Cracks in condo market

Cracks within Charlotte's condo market are starting to surface as supply escalates and sales prices skyrocket.

At SouthPark's Piedmont Row, investors from Florida facing foreclosure are offering a two-bedroom unit at $16,000 less than their purchase price.

"We're trying to do a short sale so the bank will accept a lower amount than what is owed," says Al Negru, a broker with ReMax Elite Associates, who is handling the condo on behalf of relatives.

Negru says the original buyers were banking on leasing out the unit, a popular investor play. A tenant's rent would, ideally, cover mortgage, taxes and condo fees, allowing the owners to profit from appreciation on a later resale.

But less than a year after purchasing at Piedmont Row, the investors have put the condo back on the market, listed along with 30 other units. The mixed-use development in SouthPark was said to have sold out its first phase of 84 units in one day in 2005.

"At that time, the condo market was booming everywhere," Negru says. "The assumption and expectation was that it would be no problem to make it work."

The numbers didn't work, not at $318 per square foot to buy, another $250 a month in association fees and a property tax bill of $4,808. Now Negru needs to sell the condo before the bank takes it, but he's finding serious inquiries are coming from vulture investors serving up low-ball bids.

"It's a nice unit on the corner, but there's no demand. I had some showings but not enough to generate actual offers," he says. "Other investors want to get it for $200,000. It's ridiculous."

The problems at the 179-unit Piedmont Row -- where 17% of its units are listed for resale for $245,000 to $539,000 -- come at a time when Charlotte's condo supply figures are booming and area developers continue to pour new product into the market.
Condo supply numbers tower

Analysts and many developers now worry that supply is already far exceeding demand.

The number of new units on the market represents a 29-month supply, based on the current rate of closings, according to an analysis by Metrostudy, a national market-research provider to the housing industry.

A six-to-eight-month supply is considered a healthy market, says Bill Miley, Metrostudy's Charlotte market manager.

But tracking condo supply requires a tricky calculus. Metrostudy counts closings on units only when it determines absorption. Analysts are unsure about how quickly buyers will clear out the inventory until new projects are completed and contracts are converted to sales.


Source : http://southflorida.bizjournals.com/