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ElricSeven

Uptown Condos Overpriced?

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ElricSeven    0

I might as well kick this one off, since it is a subject near and dear to my heart:

http://www.charlotte.com/mld/charlotte/business/11730844.htm

On a side note, I think that the media has to break out the Thesaurus to find a word analogous to "soar," they use it for everything.

What wasn't considered in this article:

Previous condo booms were not typically the more luxorious ones that we've got today.

People today seem to find condo living more acceptable from a long term point of view, even to the point that baby boomers are interested in the low maintenance, high amenity lifestyle.

The Center City is getting new shopping and other amenities with each of these condo buildings. In addition, the more people in the Center City, the more acceptable it becomes to live there and the more amenities, shopping and entertainment will be added as we approach the 15,000 population mark.

There's only so much room in the Center City and the prices of land are also very high.

Construction costs have risen over 30% for concrete and steel in the past year.

Condo costs in outlying areas like Myers Park are actually higher in some cases, but with a lot more available land to build on.

Only one of those highrises is being built speculatively, that's the Avenue.

All that being said, I'm sure there's a risk of fluctuation. The question will be of what magnitude.

E7

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monsoon    0

I think that real estate speculation is playing a part in the high prices downtown. But Charlotte has had a pretty resilient economy in the past so while there might be some people burned by what is to come, I don't think there will be huge price drops in these condos.

Of course if energy prices lead to huge interest rate rises as they did in the 70s, I can see the market shrinking up nothing because no one is going to be able to pay these prices if rates cross the 10% mark.

For example the payment on a $200K loan is as follows.

  • 4.5% = $1013.37

  • 6.5% = $1264.14

  • 10.0% = $1755.14

  • 12.5% = $2134.52

  • 16.5% = $2770.30 - This was the peak rate in the early 80s when energy costs in relative terms were the highest.

Don't forget the $206/month in property taxes and possibly $200/month in insurance and dues.

We get the following then

  • 4.5% = $1419.37

  • 6.5% = $1673.14

  • 10.0% = $2164.14

  • 12.5% = $2540.52

  • 16.5% = $3176.30

Quite an undertaking. Does anyone doubt that oil prices are not going to continue to rise?

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ElricSeven    0

I think that real estate speculation is playing a part in the high prices downtown.  But Charlotte has had a pretty resilient economy in the past so while there might be some people burned by what is to come, I don't think there will be huge price drops in these condos. 

Of course if energy prices lead to huge interest rate rises as they did in the 70s, I can see the market shrinking up nothing because no one is going to be able to pay these prices if rates cross the 10% mark.

For example the payment on a $200K loan is as follows. 

  • 4.5% = $1013.37

  • 6.5% = $1264.14

  • 10.0% = $1755.14

  • 12.5% = $2134.52

  • 16.5% = $2770.30 - This was the peak rate in the early 80s when energy costs in relative terms were the highest.

Don't forget the $206/month in property taxes and possibly $200/month in insurance and dues. 

We get the following then

  • 4.5% = $1419.37

  • 6.5% = $1673.14

  • 10.0% = $2164.14

  • 12.5% = $2540.52

  • 16.5% = $3176.30

Quite an undertaking.  Does anyone doubt that oil prices are not going to continue to rise?

<{POST_SNAPBACK}>

I actually think they'll rise at a fairly steady rate, but am anticipating that with the advent of drilling in the ANWAR and the use of hybrids, and what appears to be a death in the popularity of SUVs, we'll be fine.

The bigger risk might be a halt by the Chinese in propping up our dollar and a rise in government deficits.

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SmellyCat    0

The biggest risk is the overuse of interest-only and negative amortization loans by flippers, who often put the reservation fee down on their credit cards. If rates spike and values drop precipitously, there will be many sets of condo keys thrown back to the banks who made these loans to people with both marginal worths and motives.

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ElricSeven    0

The biggest risk is the overuse of interest-only and negative amortization loans by flippers, who often put the reservation fee down on their credit cards.  If rates spike and values drop precipitously, there will be many sets of condo keys thrown back to the banks who made these loans to people with both marginal worths and motives.

<{POST_SNAPBACK}>

And how many people do we think are doing this in Charlotte, in these particular buildings? Maybe we need an informal tally of who is buying a condo in Uptown and who is a speculator, versus who intends to live there?

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atlrvr    1002

Well most uptown condo pre-sells to investors are limited by the developer (who is usually limited by his investor) at 30-35%. There are certainly ways around this, but the general standard is that if you don't but it as an investor, it must be owner occupied for at least 1 year.

Now I'm sure that some people will claim it is there residence, and in fact rent it out quietly.

