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Anybody see a problem with this? The biggest project of the bunch, which is currently selling, has had a few meaninfull price cuts already, the rest are only in the "reservation, no commitment" stage... Plus, the biggest one has an 18 month, "you can't sell it" clause, which only the very first buyers are now coming out of, to try to compete with brand new ones already priced 100K lower...
Each one, when asked, will tell you how their project is unique, and thus will not be affected by downturns in the other projects...
Maybe its just me, but if I was building a new project here, trying to sell a 2bedroom condo for $750K, while the neighboring project gets slammed by foreclosures, which are already selling at 30 cents on the dollar, I'd be worried...
But I supposed I'd be a ton more worried if I was the bank that wrote the commercial note to the builder...
Yeah, sure, we've seen the end of this downturn...
Well, economically speaking, the cost to build the condo can't exceed its value, without deterioration to the property. Prices can only fall so far. We will see banks, builders bankrupt, nothing else.
"the biggest one has an 18 month, "you can't sell it" clause,'
Wonder if they have an 18 month 'we can't sell it for less than what you paid or we pay you the difference in cash" clause
This is why I firmly believe the worst is just beginning. Lots of places still underconstruction that are going to add a lot of inventory. I just got done touring a KB community on the west side of the Tucson mountains thats all but dried up. The entire road system, utilities is in place. But the model homes are all fenced up and locked tight. The place is dead.
I would not want to buy in an area with blood rushing through the streets. my my
No. I would also not buy in Alpine, NJ since they have rap singer shootouts every day.
The builder in my development is in bankruptcy, but is still limping along and building in the last section here. There is one new house in particular there that has been sitting, vacant, for about 6 months - apparently waiting for the owner to meet some contingency. It was broken into a couple of months ago. The bandits got in by cutting a hole in the screen enclosure large enough to fit a truck in - then broke a window. I guess they caused flooding in the home that ruined the newly installed hardwood flooring - many thousands of dollars of damage, not including the stolen appliances. Everything was later "fixed." During a bike ride through the neighborhood last Friday, I witnessed no less than 8 police cars parked outside of the same house. K-9 unit and a mobile lab looking vehicle. Hmmm, what could it be this time to warrant such a police response? Hasn't been reported in the blotter yet. Craziness.
I saw a meth lab in Alpine, NJ yesterday. There were no cops since the rap singer who owns the house paid them all off.
Drugs probably were stashed in the house if you saw a K-9 unit. The bubble also helped another thing.. Drug runners buying really nice houses in nice neighborhoods and using them as stash houses. My Bro-In Law is a K-9 unit and they have gotten just record number of busts in the last couple of years in places you would have never expected to have them.
I have friends living in a small custom-build development. They just found out second hand, a couple of months ago, that the huge 4700 sq ft next door was being used as a grow house. Fortunately, it went foreclosure and was recently sold to a third party. You just never know, I guess.
the stock market crash did not end with blood on the streets and this will not end that way. you will feel bad later that you did not buy now. it is a great time to buy. arm resets are not going to create a blood bath as you expect. the sub-prime created some trouble and others are just going to survive.
Thanks for posting that azrob. The condo markets are the worst, even in the much more modest hoods I'm looking at there is a new supply coming on.
As far as the bank taking a hit, most commercial transactions have a loan to value of 50%, so the banks are still OK as of right now. Once prices go down another 10 - 15%, its going to get hairy. Did you see Citi took a $1 billion charge on its commercial real estate portfolio? Who are the big banks out in your neck of the woods?
"the stock market crash did not end with blood on the streets"
there was alot more bloodshed than most let onto. You didnt hear about the people that were too embarrased that they lost their retirement etc. I know someone first hand that lost 335k in the month of Sept. 01
From another related story :
"Orlando developer Cameron Kuhn's final holdings in The Plaza office-condominium towers are headed to the auction block".
"Now Kuhn is battling lawsuits, liens and a foreclosure suit against his Windermere home, and has been scrambling to trade or sell assets to stay afloat."
AZROB...what is the average HOA for these luxury condos in AZ?
"the stock market crash did not end with blood on the streets"
Tell that to the people that hell the S&P 500 and saw it drop over 40%. Don't forget the blood bath in the NASDAQ that dropped more than 60%. When will we ever see NADAQ at 5,000 again? Maybe another 10 years. It took the Dow and S&P more than 7 years to reach 2000 level, it's going to take 15 to 20 years for the NASDAQ to reach it's peak.
