Wednesday, June 4, 2008

Another Condo Glut Estimate

The Tribune has a piece on the local condo market, "Who’s paying for the condo craze?". Here's an excerpt:

"During the past few years the city has committed hundreds of millions – $300 million in South Waterfront alone – to encouraging various condo developments around town. The idea, of course, was that this money would be paid back from taxes on the condos.

So what’s going to happen now that the condos aren’t selling?

As should come as a comfort to no one, there is a considerable difference of opinion on that score.

Two months ago, The Oregonian ran a news story on the downturn in the condo market saying there are about 1,300 condos on the market. As they saw it, however, that wasn’t going to be a problem because if condos continued to sell at a rate of 800 a year, the backlog would be erased in 18 months or so.

This week, the Portland Business Journal upped the unsold condo figure to 2,500. Even then, the article went on to predict, there could be a “condo shortage” in two or three years.

The current issue of Brainstorm Northwest, a conservative business magazine, places the figure at closer to 7,500 and says that the backlog of unsold condos might well last a decade.

P-town, we’ve got a problem."

Ya think?


Anonymous said...

Oh my GOD! A condo shortage? Get me PDC on the phone! Then call Homer Williams and Mark Edlen! We need to get these two guys started on building us more $400,000 skyboxes! I'm sure PDC has a few bucks left over to build them each their own tram to take them too and from their very important work!


Kind of ironic that a conservative publication sees a problem with all this seeing as how their policies of worshiping-the-wealthy had a big part in all of this elitist nonsense.

Portland Gentrification said...

I always say, the Tribune tells you all you need to know, as long as you can read between the lines.

The "infill" condo projects are still sprouting up all over the city though. They'll probably become lux apartments too. Tragic, since most of them are just remodeled cheap apt complexes where they kicked out the families living there, eg June Manor on 39th/Taylor, Kari Lynn on 49th/Stark etc etc. Thanks for fast-tracking the condo conversions, City of Portland...

Bridgetownpeddler said...

Recently two 1970's era crappy apartment buildings in St Johns were converted Condo (well actually a lot were... ) these two have now been turned back to rentals.

What is interesting is that even with that happening and with other townhouse and condo untis dropping prices and not having sold out their inventory I recently noticed 2 new listings for new condo buildings to be built in St Johns/Cathedral Park neighborhood. Will be interesting to see how those play out. Is this neighborhood holding up better than others or are they just going to sink further into the glut? Time will tell..

Anonymous said...

I'm one of the few (possibly crazy) people currently looking at places. And yes, they are condos because, I'm sorry, I don't want to take care of a yard or anything else of that nature. I put in an offer on a place recently and the seller was only willing to come down a very small amount - she's looking to make a $15K profit after a tenancy of less than two years. I thought she'd be lucky to break even and I went a little lower than that to start. She thinks the market is improving and I wonder if she's living in some kind of alternate universe and has missed all the press.

And never mind trying to get decent financing for a unit in a complex that's largely empty. I have excellent credit and still the deals are crappy if you don't have the magic 20% down or they're not a certain percentage sold. I just don't see how they're going to fill these new projects. I think more and more will go to apartments or lease-to-own.

Perplexed said...

I think most of the cheap apartment conversions will fail unless the building is in a prime location.

Portland condo developers suffered from gluttony, too much of a good thing. For the life of me I can't understand why the banks funded so many in so short of time, any analyst could figure out that there would be a glut. I think they bought the story by PSU hook line and sinker.

Condos work for urban dwellers, IMHO, only when they are inexpensive housing for households with modest but regular income or high income/asset households who want services and ambiance. They are very suitable for retirees, not so suitable for families with kids. Basically, the market is quite narrow... which means these developers are in trouble.

My question is what will the work-out look like? Some have converted to rentals but even then I doubt they can find enough renters willing to pay rates that make the building cash positive. Smart buyers won't purchase in a building that won't sell out to owner occupants - too much HOA risk. On the other hand a developer in trouble doesn't care who lives in the building if they can get out from under.

