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Originally Posted by LookingUp
I just think the market for high-rise condos isn't going to slow down. Hopefully, their prices will be affordable for younger buyers - that's a huge untapped market.
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I don't think I can agree with you on the condo market not slowing down. It already has here in DC and in other major cities around the country.
Here's an article from The Arizona Republic (Phoenix). Sorry for it's length, but I think it's worth reading. I just hope no one comes back with a, "But Austin is different kind of market" statement. It ain't.
Valley flooded with condo projects
High-rise units won't all be sold, analysts fear
Catherine Reagor
The Arizona Republic
Mar. 5, 2006 12:00 AM
On prime pieces of land across central Phoenix, Scottsdale, Tempe and recently even in the bedroom communities of Mesa and Ahwatukee, signs are going up promoting upscale condominium towers and lofts.
But at many sites, those signs will be the only things erected for a while. Maybe ever.
Almost 8,000 condos and lofts are planned or under construction across metropolitan Phoenix, more than what went up in the Valley in all of the past 10 years.
The projects include residential high-rises that could rival the state's tallest skyscraper (or at least transform suburban skylines), brownstone mini-mansions along busy streets and mid-rises beside lakes, canals or high-end shopping centers. There are also downtown offices poised to become high-rise homes and all types of urban housing developments along the light-rail line.
Early success of projects like Camelback Esplanade near the Biltmore area and Artisan Lofts on Central Avenue enticed more developers of high-rise projects to Phoenix. And as excitement over urban living, or urban-style living, grew, demand soared, right along with prices.
But real estate analysts say that despite the Valley's growth, forecasts call for at least 100,000 people to move to the Valley every year for the next several years, there just aren't enough people willing to pay ever more to live in all the planned high-rises.
"There's a lot of discussion about vertical living, but condos, or vertical living, will not become the dominant housing in the Valley," said RL Brown, publisher of the Phoenix Housing Market Letter.
He estimates that less than 20 percent of all the planned high-rise residential projects will be built.
Condo glut
The pricey residential high-rises going up now have more competition than just the more affordable tract homes on the edges of the Valley.
Many investors who bought units in the first wave of high-rises now are trying to sell. And last year, more than 10,000 apartments across metropolitan Phoenix were turned into condos or bought by investors, who plan to convert them into units that sell for far less than their new, high-rise siblings. That's at least three times as many conversions as in 2004.
Most of the high-rise condos start at $400,000 or higher. A converted unit could sell for less than $200,000. A typical three-bedroom, two-bathroom home in the suburbs sells for less than $300,000.
Like Valley home builders, many condo developers have tried to limit the number of investors. But it hasn't always worked.
At the end of February, 18 of the 90 condos in the Orpheum Lofts were on the market. The historic art deco tower in downtown Phoenix was transformed from an office building last year. It sold out, and now many of the original buyers are turning out to be investors trying to sell.
"Condo developers are now competing against speculators," said Jay Butler, director the Arizona Real Estate at Arizona State University's Polytechnic. "A lot of the early condo investors in the Valley can sell for less than what is being sold new and still make a profit."
Last fall, Taylor Hunt bought a studio in the 17-story Landmark, an older apartment high-rise on Phoenix's Central Avenue that was converted into condos.
"I like the urban lifestyle, and the price was pretty awesome compared to some other high-rises planned for the area," said Hunt, who sells shoes at Nordstrom in Scottsdale. "A lot of homes in Arizona are pretty generic. I wanted something different."
Hunt lined up with dozens of other buyers to buy his condo last summer. He paid less than $200,000. Because prices at Landmark were lower than most new towers and the building was ready for buyers to move in the midst of last year's frenzied housing market, Landmark is 75 percent sold out.
Housing market watchers say only about 1,500 new high-rise and mid-rise condos will likely sell this year in metropolitan Phoenix, partly because of conversions.
"Construction and land costs have gone up so much. We have the competitive advantage," said Chip Conk, president of Montecito Property Co., one of the biggest condo-conversion developers in the country.
Montecito built a 312-unit Montage conversion project last fall in northeast Phoenix that sold out in days. But it's now taking longer for conversions to sell. And prices are beginning to fall. The average cost of a converted condo in the Valley was $199,675 in January, compared with $210,000 in November, according to housing analyst Brown.
Robert Sheridan, a veteran national condo converter who is developing a project in Scottsdale and also leading a fund to buy failed condo-conversion projects on the East and West Coasts, said the conversion craze is over.
"Only the condos in the best locations will sell now," he said.
Though his company converted the Las Brisas apartments in north central Phoenix a few years ago, Sheridan said he wouldn't do another one in central Phoenix because there are too many in the area.