As I've stated before, there seems to be no real bubble occurring yet in Uptown in my opinion. Most of the tremendous price increases are due to people wanting to live downtown.....it's tough to buy a resell now and get the numbers to work as a rental. Until uptown become a primarily rental market, or until about 3.5 years when a lot of 5/1 ARMs correct, I say the market is bulletproof.

That said, I do think that Novare and possibly others in the future can put downward pressure on the market by delivering units well below market (this can occurr as long as land remains relatively inexpensive) but this pressure will be felt mostly by lower price-point units.

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ElricSeven    0

I think that real estate speculation is playing a part in the high prices downtown.  But Charlotte has had a pretty resilient economy in the past so while there might be some people burned by what is to come, I don't think there will be huge price drops in these condos. 

Of course if energy prices lead to huge interest rate rises as they did in the 70s, I can see the market shrinking up nothing because no one is going to be able to pay these prices if rates cross the 10% mark.

For example the payment on a $200K loan is as follows. 

  • 4.5% = $1013.37

  • 6.5% = $1264.14

  • 10.0% = $1755.14

  • 12.5% = $2134.52

  • 16.5% = $2770.30 - This was the peak rate in the early 80s when energy costs in relative terms were the highest.

Don't forget the $206/month in property taxes and possibly $200/month in insurance and dues. 

We get the following then

  • 4.5% = $1419.37

  • 6.5% = $1673.14

  • 10.0% = $2164.14

  • 12.5% = $2540.52

  • 16.5% = $3176.30

Quite an undertaking.  Does anyone doubt that oil prices are not going to continue to rise?

<{POST_SNAPBACK}>

One thing to consider too, is that I think house prices did quite well in that era due to inflation of the cost of building them. Further, an oil spike would probably help the popularity of Uptown condos due to the short to non-existent commutes. If, of course, you live and work Uptown which I belive the majority do.

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Raintree21    2

Previous condo booms were not typically the more luxorious ones that we've got today.

<{POST_SNAPBACK}>

If you want to call $200,000 for 600 sq. ft. luxurious.

I think that real estate speculation is playing a part in the high prices downtown.

<{POST_SNAPBACK}>

What about the areas surrounding downtown? I've seen prices increasing in the surrounding neighborghoods like Wesley Heights seemingly based on speculation.

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monsoon    0

Its interesting as the oil shocks of the 70s had the opposite effect. People left the cities during this period. The bigger companies will compensate these days by allowing more telecommuters. There is no reason the majority of jobs in the downtown could not go to this mode if needed. I telecommute and I find it great not to have to travel to an office.

Another thing about interest rates. Deficit spending by the Federal government will cause huge spikes in interest rates as the Govt will be competing against private individuals for money. During the cold war spending of the Reagan years rates consistantly stayed above 10% and often they were higher than that. No need for me to mention the debt currently being run up by the Federal govt.

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atlrvr    1002

Well....the 70's also saw skyrocketing crime rates, and true white flight.....the fact now is that downtown living is "cool". Environmentalism is gaining acceptance.....perhaps one day people who drive SUVs will feel persecuted much the way today's smokers feel.

Who knows how long the trend will continue to move back into urban cores, but I would say that both generation X and Y will tend to follow that trend.

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ElricSeven    0

Its interesting as the oil shocks of the 70s had the opposite effect.  People left the cities during this period.  The bigger companies will compensate these days by allowing more telecommuters.  There is no reason the majority of jobs in the downtown could not go to this mode if needed.  I telecommute and I find it great not to have to travel to an office.

Another thing about interest rates.  Deficit spending by the Federal government will cause huge spikes in interest rates as the Govt will be competing against private individuals for money.  During the cold war spending of the Reagan years rates consistantly stayed above 10% and often they were higher than that.  No need for me to mention the debt currently being run up by the Federal govt.

<{POST_SNAPBACK}>

I do concur that government spending might be a problem. As far as telecommuting goes, I have heard a lot about it, but IMHO it isn't a viable option for most of the service-oriented firms Uptown. You need to be in the office most of the time. Telecommuting, however, might be one of those things that helps keep a lid on gasoline prices.

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ElricSeven    0

If you want to call $200,000 for 600 sq. ft. luxurious.

What about the areas surrounding downtown? I've seen prices increasing in the surrounding neighborghoods like Wesley Heights seemingly based on speculation.

<{POST_SNAPBACK}>

People pay $70K for a car these days, it is all about the look and feel of the place for a young professional. Space isn't always value. Plus the rent up here bears up under scrutiny at those costs.

I do believe that yes, the surrounding neighborhoods are going up in price, pretty steadily. You would think that a good indication.

