3344!

[monsoon]

3344 is the number of proposed and underconstruction condos in highrises in downtown Charlotte. This number does not include the multitude of condos in buildings less than 13 stories tall or outside the loop. This is according to Doug Smith's rundown in today's paper. I am going to make a wild guesstamation based on the article and say the median average price of these units is somewhere in the neighborhood of $400K

He also notes that now that 106 unit Courtside has completed, the first of the new series of highrise condos to be finished, that 21 of these units have immediately gone up for resale. Adding unsold units and one gets that approximately 25% of the building is for sale and it is only just completed. Developers don't like this as it pushes up inventory and drives down prices.

3344 $400K condos seems like an excessive number to me given the number of lowrise projects that are going up as well. What is your opinion?

[dubone]

50000 people moved to the Charlotte region last year (right? or was some other recent year?). National studies show that 1-2% of metropolitan regions want to live in urban and/or high rise projects in the center of the city. These 3344 units are spread out in delivery of multiple years, year are still only a tiny fraction of the people living here.

I believe that it is reflective of downtown finally being a nice place to live, opening up development possibilities. I also believe it is based on the national trend of the current young generation wanting to live downtown versus the suburbs.

I believe that some percentage of those units was bought by flippers, but I also believe that is just part of the healthy growth that we have been experiencing uptown. That said, I suspect there will be price plateaus after the spikes of availability when the projects are done.

[SmellyCat]

I don't think 20% as investment units is actually that bad of number, in fact, it's probably about average. And not all investors are "flippers" either - some are just buying for the purpose of renting them out for the medium to long term. And having a small number of flippers does add some liquidity to the market.

I believe the average investor % in new condo projects in South Florida is about 50-70%, to give some perspective.

[Vitamin_N]

At least we're not Miami:

...about 25,000 condos are under construction in Miami-Dade County, with two-thirds costing $700,000 or higher; another 25,000 units have gotten building permits and 50,000 have been announced for future construction.

link:

http://www.dallasnews.com/sharedcontent/dw...oz.4a9c1dc.html

[rockhilljames]

Well that puts things in perspective.

I agree, around 3500 units coming online over the course of three years doesn't seem that much for a metro population of around 2 million. Again, if only 5% of the people in the metro want a downtown, urban lifestyle that still leaves a lot of room to grow.

[monsoon]

Well that puts things in perspective.

I agree, around 3500 units coming online over the course of three years doesn't seem that much for a metro population of around 2 million. Again, if only 5% of the people in the metro want a downtown, urban lifestyle that still leaves a lot of room to grow.

The 2million is the CSA population spread over a 6000 sq mile area. A more relevant number would be city population growth, without annexation which is a much much smaller #.

Last year, the census estimated that 24,577 people moved into Mecklenburg. 65% of that went into the surrounding towns and in Mecklenburg. This means that 10,000 or so people moved into Charlotte. Now 5% of that is 500 people. This means that over 3 years, you have 1500 people moving downtown to be shared amongst 3344 highrise condos, dozens of lowrise projects and resales. It just doesn't compute. Even if you double the numbers it still doesn't compute.

[ElricSeven]

Well that puts things in perspective.

I agree, around 3500 units coming online over the course of three years doesn't seem that much for a metro population of around 2 million. Again, if only 5% of the people in the metro want a downtown, urban lifestyle that still leaves a lot of room to grow.

I'd still be worried if you've reserved a $600 per square foot place at the Vue with some thought toward doing anything but living in it for a few years.

[dubone]

Also, Courtside come online half a year ago, and some of those other units won't come online until 2010, so that makes it a four year spread. I think these numbers are great proof that uptown is growing at a much more reasonable rate than most think. I mean, how many times that number are being built in the suburbs with similar price points. This is a small fraction of that.

[monsoon]

Also, Courtside come online half a year ago, ....

And 25% of it is already on the market? That does not sound healty to me.

[SmellyCat]

And 25% of it is already on the market? That does not sound healty to me.

Again, not really an alarming figure when you consider that investors/flippers typically make up 20% of any project. I would also surmise that because Courtside was one of the first condo projects announced and people got in at a fairly low basis (less than $250/sf??), many of those people who originally were planning on living there are compelled to capitalize in this frothy market which now seems to average $350/sf or more. You would think the higher priced projects announced since Courtside (Vue, Metropolitan, 210 Trade, etc.) would be more owner-occupied oriented in nature and not as attractive to flippers and investors.