What a mess.

Perplexed said...

Anno who made an offer, just keep that building on your short list. My brother is waiting for the condo market to exhale and is very picky about features and buildings. The fall/winter market should be interesting.

He told me that he is prepared to wait even a couple years for the right opportunity as he is content as a renter.

Anonymous said...

PG wrote: "Thanks for fast-tracking the condo conversions, City of Portland..."

Condo conversions don't have anything to do with the city. It is simply a change of the form of ownership of an existing building. Papers are filed with the State and a plat is recorded at the county. No one needs to give or receive permission.

Anonymous said...

anon 9:12, where are you looking to buy a condo?

Anonymous said...

Perplexed, I have a family (1 kid, one dog, wife) and have lived in my condo for 8 years. No services or amenities. It may not be for you but we love it. It is like being on vacation every day.

Anonymous said...

"Kind of ironic that a conservative publication sees a problem with all this seeing as how their policies of worshiping-the-wealthy had a big part in all of this elitist nonsense."

Ya Anon 7:43, City Hall is just teaming with nasty conservatives like Sam Adams and Eric Sten.

Anonymous said...

Elitism isn't foreign to liberals at Portland City Hall but it's an openly embraced mainstay of conservatism. That was what my comment refered to, the irony of a conservative publication finding fault with the condo elitism.
I saw this same condo madness in my last city in the 80s. It ended very badly with many going upside down and remaining there for many years, probably until the latest mania of the 2000s.

Anonymous said...

Perplexed: "too much HOA risk"

What do you mean?

Perplexed said...

"too much HOA risk" happens when a consequential portion of condo owners in an association fail to pay their dues - as when a unit is in default to the lender. Huge cash flow problems result for the HOA. Once foreclosure happens the lender is obligated to pay the HOA but they are often delinquent, not paying until it is sold.. assuming the HOA has filed a lean.

An attorney will need to verify this, but it is my understanding that the mortgage is superior to unpaid HOA dues and the mortgage holder has no obligation to pay back HOA upon foreclosure. DC has a super-lean rights for HOA dues for 6 months prior to foreclosure.

Perplexed said...

Let me add to my earlier comment about owning in a condo with a lot of renters. First I wish to say that I have nothing against renters however, at least in Portland their length of occupancy is on average shorter than that of an owner. There is a lot of ware and tear on a building with tenant moves, a cost of maintenance that must be born by the HOA. The other problem for HOAs and renter occupied units is that when a renter violates the CC&Rs the HOA can only notify the owner who then may or may not deal with the tenant.

Earlier I said that condos are not suitable for families. There are exceptions as one poster mentioned. However, children need space to run and play - at least mine did. I have been looking at condos in the city center. Except for Wallace and Couch parks I haven't seen swing sets and jungle jims.

Leo said...

Can you provide the link to the story? I don't see it in the post, and I can't seem to find the article on the Tribune web site.

PDX Outsider said...

Sorry about that, I included the link in the main article now. You might need to refresh your browser to see it.

Thanks for pointing that out.

Perplexed said...

Anyone notice the number of 'price reduced' and 'new price' on Craig's List today?

PDX Outsider said...

Yup, been seeing them for a while now. Price reductions are all over the place.

There's a triplex in the SE (50th and Blemont I think?) that started at $435, then went to $424, now $399. It's been on the market over 6 months, still hasn't sold, probably because it still doesn't make money at $399k.

Anonymous said...

I've been reading the Craigslist "reduced" ads for a while now. We seem to be at a high of over 500 though it has hovered near that for some time.

Here's something I've noticed. As the downturn drags on and properties languish longer, the font size used in the Craigslist ads keeps increasing.

condo in Philippines said...

Wish you can shared some pics of the condo inside. Anyway, do you have any updates with this post?