid falling sales and dropping prices in an overloaded condo market, real estate executives say.

With the market sliding, a flood of condo flips could grease the market’s downward slide, executives warn.

“Putting more supply in a soft market, that obviously would create more volatility in prices on the down side,” said Thomas Meagher, head of Northeast Apartment Advisors.

“There are a huge number of flippers,” Kelley said. “If I didn’t close quickly, I would be up against 30 or 40 units in a matter of a week.”

31 comments:

xSpartaNJ said...

Florida looks like it could become one of the worst markets for "Flippers" in the near future. The leveling of motels, conversions, and new construction of condos is just starting to come on line strongly. These projects have been planned for years and are now hitting the market. I think 2006 will have a big downturn in the market. What could make is worse is the slowing down of other areas of the country that feed the Florida condo market. ie: NY, CT,NJ Mass.

Could this downturn be as bad as the one in the 80's where unsold condo buildings sat empty for years?

Katy said...

I love this. As I've been talking to people about the downturn in the Boston housing market over the last few months, the standard response is always: "well, maybe in single family homes. Condominiums are doing really well and will continue to go up." Doubt it. I know a person who bought in one of the "up and coming" Boston neighborhoods (read: shitty industrial area with no neighborhoods) just last year and now can't sell, even though he has to.

foxwoodlief said...

Yes, the canary in the coal mine condos! The last to rise the first to fall. So it goes here in Phoenix. The last sizzle to the bubble market here and now flat cold. My apartment I 'm living in while waiting for my house I bought last spring in Austin to be finished went condo. The developers from California bought in August/Sept when the market was sizzling and Condo conversions were selling out the day they opened. The units came on the market Nov 1st. The greedy %$%$# had a meeting for tenants and the greed was disgusting. They told us that we needed to jump in and BUY before the units came on the general market. We'd get a discount to buy them "As is" and if we waited we'd have to pay full price. They tauted the other projects that had sold out in a day and how they offered a superior product at a "competive" price.

Don't get me wrong, the place I live in I loved when they were first built and I had always wanted to rent one and the opportunity came four years later when I sold my house that had gone up $100,000 in two years and bought a home in Austin to be built. They are nice townhomes with contemporary floor plans and single car garages in an excellent downtown location blocks from where the future light rail will be built. Once they are renovated with new carpet, tile, kitchens, they are sweet but not at $425,000 for 1400 sq ft. I think they are worth no more than $280,000 and even then that is steep since I bought my last house in Phoenix that was 2800 sq ft, a two car and a seperate one car garage, nice view lot, expensive landscaping, rock facade, marble fireplace, wrought iron staircases, and just about every upgrade one can have from a theater room on down plus a sweet pool for less than the $280,000.

Well, they place is a ghost town. They've sold a few of the smaller units (1 bdrm) to investors the day they opened and nothing is moving. After having enticed most of the tenants to move out they've allowed us to extend until our home is ready in March. All these empty units (over 100) and no revenue and no buyers. Our neighbor who is one of the maintenance guys for the remaining rental tenants keeps us updated on the sales. I think they sold two units in two months! I'm waiting to see when they start lowering the price since they must have high carrying costs for the mortgage when they bought plus the costs of renovating the units that are vacant.

Condo melt down? In many cities, yes. In other cities, still affordable. You can buy a new condo in a great in-town location for as low as $82,000 and new lofts still sell for less than $150 a sq ft with views of the skyline. I can't wait until Florida pops so I can go buy a beachfront vacation home!

aznycblogger said...

I just moved into a condo that we're leasing near the Paradise Valley Mall. There was no way we were going to buy anything in this overpriced market but wanted to move to an area with better day care and schools (we moved from South Phoenix). We'd been looking for several months. The place we're leasing is a recent coversion. Funny enough, the condos were originally built a few years ago as condos, but didn't sell so they went as rentals only to convert about 9 months ago. I'd say one third of the residents are leasing from an investor. It looks like approx. 40% of the units remain unlived in. Some have signs in the windows reading "For Sale, For Lease, Lease Option, Flexible Lease Terms." In August these units were being leased at $1,200 per month for a 2 bedroom/2 bath with an attached garage. The monthly rent went slowly down. We negotiated on our lease and were able to get $975 per month. We're leasing from an investor through a property managment company who said that one investor from the Bay area came here last year and loved these units. He bought some units here and a lot of his friends did on his recommendation without even coming to see the place. A majority of the investors are from California. New carpets have been put in some of them. More people have moved in this week as I'm sure more investors are lowering their monthly asking price. Additionally, my place overlooks a new condo construction by Starpointe Communities. I wonder what's going on there since the construction has stopped in the last couple of weeks. They're working on an underground parking lot for the "luxury" condos. I wonder if they're stopping construction as investors pull out and if they'll sell or sit on the space. I hope so as I have a great view that would be blocked if the condos went forward.

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