Friday, March 21, 2008

WSJ: Woes in Condo Market Build

The WSJ is one of the better newspapers out there. Its housing news is only a few... years behind the housing blogs. But it has an interesting article on condos.

One option for a developer is to convert the condos to apartments. However, these projects are usually financed with the presumption that sales of individual condos pay off more than rents from a comparably sized apartment building. Also, lenders typically expect developers to pay off condo construction loans with the millions of dollars they receive when closing on the sales. Such a quick payout isn't possible if the developer is only receiving monthly rental payments.

The article details the thousands of condos entering a dozen markets: Miami, Phoenix, Atlanta, San Diego, and Dallas. The article points out that the condo can undermine an otherwise healthy real estate market... but wait... they note that most buyers just cannot qualify for a $500k loan anymore. Maybe that is why the market is falling apart?

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