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nyxmike    3

The article said they only expect 5 out of the 7 proposed towers will be built...

Courtside, 230 South Tryon, and Avenue are under construction. We already know The Park is dead, so that means that either The Vue or the Epicenter will get built, but I am hoping for both. I thought 20 to 30,000 more people out of the metro are willing to live downtown, so hopefully the article is wrong...

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atlrvr    1002

Again, I tend to think EpiCentre will only happen as apts......

I think that the rest will happen as condo, but certainly no new high-rises would be successful until at least a late 2008 completion.

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A2    1

The article said they only expect 5 out of the 7 proposed towers will be built...

Courtside, 230 South Tryon, and Avenue are under construction. We already know The Park is dead, so that means that either The Vue or the Epicenter will get built, but I am hoping for both. I thought 20 to 30,000 more people out of the metro are willing to live downtown, so hopefully the article is wrong...

<{POST_SNAPBACK}>

I don't buy it. I think Charlotte is a totally differnet market than most. I think what will eventually happen is that developers will be forced to build more rental. I think if you add that to the mix the market can sustain the (7) condo towers proposed. Charlotte is one of the fastest growing cities in the country and the center city is adding ammentities daily. I really think the article is full of it. I hate to see articles speak so negatively. We are currently right under 12500 residents within the loop. As soon as we hit that "magic" number you are going to see another big headline. And that will be "RETAIL". Once this develops and takes root the retail/residential development will feed on itself. I think of it as a domino effect. I love cnter city and I am thoroughly excited to see the condos going up. I think instead of a market bust you are going to witness a market boom. Real Estate is highly localized. It's not a national thing. We are not Miami. I see that city going through a real bust with the amount of speculation going on in that city. I think more of Charlotte's demand is genuine and not pure speculation. People really do want to be a part of Charlotte and buying their residence downtown makes them that much more a part of it. :thumbsup:

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ElricSeven    0

I don't buy it. I think Charlotte is a totally differnet market than most. I think what will eventually happen is that developers will be forced to build more rental. I think if you add that to the mix the market can sustain the (7) condo towers proposed. Charlotte is one of the fastest growing cities in the country and the center city is adding ammentities daily. I really think the article is full of it. I hate to see articles speak so negatively. We are currently right under 12500 residents within the loop. As soon as we hit that "magic" number you are going to see another big headline. And that will be "RETAIL". Once this develops and takes root the retail/residential development will feed on itself. I think of it as a domino effect. I love cnter city and I am thoroughly excited to see the condos going up. I think instead of a market bust you are going to witness a market boom. Real Estate is highly localized. It's not a national thing. We are not Miami. I see that city going through a real bust with the amount of speculation going on in that city. I think more of Charlotte's demand is genuine and not pure speculation. People really do want to be a part of Charlotte and buying their residence downtown makes them that much more a part of it.  :thumbsup:

<{POST_SNAPBACK}>

Huzzah! The problem with news articles is that they tend to be poorly researched and overly rosy, or overly pessimistic. They want it to be "news" and not just information. They have to sell papers you know.

I found it ironic that this is the same paper that's been shouting the rise of the center city with articles every other day and typically three or more columns devoted to development and retail.

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A2    1

Huzzah!  The problem with news articles is that they tend to be poorly researched and overly rosy, or overly pessimistic.  They want it to be "news" and not just information.  They have to sell papers you know.

I found it ironic that this is the same paper that's been shouting the rise of the center city with articles every other day and typically three or more columns devoted to development and retail.

<{POST_SNAPBACK}>

could not agree more....

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SmellyCat    0

hopefully as Charlotte becomes a world class city it will substantially upgrade its media coverage...both print and broadcast. It's really lacking and even embarrassing at times.

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monsoon    0

Well....the 70's also saw skyrocketing crime rates, and true white flight.....the fact now is that downtown living is "cool".  Environmentalism is gaining acceptance.....perhaps one day people who drive SUVs will feel persecuted much the way today's smokers feel.

Who knows how long the trend will continue to move back into urban cores, but I would say that both generation X and Y will tend to follow that trend.

<{POST_SNAPBACK}>

Actually its my perception that environmentalism was bigger and better in the 60s & 70s that anything close to the mass consumerism society that we have now. And vehicles got better gas mileage in 1979 than they do now in 2005.

And case in point, even in this educated crowd, 1/2 of the conversations that take place here are over what new chain store is opening in Charlotte. Gen X & Gen Y has a lot to learn about sacrifice to save the environment.

