Top places to cash in on real estate deals

September 23, 2009 · Tagged with Real Estate 

“What’s the staying power of developers and banks? It’s not forever,” says Jonathan Miller, president of Miller Samuel, a Manhattan-based appraisal. “Can they last 10 years or five years? I doubt it. At some point you’re going to see talk about drastic repricing. It’s the situation in most metro areas that saw luxury condo development.”

That’s bad news for prices in places like Key Biscayne, Fla., New York’s Upper West Side and Bal Harbour, Fla. where large swaths of new development projects sit unsold. In those markets, condos are sitting on the market for an average of 284 days, 273 days and 285 days, respectively.

Because they’re easy to build, condos tend to be what’s known as an elastic product. Prices and construction go up quickly in good times and down sharply in bad. Before this most recent housing collapse, America had never experienced a national, multi-year decline in prices, but evidence from past bubbles that affected housing suggest that the highest end will feel the largest dollar value decrease.

Gone are the days when condos would sell out before they were finished. Now it’s the one segment where the sales rate hasn’t picked up in year-over-year terms, according to the NAR. It’s not just new buildings with an inventory glut. The 234-unit Trump building at 200 Riverside Dr. on New York’s Upper West Side, completed in 1999, has 25 sales listings, and 12 rental listings, according to StreetEasy, a New York data firm. That’s 16% of inventory for sale or rent.

In Fisher Island, Fla., things are worse. Even though the top end of the market has a median price tag of $5.3 million, the average condo has been on the market for 350 days. Some projects, like the Palazzo Del Sol, started in March of 2007, have yet to come onto the market. So if developer Fisher Island Holdings gets the $300 million project finished and delivers 47 condominiums onto the market, its unlikely any will find buyers. Based on the sales rate, there is 20 months of inventory, based on data from Trulia.com.

The best way to get a deal on properties in these markets is either to pay with cash or to put down enough of a down payment that you can qualify for government sponsored loans. When you look at how long properties are sitting on the market in some of these neighborhoods, you start to realize that any offer (even a lowball one) may be an offer the seller can’t refuse.

Malibu, California.
90265

Median luxury price: $1.77 million

Number of condos for sale: 21

Average days on the market: 306 days

Source: Altos Research, figures represent top 25% of condo market

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