Affordable Housing Institute : US

As we plumb the depths to which an unsold condo may sink –

 

I barely recovered my deposit

 

– based on a New York Times visit to deepest darkest high-rise Miami, we have seen an investor being escorted through corridors measureless to man down to a sunless lobby.

 

The lights are turned down to save on electricity costs, as owners forced out by foreclosure have left fewer tenants to pay fees.

 

Not exactly a bright sales story, is it?  While the investor, being shown the property by a Condo Vultures Realty broker, thinks prices could fall further than from $700,000 to $200,000, even the Marianas Trench has a bottom:

 

See any rights of light this far down?

 

Eventually prices will stabilize.  Markets do clear.  In the meantime, the condo association might want to pony up to keep the common space looking good – or raising money for other, even more urgent purposes:

 

Rosa Rodriguez, a resident and property manager at Parkview Point Condos in Miami Beach, says her former neighbors have left her with so many problems that she would never buy a condo again. The 38 foreclosures in her 244-unit building and the unpaid dues nearly cost the residents running water because the building could not pay its bills.

 

Condos that fail expose their potential leadership void.

 

It wasn’t a problem until now

 

That void is all too visible to buyers:

 

The building abruptly stopped repairing its ceiling lobby and left its wiring and ducts exposed when the board ran out of money. She avoids answering questions from visitors about ceiling repairs.

 

“We’re not going to tell them we don’t have any money,” she said. “That’s embarrassing.”

 

Whereas mentioning this embarrassing fact, as if in confidence, to a New York Times reporter and thinking it’ll somehow stay private, is downright dumb.

 

It’s the internet, we can control it, right?

 

Buildings with few units can suffer even if it just one owner falls into trouble.

 

Yes, because small denominator means higher percentage. 

 

It does?

 

Doris Wilson, who owns a one-bedroom apartment in a building in the Bronzeville neighborhood of Chicago, struggled to get a lender to pay $2,500 in association fees after it foreclosed on one of the seven units in her building.  The bank eventually paid the money, and the association has since been able to paint its wrought-iron fence and clean the sewer system.

 

Still, Ms. Wilson worries that the expected sale of the foreclosed unit at about $94,000 will hurt neighbors who paid or refinanced their units for three times that price.

 

Maybe, Ms. Wilson – depends on when you plan to resell.  If not for awhile, it’s probably irrelevant.

 

In the short term, she dislikes asking her neighbors to pay an extra assessment of nearly $220.

 

Every property needs an advocate.  That advocate has to raise the funds to do what the building needs for self-defense, even if it’s costly for individual residents.  Otherwise the condo is led by its weakest, most timid, poorest members – and that’s guaranteed to drive everybody’s value down.

 

She dreads going to monthly condo board meetings, and she avoids some neighbors who are struggling to pay the additional fees.

 

Amateur managers have thin skins.  They think it’s personal, because being a neighbor is a personable thing. 

 

“It’s personal,” she said. “Here they are going through a hard time and you have to ask them to pay.”

 

It’s not personal, it’s business.

 

“It’s just business”

 

If the ship sinks, we all drown. 

 

Sometimes our economics are torpedoed

 

Protect the ship. 

 

Marki Lemons, a Chicago real estate broker, says that investors are hesitant to buy properties with many foreclosures because of the possible problems.

 

Entirely understandable, even prudent.

 

Some buildings with four to eight units have had so many foreclosures that their condo associations have disbanded and windows have been boarded up.

 

When a property becomes ‘too vacant,’ it is no longer internally defensible.  It becomes a target for clandestine occupancy – meaning, crime – and has to be boarded up in community self-defense. 

 

Condo shakeouts cull the herd pretty severely because they draw harsh distinctions between markets strong and weak.

 

Some of you aren’t worth saving

 

So far, the Manhattan market has been largely spared, in part because of foreign owners who never sought a quick profit.  

 

They bought in America to turn their appreciated currencies into cheap dollars, and their gilt into tangible assets.  Those long-term geopolitical considerations are still valid.

 

By the end of the year, about 15,000 units will have been added during the five-year condo boom in Manhattan, according to Miller Samuel, a real estate research firm.

 

In a city of seven million, with maybe 2,000,000 housing units, that’s quite manageable, under a 1% increase in total supply.  New York will stay tight.

 

Keeping our values strong

 

Jonathan Miller, the company’s chief executive, said that foreigners, who have bought up to a third of these new condos, typically put in more cash and plan to hold for some time.

 

“They’re in it for the long-term equity play,” he said. “They’re looking for a 10-year hold.”

 

Or longer.  People like moving their money to America.

 

Those who fear a downturn remember that Manhattan co-op prices suffered so much during the housing downturn of 1989 to 1993 that buildings had a hard time luring buyers.

 

True, but a very different global macroeconomic environment.

 

This financial instability hurt New Yorkers at all economic levels. Some recall neighbors handing over their Fifth Avenue apartments for $1 because they could not afford the maintenance fees.

 

Might be true; might be an urban legend like those giant albino alligators in the sewers.

 

I don’t need to skulk about in sewers

Send post as PDF to