'Signs Of Decline' In The Condo Bubble

Inman News has the latest on the condo bubble. "As the national real estate market descends from record heights, condo developers in some markets are buddying up to home shoppers and real estate agents with promotions and incentives. Inventory is up, and some sellers have dropped prices after realizing they were expecting too much, Thomas C. Demsker, a realtor in New York City said. It's not unheard of to see price reductions of $100,000 for properties that are slow to sell." "'They're (developers) much more flexible and much more accommodating. What they're doing is sweetening the pot by adding a little perk here or there. It's becoming more prevalent. Some are actually negotiating on price,' Demsker said. 'They've become very amenable to my calls all of the sudden.'" "Similar trends are echoed on the West Coast, with real estate professionals in Southern California reporting that developers are reaching out to the brokerage community and are more aggressively marketing their properties. Veronica Hicks, broker-owner based in Orange County, Calif., said the condo market is generally slowing, and buyers 'are starting to be a little bit more apprehensive.'" "Developers of new condo projects aren't negotiating much on price, Hicks said. 'What they are offering consumers is not necessarily price reductions. They are offering them upgrades and closing-cost assistance,' she said. Some developers are offering commissions of up to 4 percent and 5 percent of the sale price as compensation for bringing buyers into a transaction. 'As recent as a few months ago they were offering absolutely zero,' she said." "Troy Soumis, broker-owner company that focuses on downtown Los Angeles, said it's still a seller's market for condo units, though 'it's not as good as it was last year.' Inventory is up, and several conversion and new-construction projects are coming into the market. The growing inventory is also a result, in part, of investors who bought the properties for a quick sell and are now returning them to market." "Meanwhile, the Washington, D.C.-area market 'has softened quite a bit and several projects have folded,' said Daniel Rubén Odio-Páez, based in Arlington, Va. One proposed $100 million-plus project in D.C.'s Logan Circle area has been withdrawn from the market. 'Our market is still strong but there seems to be a glut of condos,' and condo inventory is three times higher than it was 12 months ago, year-to-date, he added." "Market analysts have cautioned about the waves of proposed and under-construction condo projects in some markets, such as Miami and Las Vegas, as a possible indicator of over-supply, with some developers changing their condo plans mid-stream or canceling projects altogether. John Mudd, a Tampa, Fla., realtor, (said) that pre-construction and condo conversion sales are slowing down, 'but that's not my problem, it's the problem of developers. Their brokers often give me and my buyers first pick of the units. Brokers who tell agents it's about getting the listings are wrong. In this market there are too many listings.'" "Mudd said that the market has 'normalized' in the Tampa area. 'If you know how to paint a picture with words to reach the buyer you're targeting, and if you know what buyer demographic to target, you won't have too much trouble selling condos, even if there is a glut of condo inventory on the market, and there is a glut of inventory.'" "Joshua Lioce, broker-owner in Milford, Mass., noted that the higher-end condo market is showing 'signs of decline' in his market area. 'A builder in Uxbridge, Mass., about an hour southwest of Boston, is currently offering to pay the first year of condo fees, roughly $2,500. This is something that we have not seen around this area, but I feel that we will see more and more of this, especially in the higher-end condos.'" "And in San Francisco, the high-end condo market seems to be performing better than the low-end, said (realtor) Ed Campaña. Developers may be more willing to negotiate on the lower-priced units, he said, though they generally aren't offering too many incentives right now. That may change as interest rates bump up, he said. Open houses have slowed down a bit in the condo market, and there aren't as many offers for properties now, he said. 'This year I think will be steady. After that, all bets are off.'"