Saturday, May 31, 2008

Condo Sales Stall Like an Old Plymouth

According to a recent article, "Condo pipeline dries up" in The Portland Business Journal, sales of new condo's in Portland have come to a screeching halt.

"The John Ross condominiums have sweeping views, an elegant shape that inspires architectural envy, and a whole lot of unsold units.

To date, just 177 of its 303 units have attracted buyers.

According to Multnomah County property records, a database that includes sale dates along with information about the property, buyers and prices, just two units have sold in 2008."

Only 2 units have sold in 5 months? At that rate I'll be dead before they sell the rest.

According to the article, there are over 3 years of inventory for condo's at the current sales rate.

"Today, Portland has about 2,500 unsold condominiums, a figure that includes developers' inventories and another 1,000 "phantom units," which refers to condominiums bought by investors who intended to turn a quick profit and who apparently are holding out for the market to return.

Assuming Portland buyers have an appetite for 700 to 1,000 units a year, it will take nearly three years to clear out the current inventory."

I'm still amazed that the construction industry hasn't found better ways to predict when the market is going to slowdown or pickup. It seems like it's always feast of famine. Develop thousands of new units, flood the market, stop construction, then miss the bottom and scramble to build more.

""We probably have about a two-year supply in the downtown area," said Newton, who said barring an economic collapse, Portland continues to attract newcomers and will need to keep adding new housing in the future."

Yes yes, we know so many people are moving here. With a soft economy I'm not sure where these jobs are coming from. I'll post the migration statistics when I find them again.

But if you're in the market for a condo (and I know a few readers are) it should be a great time to negotiate. And will likely only get better until the inventory drops, either from increased sales, or conversions to apartments.


bearlee said...

I would be very hesitant to enter into an HOA where most of the homeowners had entered the market in the past few years. Why? What kind of lines did these folks take out? How many are in foreclosure or at risk? How many are at risk of NOT paying their HOA dues? At what point does the owner/developer turn over the HOA to the condo owners? What happens when 30% remain unsold? Who's paying those HOA dues?

Tread carefully in these times.

Collateral Foreclosure Damage for Condo Owners

GAT Mac said...

Dang it, bearlee, just as I thought I might start looking for a good deal on a condo, you had to go point out the HOA risks.

My wife hates the apartment where we live and wants to move out. We will consider another rental, but all rentals have their downsides as well.

Is there no sane RE option in Portland?

Perplexed said...

It seems to me that state law should be changed so that HOA fees have the same status as mechanic's lien in foreclosure, the lien stays on the property to be paid on sale. Then I think the mortgage holder should be forced to sell the property at auction within 60 days UNLESS the mortgage holder pays the HOA all the outstanding dues on the unit and pays dues going forward on time.

Yes, this will drive down the value of the homes of the condo owners who weren't involved in this mortgage nightmare, but the building will occupied by dues- paying property owners.

PDXOutsider said...

"Is there no sane RE option in Portland?"

Seems like renting is a sane option. You can rent a house now for much less than the monthly payments, I know we are and we love our place. We're in no hurry to move out which helps us be patient.

When we were looking for a rental in the fall of 2006, we saw lots of over-restored houses that the owner's couldn't sell so they are renting them (and likely losing money).

Maybe you guys should look at renting a nicer place? $2k in moving costs pales in comparison to losing $20k in equity.

Anonymous said...

Why should developers like Homer Williams and Mark Edlen stop building condos when PDC keeps giving them millions of dollars to do so?

In fact, I've heard from an insider that the Portland Development Commission is restructuring and will emerge renamed the Homer-Edlen Condo Commission.

Perplexed said...

I admit I have a devious mind, but...

Since once a condo has been foreclosed upon the bank (or mortgage company) owns the unit. If the HOA dues aren't paid is there any reason why the HOA can't foreclose on the lender???

Surely there is a Portland attorney who would have some fun with that.

skeptictank said...

Isn't it pretty tough to get a loan to buy a condo/townhome these days? I think it's partially due to the looming HOA issues. Bearlee's right: HOA risks are not insignificant at this point. Also, you can bet that the condo fees you're being quoted (if you're looking for a condo) will be going up significantly if this is a new development. Was talking to a young fella who bought his new condo a couple of years ago: he was quoted $220/month in HOA fees. Now (less than two years later) the fees are up to $400/month. Apparently, the HOA fees are purposely lowballed to get you locked in.

Perplexed said...

My feeling is that low-ball HOAs are routine for new developments because lenders factor in those fees when calculating payments (as insurance and property taxes).

Older HOAs walk a balancing act of dues because of this. It is very important to read HOA minutes for at least a year, and the reserve analysis, when purchasing a condo.

IMHO an older HOA is much better than a newer one. Even the HOAs that are regarded at primo today went through issues during their first 5-10 years.

Anonymous said...

let's see...just before the bubble started that place might have fetched may be 80K? or so?

Perplexed said...

June 8 count of core area condo sales ($300,000 or less, 500 sq ft or more): for sale 123 units, sold in May (Trulia) 14 units.

With rare exception the units for sale do not include unsold developer units.

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