September 28, 2006

From dot-com to dot-condo: Empty condo towers and panicked investors caught with the hot potato

Folks, no matter what the NAR or Harvard tell you, condo prices are going to drop nationwide.

Why? Because they were swooped up by investors these past few years to daytrade like pets.com. And these investors don't live in 'em, and if they rent 'em out the negative cash flow kills 'em. If they hang on to 'em they lose even more as their value plummets.

In cities like DC, Vegas, Miami, Phoenix and San Diego, I think you'll be looking at 50%+ declines from top to bottom. They'll come down in price to the point where monthly ownership costs equal monthly rental income. It's called The Fundamentals. Something the corrupt Nicholas Retsinas with Harvard doesn't understand, or doesn't want you to know.

The aftermath of condo fever

People camped out for the chance to buy a unit in Radius, a condominium development in Hollywood, Fla. The building's 285 units sold out in just over 10 hours -- half a year before construction was even set to start.

But that was in the summer of 2004, when the red-hot condo market was peaking and money could be made by investing in condos expected to quickly appreciate. Units were often on the market for resale as soon as they were completed. It's a much riskier proposition to flip a condo in some of today's cooling markets.

"You see some of these communities that investors purchased ... there are no lights on at night," said Bill Donges, chief executive officer of Lane Company, developer of Radius, which is scheduled for completion in the spring.

"The market is clearly oversupplied in many places," said David Seiders, chief economist for the National Association of Home Builders. "The key symptom of that has been on the price front. Prices have taken a hit."

Not wonderful news for those who have invested in condominium units with the intent to sell them quickly -- and are still holding them. According to NAR data, 31% of investment purchases made between 2002 and 2005 were condos.

30 comments:

Bubba2Friday said...

So, two days ago I posted to Larry Kudlows' blog about the poor housing data out that morning. I was labeled a "commie bastard" while another individual stated his home had appreciated 300% in ten years - he was so far up the newest housing data was nothing to worry about.

Then yesterday I posted the link to the video feed (thanks Keith) on the "Liar Loans" story in the Bay Area and challenged any of the cheerleaders to spin it positive. (Incidentally, Liar Loans mentions about a 300% price appreciation for Bay Area - what a coincidence...) Not a single cheerleader took the challenge. In fact, they all went silent yesterday. Amazing!

How long until Wall St. gets the message? CNBC is on a DOW record watch now = cheerleading anyone???

Anonymous said...

Who gives a crap about condos, I have never understood why you would want to live in a apartment that you own. I think this whole bubble thing with end up like Y2K, lots of talk and panic and nothing happenned. But hey its fun to talk about in the mean time.

tabasco jenkins said...

Hey Keith, good thing you sold your Gold last week (after holding for barely a week and no gain), it's only up 5% since then....good job, buddy

Anonymous said...

In 1976, condos along the MD/VA coast were selling for $75K. A couple of years later banks were unloading them for $12K. The only story sadder than a typical condo purchase is the one about the luxury time share...

Anonymous said...

"I have never understood why you would want to live in a apartment that you own."

Me either, but the problem is that because of this f*ing housing bubble, in most major cities that is all one can get for their 300K, nowadays.

And, btw, it will happen- people simply do not make enough to support the prices and all of the jobs are getting exported.

Anonymous said...

Condos, Condos, Condos...get your condos here!

Anonymous said...

Tabasco Jenkins:

Thanks for pointing that out to Keith. Maybe someday he will learn that gold is NOT an investment. It's a hedge. I am beginning to wonder if Keith really even understand the fundamentals?

Anonymous said...

Why is this then?
http://tinyurl.com/l88se
+15% in UK!!
Same could happen here. There is no limit.

tabasco jenkins said...

Anon, Thursday, September 28, 2006 4:48:45 PM.

I prefer to think of Gold as a currency, which is not something one should attempt to swing trade. Accumulating a currency is never a bad thing, though, especially if that currency is increasing in value in relation to the currency you would use to purchase things in your day to day life.

Anonymous said...

Keith please dont buy any gold, I want it to keep going up.

Anonymous said...

But the best currency is women. What else can cause you tomake such stupid mistakes. That keep on costing you for the rest of your life.

Disgorge! said...

Ooh, feel the chill! Only the hard core posters left here.

Has the Housing Bubble Blog Bubble popped?

Anonymous said...

I think condos make a lot of sense for a small segment of the population.

For example, retirees that don't want to maintain a house but want more security than an apartment offers (security from having to move after your lease is up because the landlord wants to remodel or whatever).

I have see a lot of "b grade" apartment complexes being turned into condos that are now just coming onto the market (kind of late!). They are trying to sell an apartment that used to rent for 600-800 a month for $140k and more. I would consider one as a rental if I could pick it up for around 50k.

Anonymous said...

Ooh, feel the chill! Only the hard core posters left here.
yEAH ONLY US WITH STEEL BALS ARE LEFT.

Anonymous said...

condo's are the housing equivalent of wal-mart discount aisle crap rain poncho. it serves a purpose (protection from rain and cold) for a while, gets better press than it deserves for a while, deteriorates and is eventually put out at a garage sale for a fraction of its original cost. the new owner patches up the holes and wear spots with some duct tape and the process begins anew.

