Confronting the condo glut........ (New York, York: real estate market, apartments, foreclosed)
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That is a very thought-provoking article, and it echoes what has happened in previous downturns when Manhattan became more affordable in that the prices in outer boroughs declined. A glut of unsold units is not good for the communities, nor for the city as they have the potential of becoming neglected ghost structures that could impact public safety through such things as neglected maintenance or providing a safe haven for criminal elements.
An occupied unit is immensely preferable to unsold units, though one does have compassion for those who bought in at the peak and are paying a mortgage and maintenance on a now diminished value apartment, that will likely be further diminished by any conversion away from the original offering. Flawed policies and speculation brought the market to this point, so there should be compensation for the owners who bought into the projects in the revamped offering plan. Perhaps they do not have to pay maintenance for a period of time to bring their units in line with affordability of the current offering structure, since their mortgages cannot be changed by the new management structure of the building.
Policies in favor of building after bulding of alleged luxury condos created the land rush mentality in many areas, hence the reason why I take a view of caution when yet another initiative is unleashed on the city to promote the "next <insert name of trendy neighborhood that cannot be created, but gives the illusion of luxury>." Recognizing the gap in policies that brought about the current situation and striving to change the policies so as not to displace the middle class is a step in the right direction.
Downtown Brooklyn, the focus of the article, has much in favor so that a renewed policy to get buildings occupied could easily become a reality. Some of the more far-flung areas of the outer boroughs are where there are going to be more challenges to attempt to stabilize markets that may have a plethora of unsold units, owing to desirability factors that made the markets a challenge even as there seemed to be no limit to the prices or number of units to be built.
I'm not happy to see this problem but I can't say I'm surprised.
Over the last five years we've seen these developers building these overdone condos with fancy names (The Ripoffee at Le Vista Pointe) and charging $400,000 for a studio while nearby apartments are going for $800 a month. It's finally come back to bite them in the rear, and even though the buildings only have 10% occupancy, they still have no desire to lower their prices to something reasonable.
Agreed,but you can't force them to sell for less than they want just because you think what they are selling is worth less right now.Some will bail out but most will probably hang on for the market turnaround and rebound.As market professionals they know that the rebound will come, that it will happen quickly and prices will rebound faster than they fell.It's the way markets work after a correction.
It is really no different than in the stock market where savvy investors refuse to sell as the market falls because they know that historically,when the market turns,it very quickly regains 1/2 or more of it's top to bottom loss in a very short period.They know that trying to time the market usually doesn't work and that most people who sell on the way down wind up buying back in on the way up at more than they sold for.So they sit and wait , refuse to sell and buy more at a time like this.They are like sharks.They know it might not be the absolute bottom but they don't care because they want to be there when the rebound comes.It's a time when people get really rich because they get 50% returns on their investment in a matter of weeks or months.
These same principles have usually applied to the real estate market and they most likely will again. So if they don't have to sell they won't .
Agreed,but you can't force them to sell for less than they want just because you think what they are selling is worth less right now.Some will bail out but most will probably hang on for the market turnaround and rebound.As market professionals they know that the rebound will come, that it will happen quickly and prices will rebound faster than they fell.It's the way markets work after a correction.
Actually, it's the opposite: bubbles form fast but they die slowly. In the last real estate bubble (late 80s) it took 2.5 years to reach peak and 8 years to rebound (3 times as long). As the present bubble is unprecedented I would assume that the period of recovery would be much longer. Take a look at this graph:
The question is how to fill those units. I have a feeling that there will be Councilpeople who will try to add rent control and stabilization provisions in Speaker Quinn's proposal, in order to protect against a huge market rebound; and therefore a huge market increase. Now, developers will most likely be against those provisions, but now comes the questions: Do you hold out for a market rebound and how long CAN you hold out?
The city's policies in the last 8 years are partly to blame for the mess. It's in their best interests to have those units filled, to prevent condo ghost towns. Developer greed is the other blame, and now they are stuck with empty spots and a LOT of debt!
The city's policies in the last 8 years are partly to blame for the mess. It's in their best interests to have those units filled, to prevent condo ghost towns. Developer greed is the other blame, and now they are stuck with empty spots and a LOT of debt!
Hopefully, the city will go with its best interests, although I'm sure the developers will lobby their tails off to keep that from happening. I'm afraid I have absolutely no sympathy for "developers;" let 'em get what's coming to them.
Hopefully, the city will go with its best interests, although I'm sure the developers will lobby their tails off to keep that from happening. I'm afraid I have absolutely no sympathy for "developers;" let 'em get what's coming to them.
But is it in the city's best interest to have empty buildings? The developers "getting what's coming to them" may also have a very negative effect on the city!
Man, I'm thinking of a few more scenarios that could happen, such as the City taking over some of these buildings, the same thing it wants to do with some of the foreclosed homes in neighborhoods like Jamaica, Queens. And the Obama money may pay for it! I know it sounds crazy, but in this economy, everything could be on the table!
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