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monsoon    0

I don't buy it. I think Charlotte is a totally differnet market than most. I think what will eventually happen is that developers will be forced to build more rental. I think if you add that to the mix the market can sustain the (7) condo towers proposed. Charlotte is one of the fastest growing cities in the country and the center city is adding ammentities daily. I really think the article is full of it. I hate to see articles speak so negatively. We are currently right under 12500 residents within the loop. As soon as we hit that "magic" number you are going to see another big headline. And that will be "RETAIL". Once this develops and takes root the retail/residential development will feed on itself. I think of it as a domino effect. I love cnter city and I am thoroughly excited to see the condos going up. I think instead of a market bust you are going to witness a market boom. Real Estate is highly localized. It's not a national thing. We are not Miami. I see that city going through a real bust with the amount of speculation going on in that city. I think more of Charlotte's demand is genuine and not pure speculation. People really do want to be a part of Charlotte and buying their residence downtown makes them that much more a part of it.  :thumbsup:

<{POST_SNAPBACK}>

Actually an examination of where the population in Mecklenburg county is moving would say otherwise. Since 2000, the county population has risen by 75,000 people. Yet during this period, the DT population has increased by what, 3500 people at best? People are very happily moving to the area in great numbers and the downtown is not on their radar screen if you believe these numbers. The pressure is so bad on places such as Huntersville, the Huntersville City Council has moved numerous times for the last 10 years now to stop development in its jurisdiction. Yes, stop development.

The Center City is but just but one of numerous neighborhoods in the city. It is very expensive one to move into and it does not solely represent "Charlotte". Moving there does not release you from owning a car from a practical standpoint and there are many disadvangages including the very tiny spaces to live in, noise and other problems with urban living. Sure it appeals to some but for most people it does not. And there are plenty of people in town that would suggest that you have to live in Dilworth, Myers Park, or Eastover for the real true Charlotte experience. I know many of these people who would also say that unless you were born here you can't really be part of "Charlotte". They are not correct in this either.

It also doesn't help that every time BofA and Wachovia merge, a number of high paying jobs leave the city and others are going to India. My guess is the DT employment figures are not changing that much, so while the Charlotte economy is indeed growing, its not clear to me that it is driving much of the downtown building boom.

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ElricSeven    0

Actually its my perception that environmentalism was bigger and better in the 60s & 70s that anything close to the mass consumerism society that we have now.  And vehicles got better gas mileage in 1979 than they do now in 2005. 

And case in point, even in this educated crowd, 1/2 of the conversations that take place here are over what new chain store is opening in Charlotte.  Gen X & Gen Y has a lot to learn about sacrifice to save the environment.

<{POST_SNAPBACK}>

Ironically enough, most of the gas guzzling SUV drivers I know were the same people who were environment freaks in the 70's. I think most (and I emphasize most, not all) people just shift with the crowd and with the demands of the times. Paying 15% of your income out in energy costs tends to make you conscious of it, whether you think it is moral or not. Regardless, I won't question the trend as I think it is a healthy one.

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Real Estate is highly localized. It's not a national thing.

<{POST_SNAPBACK}>

True, except developers are building based upon national -- not local -- trends. I worry that the current high-rise residential dev. trend is too much too soon. Mind you, I don't see this as a problem solely for Charlotte, but the nation as a whole. I just don't think we're doing enough to address the real reasons we can't revive DT in most American cities.

ITA with you about Miami. Florida as a whole is about to wake up to a real estate nightmare. I think real estate bubbles like that are going to eventually hurt the industry as a whole, including Charlotte. We saw the same thing happen in CA in the 80s and 80s. They killed the entire market for a while there. They really ended up screwing the entire country in many ways...

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atlrvr    1002

Using your numbers.....and I would say they are probably accurate within 10% either way......"Uptown" has accounted for 4.6% of the county's growth yet the area only occupies 0.3% of the available land to move.......so I would say that people are probably moving to Uptown as a very local area at a much greater rate than most any other part of the county.

But as to whether most people chose and urban or suburban lifestyle, yes, the majority are still chosing suburban.

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atlrvr    1002

We saw the same thing happen in CA in the 80s and 80s. They killed the entire market for a while there. They really ended up screwing the entire country in many ways...

<{POST_SNAPBACK}>

Not Charlotte.....I just got out of a meeting with a developer who moved here from CA, who freely admitted that he paid $50k more than he should have for his house on Lake Norman, but he didn't care because it was such a great deal compared to CA. :rolleyes:

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nyxmike    3

Does Charlotte bother to encourage companies coming there to relocate downtown? Most of the offices being built are suburban. Maybe Charlotte should look at adding incentives to encourage more companies to move downtown (unless they already do and I am unaware of it).

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