Anonymous said...

Early in 2004, Mark Clemente left his uncle's dry-cleaning plant in Detroit to go east and, hopefully, make his fortune in real estate. Shortly thereafter, he became a broker at E&G Realty, a small firm in Newark, N.J., where he earned a respectable $195,000 in his first year.

But it has been downhill ever since. The housing slump and fierce brokerage competition led to the demise of E&G. Mr. Clemente's income collapsed, and over the past six months he has held a number of part-time jobs, including one making sandwiches at a Queens delicatessen that paid him $100 a week. "I'm going home; my real estate career is over," he said the other day.


195K?!!... more than two times an engineers salary? (And to become an engineer - you need to get a 4 year university degree.)

So where did that money go? If he saved it - he should be able to live at least two years without worrying...

Do these people expect anyone to feel sorry for them?

rest of the article is here:

http://www.nysun.com/pf.php?id=40411

keith said...

HP sets traffic records every week. click on the traffic button at the bottom of the main page, and look at the charts. you'll be amazed

250,000 views a month now...

InfidelWoman said...

You Rock Keith. I am proud to be an HP Alumni Blogger since August 2005.
Does that mean I have steel Ballz?
he he

Mammoth said...

Condo-shmondo! Condos have had their day in the limelight, and now once again they have become the ‘kiss of death’ for anybody trying to sell one.

People complain about paying taxes on their single-family homes - with a condo you also have to do this, plus pay the monthly HOA fee as well.

But what really caught the Mammoth’s eye on this thread was the photograph of potatoes. Has anybody noticed that the price of potatoes has doubled in the past year?

When people are forced to make a choice between sending in that monthly mortgage payment and putting food on their family’s table, guess which one they’ll pick?

Anonymous said...

no one wants to live in a condo, but in So Cal a starter home *IS* a condo. Unless you like mobile home parks I guess.

a.creampuff said...

Can the short-term thinking. If oil dropped because of that Jack 2 discovery in the Gulf, that is a real laugh. When that rig comes online ten years from now, it won't compensate for increased consumption and decreased production from everywhere else. Oil dropped and the market rebounded - talk about a blip! What will happen when we invade Iran? The bulk of the ARM resets doesn't happen until next year. Die-hard HPers only? This thing has a long way to unravel. Who knows, maybe a miracle will save us from the worst?

Anonymous said...

HP sets traffic records every week. click on the traffic button at the bottom of the main page, and look at the charts. you'll be amazed

250,000 views a month now...

-----------------------------------

Yea but, 50,000 of them are from borkafatty.

Anonymous said...

" think you'll be looking at 50%+ declines from top to bottom. They'll come down in price to the point where monthly ownership costs equal monthly rental income."


and why wouldnt rents just double over next couple of years to compensate for housing's inflated values?

Anonymous said...

anon 7:06:18 PM: 195,000? if he was smart he better have at least put that money in a CD getting 5% The interest would pay much better then the 100/week sandwich job. Maybe he blew it all maybe on condos because 100/week at subway sounds desperate

Anonymous said...

Hey, don't be to harsh on borka.....he can't help it, this site is the only thing he's got!!

No friends, No Life, No brain!

Anonymous said...

borkaborkaborkaborkaborkaborkaborkaborkaborkaborkaborkaborkaborkaborkaborkaborkaborkaborkaborkaborkaborka......kinda like toga,toga from animal house!

mihcci said...

and why wouldnt rents just double over next couple of years to compensate for housing's inflated values?

Because the people can't afford a doubling of rents. Just like they really can't afford houses. That's the whole point of this blog. As people get kicked out of their "homes" they'll only be able to pay a rent that was equivalent to what their mortgage was before it readjusted. Not even that, really, as they'll also have to service some of the debt from their bankruptcies. Landlords don't do option ARMs; they always charge what the REAL (versus surREAL mortgage mkt.) will bear. Yeah, there will be a greater demand for apartments but the money won't be there to increase the price correspondingly. If the people could afford a doubling of rents, they wouldn't be getting kicked out of their homes in the 1st place!
I know three people who are within six months of losing their homes because of the stupid loans they took. Another one is stuck and miserable in Vegas because she can't afford the 50k hit she'll take if she sells. One dope sold his house - which he owned free and clear - to get into flipping. Took the entire amount (450k) and threw it into another home on which he took out a 200k loan. Said he would double his money in a year. That was the summer of 2005. Genius. Now he can't sell the house, has a 200k loan and can't retire because he has to pay the mortgage. Told him to do an FSBO, drop the price $100k to dump it quick or it'll get worse, pay off the loan and walk with at least some of the equity from his 1st home. Nah, says he, he'll wait it out. Hope he's very, very patient.

InfidelWoman said...

Hope he's very, very patient.

Hope he is very very young.

Disgorge! said...

Vegas is SUCH a hole in the ground, and I know that because I live there!

The water supply is drying up and this is hidden from locals and investors so as not to tank the RE market.

Lake Powell (levels not monitored by anyone!) upstream is used to "top up" Lake Mead every time the water level in Mead approaches critical level, thus keeping the severity of the situation out of the news.

With global warming shrinking the snow pack on the Rockies more every year, the outlook for Vegas (and Phoenix, and LA) is extremely bleak.

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