February 17, 2006

New Condos Are Everywhere And Their Prices Are Soaring. So, Who's Buying Them?

I can't for the life of me figure out how stupid someone would have to be to be buying a condo today - to live in, to rent, or to "invest". Anyone care to help HP figure this one out?

The question pops up all the time, just like the high-end condos that keep popping up near Metro stations across the Washington area: Who's buying all these expensive apartments?

Ballston resident Sonia Schmitt thinks she knows. A World Bank employee who has moved up to ever-bigger condos five times in the past nine years, Schmitt says it's a combination of buyer types.

She sees mid-thirties singles trading up from smaller condos and empty-nesters downsizing from bigger homes -- or even smallish homes that have appreciated so much that they can afford a $400,000-plus condo. More frequently, as prices jump ever higher, she sees buyer couples -- either married, cohabitating, same-sex or just acquaintances who are partnering simply to "get in the home-buying game." Most of them, she says, already live in the Washington area.

There is another big group that sometimes gets overlooked -- investors. According to a recent study by research firm Delta Associates, "investors represent 30 to 35 percent of the condo market" in the Washington area, chief executive Gregory H. Leisch said. That's higher than in all other condo markets in the nation except South Florida, Leisch said.
Investors represent about 25 percent of condo sales in San Francisco and New York and about 20 percent in Chicago, he said.

Leisch said two-thirds of Washington investors are in it for "the short term," to "flip" or assign the contract to another buyer before they sign, or to resell the unit soon after settlement, which is about 18 months after the original contract. Both maneuvers would let the original buyer get in on the huge price gains condos are showing, gains that can start when the building has been on the market for only a few weeks.

15 comments:

Riskbabe said...

There was a piece in the OC Register a few weeks ago about people buying in the Park Place apartment/condo buildings adjacent to the old Four-Daniel-Prudential complex over at Jamboree & Michelson in Irvine. These little places were going for $700 - $800K easily. The buyers were afflent OC people with families.

Anonymous said...

when you are making 300k a year, you really dont care about the ebbs in the housint mkt

Out at the peak said...

When people partner up on an "investment" and it goes South, that relationship will truly be tested.

Anonymous said...

I just visited a condo by the train tracks development with retail stores on the first floor in Glenwood, Illinois. And you know what? NOTHING has sold! It is all vacant! Them must be some condo development speculators who are going to "hit the fan". And some of these developments are financed with TIF money from the local town... AND YES the towns through TIF's became speculators TOO!

Well I say GOOD FOR EM ALL and Let EM SUFFER because one of these develoments took down my favorite ice cream parlor! Another took down a little hamburge stand that had the best SLOPPY JOES! A pox on them all!

stocksystm said...

Using a variety of foolish cliche's, this is just another example of the "Greater Fool" theory in full bloom. A lot of fools will be left "holding the bag," without a "chair to sit on." It will be about a year before we find out the greater economic repercussions of this foolishness.

Anonymous said...

When you are making 300 grand a year you are conceited and full of yourself and say.... "I wonder what the poor are doing today?" as you sip your 5 dollar late.

Then you job is outsourced....
Your babe or toy boy leaves...
Your relatives won't help....
Its a long way down....

And you have officially "HIT THE FAN!"

Philip John said...

Riskbabe,

do these affluent OC families want to adopt an Australian? (mid 20s, toilet trained, easy maintenance with good sense of humour)

Do you know many? Maybe I could give you some flyers? If they gave me my own 800k condo, I'd be willing to move over almost right away.

Phil

Anonymous said...

"We will need at least 40,000 units of housing a year to accommodate the growth that we're seeing, and in our best year, we got only about 35,000 new units. We're doing about 27,000 [units] this year," Fuller said. This is BS...inventory in DC area is skyrocketing, and I am very sure the current inventory will be doubled this summer. I lived and worked in this area, condos are up everywhere, and they are not cheap. Even with my 100K+, i can't even afford a 500K condo! Condo fees is appropriate $700/mo., that's half of what u can get for a luxury apartment...

mtnrunner2 said...

An acquaintance bought a downtown SD pre-construction condo w/ her father, about 6 - 9 months ago. They state they are not flippers, but investors who believe in the revival of downtown SD. But, what's too high a price to pay for such a condo? Granted, there may be a demand, but not at current prices. These people are too late to the game...

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