You don't call that a bloodbath?
ATL,
Immediately? As a practical matter, there is some wiggle room because a foreclosure costs money. Its hard to know for sure what will happen because banks have made out on these deals for a long, long time. Look at Wells Fargo's charge-offs on its commerical loan portfolio, its a friggin rounding error. FWIW, I think that many banks will simply do a bridge loan as a way to keep from writing bad projects off. Those with big customer deposit bases can hold the notes at par. That will delay the pain for a year or so.
My point of this post, is that some 4000 condo's IN ONE SMALL SECTION OF TOWN, are being built predicated on sales prices of half a million dollars and up per unit. Meanwhile, a recent similar design is selling for some 30 cents on the dollar...
A. The three examples I showed, lost banks 1/3 million dollars each, for loaning on these projects. Banks may be stupid, but will they continue to write uber luxury condo loans, when the capacity to lose a ton of money quickly is already established?
B. The builders for the most part finance these projects with construction loans. If the project doesn't sell, the losses to the commercial lenders will be staggering.
And you thought the sub prime mess was the only mess the Banks are dealing with.
Wait till they start having to write off billions in loan losses from Commercial RE. Banks have not set aside enough reserves for the future Commercial RE loan losses. You think these home builders will have money to stay solvent?
"Plus, the biggest one has an 18 month, "you can't sell it" clause, which only the very first buyers are now coming out of..."
that is irrelevant. You really think the builders would try and enforce these right now? Plus, usually the clauses just say that if you sell before the time, you don't get to keep the equity. Isn't your whole post that these people have lost equity?
there will be blood gushing in the streets but not in every city. only the ones which are poor really will. builders will take losses and govt is already helping them. banks will write-down all the losses and will eventually turn into higher borrowing cost for everyone (in one way it is socializing the problem). i constantly meet and talk to many homeowners (random samples) and many dont care if their home price drops another 10-15%. i think you are trying to project the problem as much worse than it is. it will make people alert and more cautious but we dont need to worry this much.
A. The three examples I showed, lost banks 1/3 million dollars each, for loaning on these projects. Banks may be stupid, but will they continue to write uber luxury condo loans, when the capacity to lose a ton of money quickly is already established?
Depends on whether or not they learned from their mistakes. Securitization market has been dry for quite some time so there is no "packaging" to try to (incorrect assumption i might add, but a topic of another discussion) spread risk. So these jumbo loans are sitting on banks balance sheets for the most part. If the banks use current comps than more than likely none will sell as the LTV will be underwater. Will be interesting to see.
Hi silent observer! Didn't think I would see you back so soon (wink).
Why do you think that every new psoter is Alpine? Maybe i am Alpine. Afterall, i ddo have the name ALPINE in my name. :-)
"This is going to end with blood gushing in the streets..."
I thought this was going to be about the Democrat debate. My money would be on Hillary...
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This is going to end with blood gushing in the streets...
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Roberto Ribas, "azrob"
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Lets call them ABC condo's, luxury all the way, and right in the heart of the pricey oldtown Scottsdale district. Built in 2005, soldout, and now, two short years after the first sale, popping up daily on my automatic shortsale/REO search... 3 came up on friday, to join the dozen or so available on mls already. Some details:
1. Studio, priced at 285K. Sold in 2005 for 680K, back to the bank on a 580K note.
2. 1 bedroom, priced at 330K sold in 2005 for 885K, 100% financing.
3. 2bedrrom, priced at 580K sold in 2005 for 925K, 875K in combined 1st and 2nd loans...
Ok those 3 are just random picks, I don't feel like looking the rest up now...Anyways, there goes at least 1 .1 million dollars in bank money down the toilet, plus carrying costs till they sell. They are selling at the rate of 1.5 a month so far this year, so I'm not quite sure the 20 or so on the MLS, ( 8 REO 8 short sale, and 4 regular good old fashined, I'm ready to lose a pissload of money cash buyers), will be getting rid of them soon.
Well, hey, bad timing to buy, or loan money on this project, whats the big deal?
This is the big deal: within a 2 mile radius of this project, another half a dozen projects are quickly nearing completion, ready to dump some 4500+ new luxury units onto the market. ALL of them, proclaiming just like ABC condo's did in 2005, that they are the cool urban modern hip place to live, and thus deserving of nothing less than the same prices ABC charged in 2005...
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