[rockhilljames]

Metro, you always seem to find the black cloud behind the silver lining!

The worst that could happen is that if developers are building too many units, the overstock would cause prices to drop, resulting in more affordable living downtown. Some investors would lose out, but that's what speculative investing is, sometimes you win and sometimes you lose.

The development groups building the condos (outside of the Park) are very experienced companies. They're not going to start a project that they don't feel is financially viable. In that regards, I'd say they've done enough research as to whether the pace of development is too much or not.

I think some projects are obviously smarter buys and much more likely to be sucesses than others, but keep in mind that many of the project cater to drastically different markets, so there is a diversity in stock there as well.

[ElricSeven]

Again, not really an alarming figure when you consider that investors/flippers typically make up 20% of any project. I would also surmise that because Courtside was one of the first condo projects announced and people got in at a fairly low basis (less than $250/sf??), many of those people who originally were planning on living there are compelled to capitalize in this frothy market which now seems to average $350/sf or more. You would think the higher priced projects announced since Courtside (Vue, Metropolitan, 210 Trade, etc.) would be more owner-occupied oriented in nature and not as attractive to flippers and investors.

Another thing you'll notice, though, is that there hasn't been quite the huge jump in value of the larger units. Not many of those are pressing far past $300/square foot. I'm thinking that $300 psf is the new $200 psf and if you've paid somewhere in that range, you're going to be pretty safe. I know a lucky person that got into Courtside very early at an astonishing $190 or so psf. So I think you do have some profit-taking motivated sales.

Again, though, I'd be loathe to go under contract on a place much higher than $400 psf. I think this whole thing is all about price. Don't pay top dollar right after hearing some slick sales pitch, buy only with the intent of living and the place and you'd be fine. I think it will be flippers from NYC that see $600 psf and think it is some kind of bargain and then buy without even intending to live here, that will screw the pooch.

[monsoon]

Metro, you always seem to find the black cloud behind the silver lining!

If there is one there, it is worth discussing. It seems to me that a dark cloud is forming over the downtown condo market. One that is already raining on developments elsewhere if the other forums on UP are any indication. If it is not to happen here, what is it about Charlottte that makes it immune from over speculation?

Afterall, if 21%-25% of the construction market right now is being satisfied by pure speculation that seems ultimately sounds like a recipe for a big problem. 25% of 3341 means 835 units being built where there isn't really a need. Ultimately someone is going to be left holding the empty bag.

[SmellyCat]

One aspect that hasn't been discussed is that the Charlotte rental market is bursting at the seams, especially within the 277 loop. Moody's just recently rated Charlotte's overall apartment market one of the best in the U.S. In theory, this should drive rents up enough to make the rental market unattractive to people who want to live uptown, thereby persuading many of them to buy instead. It also should create a rental market for some of those 835 condo units of overhang.

[49er]

at the end of the day the real truth is that downtown has become a very popular and desired place to live for thousands and there is nothing inflated or artifical about that. what we are seeing is pent up demand that resulted from a supply probably for the years before this surge. At some point we will reach the tipping point where announcements drop off and maybe a few projects are canceled...its just inevitable. i think the "dark cloud" is looming over investors who are in it for nothing but the money.

However, a point that perhaps metro or someone has pointed out in the past is the lack of diversity downtown. It really has become an enclave for higher income 20's and 30's singles looking to party and meet people. At 28 and married, I have come to the realization that downtown only offers dining options and nothing else for me...on a regular basis at least. I did the party scene down there for 5 years or so.

[MZT]

...Where's A2 on this thread?? I guess he's still packing down that cannon ball.

[dubone]

Also, metro, your number are looking at newcomers to Charlotte. Much of the high rise market includes people already living in Charlotte but there wasn't any high rise product to satisfy them. So much of this is pent up demand. Also, the studies that have been cited by Furman and others show a national trend of 1 to 2 percent of the entire metro area wanting to live in a downtown setting. So shifting that metric to a city population would not be consistent with the market demand study.

[monsoon]

Maybe it's because I spend too much time on UrbanPlanet, but I have not heard from anyone that I know, or anyone they know who are lining up to sell their houses to move to a small condo downtown. I am sure they exist, but I am not convinced there is that much demand for $400,000+ condos in this city. It's one thing to want a condo, its quite another to be able to afford it, and most, I presume, who have made it to the income levels to afford something like this, want a house with a yard. If not, there would not be such pressure on places in this county like Huntersville to keep building such development.