Problems elsewhere
Las Vegas, southern Florida and San Diego have seen the most new high-rise and condo development during the past two years, and now these markets are facing the biggest overbuilding problems, real estate analysts say.
Early projects sold out quickly, and prices jumped with each subsequent phase. Developers then rushed in with new designs, tied up prime pieces of land and began taking "presales" to test how deep the demand was for vertical living.
Investors looking to make big profits fast jumped in and bought preconstruction condos in these cities. But only the early speculators were able to sell for a substantial profit when the buildings were done.
As in metropolitan Phoenix, a record number of apartment buildings are being converted into condos in those cities.
In San Diego, condo prices are falling because of the number of resales put on the market by early speculators. Some developers also are putting new projects on hold. There are about 6,200 condos for sale, double from a year ago, according to the San Diego Association of Realtors.
Already in San Diego, some condo-conversion projects are falling through.
In Las Vegas, high-profile high-rise projects that are nearly sold out are being taken off the drawing board. Rising construction costs and tougher financing guidelines are making it harder for developers to make money on the buildings. The Icon Las Vegas tower is the latest casualty of the condo glut in Sin City.
Almost 100 condo projects with more 50,000 units are in the works in greater Las Vegas, according to a recent count. But real estate analysts say several of those will fall through as well.
Besides a slowdown in demand for these pricey high-rise homes, higher construction costs have made them less attractive to developers.
Construction costs have shot up at least 30 percent in the past year.
In Miami, more than 15,000 condos are under construction and another 60,000 are planned. To attract buyers, some developers are offering freebies like plasma TVs.
"The Valley will never be as over hyped on vertical living as Las Vegas or Miami," said Reid Butler, a residential developer who is working on the 200-unit RO3 high-rise and historic housing project in central Phoenix. "But the projects with the best plans, financing and most signed contracts will do well."
Rethinking purchases
Demand for high-rise condos in metropolitan Phoenix is expected to continue, just not at the level that would fill all the projects on the drawing board right away. So owners of such condos likely won't see their values fall, but prices also likely won't make the same jumps they did in the past two years.
The condo-conversion market is untested in the Valley. Market watchers and owners of these former apartments are waiting to see if values climb enough to let them sell for a profit after a few years. That trend successfully played out on the east and west coasts in the late 1990s.
In the past few years, values of typical two- to three-story condos shot up in the Valley, and real estate analysts say such properties in the best locations will not only hold their value but also continue to steadily appreciate, as long as homeowners associations maintain them.
For those who don't yet own, though, the number of condos on the market may be disconcerting.
Real estate agents say some investors are now beginning to walk away, or are considering doing so, from small deposits on high-rise and condo-conversion projects in the Valley.
Some investors see the rising number of resale condos and realize they have more competition to flip properties for a profit.
Other potential buyers are concerned a glut of new condos will put pressure on prices and don't want to buy until the market stabilizes.
So far, none of the high- profile projects has fallen through, though some developers have been marketing planned projects with some pre-sales to other developers.
"I don't think we are in danger of condo projects going away and people losing down payments," said Keith Mishkin, a veteran high-rise and upscale condo broker with Cambridge Properties.
He said some developers are putting projects out there just to test the market, but they won't go if demand isn't there.
Real estate analysts say those are the projects without public reports, and where buyers are only putting down small amounts, like $5,000, and not signing full contracts.
SunCor is serious about its second residential tower at its Hayden Ferry Lakeside project next to Tempe Town Lake. The developer acquired a building permit for the 104-unit project last week and hired contractor McCarthy to build it. SunCor's public report with the Arizona Department of Real Estate is approved, and 35 buyers have signed contracts. Prices for the condos range from $400,000 to $5.5 million in the second tower, and it's planning two more towers.
Most projects without "real buyers" and government approvals aren't getting financing: Lenders are clamping down on condo deals because of the many speculative projects and gluts in some areas.
"Now most lenders are very cautious and want most of a development to be sold, really sold, before they will finance it," said Eric Brown, head of Artisan Homes, which built the first lofts in the Valley. He plans to break ground on the 80-unit second phase of his Artisan Lofts on Central this year.
"There's demand for urban housing projects in the Valley, but only a few projects really make sense," he said.
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. Again, this has scam written all over it. If they have patents, this should be public information and viewable by anyone online. If they refuse to give you reference numbers to read these patents yourself online, walk- no, run. Patents are public information. Further, you're right that patents in construction are not heard of. While there are patents for specific, discrete breakthroughs of something that goes into a building, I don't see how someone could get a patent for a building process, as there are too many works of prior art with which it'll conflict.
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