[ElricSeven]

Maybe it's because I spend too much time on UrbanPlanet, but I have not heard from anyone that I know, or anyone they know who are lining up to sell their houses to move to a small condo downtown. I am sure they exist, but I am not convinced there is that much demand for $400,000+ condos in this city. It's one thing to want a condo, its quite another to be able to afford it, and most, I presume, who have made it to the income levels to afford something like this, want a house with a yard. If not, there would not be such pressure on places in this county like Huntersville to keep building such development.

I sold a house in the 'burbs to buy a downtown condo. I've heard of a few empty-nesters doing the same. Young and single people, though, appear to be very interested and there are quite a few of them. I think it is less of a supply problem than a price problem. The shape of the supply curve near the top end (north of $400K) starts to get to be pretty rarified air for most 20 and 30 somethings, unless they're relo's from more expensive areas. Which I do see a lot of. Anything under $400K seems to do really well. In fact, Courtside units in the 1,000 square foot range have much better re-sale per square foot prices ($350 or more) than the larger units which seem to be stuck in the low $300 per square foot range. I think this reflects that $400K barrier.

[ChiefJoJo]

Don't forget about folks that may choose to move from eleswhere in the city or the region into DT Charlotte. Say the couple with a 150k-200k combined income that has a house in the burbs, but wants a more urban, walkable lifestyle close to their jobs in center city. I'm sure there are a decent number of these people, especially with awful traffic on the freeways and rising gas prices.

[rockhilljames]

Two of my friends recently sold their places and moved downtown. One sold a house off Selwyn Avenue (and got WAY more than it was worth, in my opinion) and the other actually sold one of the 3030 South units to move downtown.

Neither had families, which I think is a strong indicator of who those folks are.

[SmellyCat]

I know several people at my workplace - at the fairly upper management level - who already own $750,000+ houses that have put money down on uptown condos in that 400K+ price range. They generally live far enough away from uptown (either Ballantyne or Davidson) to justify that this is their "urban getaway". One guy I know often works really late and plans on using his as a crash pad. Another couple is planning to use it strictly for days/nights when they are attending Panther games or the theatre.

Goodness knows, there's a lot of disposable income floating around Charlotte and the banks are doing quite well. For those lucky souls who are reaping the benefits, why not buy a downtown condo as a "2nd home"?

[ElricSeven]

I know several people at my workplace - at the fairly upper management level - who already own $750,000+ houses that have put money down on uptown condos in that 400K+ price range. They generally live far enough away from uptown (either Ballantyne or Davidson) to justify that this is their "urban getaway". One guy I know often works really late and plans on using his as a crash pad. Another couple is planning to use it strictly for days/nights when they are attending Panther games or the theatre.

Goodness knows, there's a lot of disposable income floating around Charlotte and the banks are doing quite well. For those lucky souls who are reaping the benefits, why not buy a downtown condo as a "2nd home"?

Or they need places to keep their girlfriends away from their wives.

[atlrvr]

I have a friend who lives in University City in a condo he owns. He will be moving into the Avenue when it is completed.

Also, a lot of demand comes from people that are renting, and aren't as location sensative, but when they buy they want to be where they perceive is a good lifestyle/financial investment.

Talking to a couple of developers in Charlotte that build downtown condos, the most likely buyer of a uptown condo is someone who moved to Charlotte ~5 years ago from the northeast, bought out in the suburbs, and then realized they missed that urban feeling, so are moving downtown and justify it because it still cost WAY less than a comparable condo/location in New York/Boston/D.C.

[ElricSeven]

I have a friend who lives in University City in a condo he owns. He will be moving into the Avenue when it is completed.

Also, a lot of demand comes from people that are renting, and aren't as location sensative, but when they buy they want to be where they perceive is a good lifestyle/financial investment.

Talking to a couple of developers in Charlotte that build downtown condos, the most likely buyer of a uptown condo is someone who moved to Charlotte ~5 years ago from the northeast, bought out in the suburbs, and then realized they missed that urban feeling, so are moving downtown and justify it because it still cost WAY less than a comparable condo/location in New York/Boston/D.C.

Like someone returning from a job in Boston?