  Toog05 Member Username: Toog05 Post Number: 174 Registered: 03-2006 |
December purchases up 33.9% on previous year Louis Aguilar / The Detroit News DETROIT -- Tumbling prices for once-pricey downtown lofts and condos are bringing in a flurry of buyers, providing a surge in December sales not seen since the bygone era of easy mortgage financing. "I tell most of my clients there is $100,000 wiggle room on certain units right now," said Sabra Sanzotta, owner of the Loft Warehouse realty agency, which specializes in downtown properties. With that bargaining leverage, Sanzotta sold six high-end units in the past month, including a downtown penthouse for $200,000. Original price: $511,000. It was her best month of sales since 2003, Sanzotta said. Seven downtown Realtors say they enjoyed one of their best months in December and see that trend continuing into the new year. Data suggests downtown is one of the few places in Metro Detroit where buyers are jumping on bargain real estate created by the national housing meltdown. Sales of houses and condominiums in Detroit jumped by a 33.9 percent in December, compared with the same month in 2006. No other market in the Metro Detroit area came close to that kind of increase, according to RealComp II Ltd., a real estate data company. It was the biggest month-to-month increase in Metro Detroit all year. http://detnews.com/apps/pbcs.d ll/article?AID=/20080130/BIZ/8 01300350 | ||
Detroitrise Member Username: Detroitrise Post Number: 1469 Registered: 09-2007 |
I wonder has the developers for The Griswold looked into this? I see they put up the bottom corner of the building already. | ||
Mortgageking Member Username: Mortgageking Post Number: 31 Registered: 12-2006 |
"I wonder has the developers for The Griswold looked into this?" Looked into what? Selling an expensive product at a significant loss? This is exactly the type of news that caused the developers to come to their senses and leave The Griswold in the dustbin. Developers aren't working to fill buildings by "any means necessary." They are in the business to make money. | ||
Ndavies Member Username: Ndavies Post Number: 2931 Registered: 10-2003 |
quote: The developer still needs to make a profit. At the $125 per square foot the people in the article were paying, the developer would have trouble covering the construction costs. Why would a developer take on the risk of building, if they couldn't make a reasonable profit? | ||
Thejesus Member Username: Thejesus Post Number: 3374 Registered: 06-2006 |
"I wonder has the developers for The Griswold looked into this?" Didn't you read? They're selling, but at rock bottom prices. You can bet your ass the Griswold developers are counting their lucky stars right now that they didn't go through with their project... This is also bad news for the prospects for any potential builds or renovations in the near future... the key thing that made all the projects in the past 5 years possible is that mortgage companies were giving more money to people than they should have and approving people for loans they should not have...now all of that's over with | ||
Jt1 Member Username: Jt1 Post Number: 11304 Registered: 10-2003 |
quote: Do you have numbers to support the claims that downtown residents have higher rates of sub-prime or ARM type loans compared to thier suburban counterparts? Many downtown developments were simply overpriced (200/sq ft for white box). The reduced prices are a matter of initial overpricing (some developers expected Chicago prices in Detroit), some has to dow with the economy and some have to do with the downturn in housing value. It certainly is not a Detroit or downtown phenomenon. What I wonder is what the $500,000 unit was in terms of location, sq. ft, ameneties. If they showed that I am sure that the reasonable price for it would have been initially way below $500K. | ||
Danny Member Username: Danny Post Number: 7096 Registered: 02-2004 |
Developers have to know that if the ecomony is slowing down. The housing marker is slowing down to. So the answer to this problem? Sell the real estate in a lower prices. You all may not make enough profits but you all have gain some customers. | ||
Thejesus Member Username: Thejesus Post Number: 3378 Registered: 06-2006 |
"Do you have numbers to support the claims that downtown residents have higher rates of sub-prime or ARM type loans compared to thier suburban counterparts?" I'm not asserting that...it's not part of my point (although I wouldn't be shocked if that were the case, but it's not relevant to this discussion) The crisis in the mortgage industry was a universal phenomenon... this discussion (and the article), however, are about downtown Detroit Not everything in life is downtown Detroit v. Detroit suburbs... (Message edited by thejesus on January 30, 2008) | ||
Jt1 Member Username: Jt1 Post Number: 11305 Registered: 10-2003 |
quote: The example from the article. The original asking price for a Condo on Cass was $177 per square foot. While they mention hw and granite it is pretty obvious from the picture of the kitchen that it is not all upgraded. $177/ sq. ft for a home on Cass is not a reasonable price. Their final purchase price worked out to $125/sq foot, much more reasonable given the location and real estate market. $125/sq ft is probably more expensive than many, many suburbs. Sometimes a few numbers like $500K do not paint the entire picture. (Message edited by jt1 on January 30, 2008) | ||
Jt1 Member Username: Jt1 Post Number: 11306 Registered: 10-2003 |
quote: Agreed. I believe that the paper is running a series on this over the week. Monday's was about developments that stopped in Auburn Hills and the surrounding areas and the early buyers that are dealing with it. My frustration lies partially with the developers. They certainly should make a profit but the amounts that they are charging for many of these projects look like they are comp'ed with cities whose downtown (and entire city) are much further along than Detroit. The only way for some of the areas in or around downtown to improve are for buyers to have opportunity to make money. When developers are asking 200K for 875 sq ft. lofts the opportunity is not there as an investment. I don't know what the profit margins are on these developments but I suspect that the prices charged are rarely in line with what the market actually dictates. That alone is keeping people out and slowing down progress. | ||
Fareastsider Member Username: Fareastsider Post Number: 796 Registered: 08-2006 |
I have been saying that the housing market is dead downtown.....I stand corrected after reading this article! Great news! | ||
E_hemingway Member Username: E_hemingway Post Number: 1543 Registered: 11-2004 |
This is good for the long term. Getting more people into these empty units should help local businesses and free up rental space for more people looking to test out the downtown area. In theory this will create a bit more vibrancy and make the area more attractive for more development further down the road. | ||
Dbest Member Username: Dbest Post Number: 78 Registered: 03-2007 |
Why all the doom and gloom? This is good news in the short term considering the fact that there is big demand downtown. Houses in Bloomfield Hills are marked down 10-50k, plenty of which are being bought, does that mean there will be no houses built there in the next few years? I guess I don't understand your logic? Its time for people to get there act together and help do what it takes to make downtown more viable, this in my opinion is the biggest problem because buyers are thinking about this way to much and the downtown cant seal the deal when the "warm and fuzzy" feeling is going on due to lack of substance IMO. BTW Went to Cincinnati yesterday and spent the day downtown and walked away very impressed, there are a ton of old storefronts(mostly occupied)littered throughout there downtown. (Message edited by Dbest on January 31, 2008) | ||
Detroitbill Member Username: Detroitbill Post Number: 443 Registered: 09-2006 |
By far the smartest strategy to take in these difficult times, Quite frankly the prices being charged on these units are more in line with what should have been in the beginning.. We are not inline by any means with cities like chicago, toronto, or even baltimore for that matter. Sell what the market will bear,,establish a viable community and in time the values will take care of themselves.. Its seems there are enough people who are willing to pay reasonable prices now,,,this is definetly encouraging. | ||
Diesel Member Username: Diesel Post Number: 46 Registered: 01-2007 |
The only problem with that theory is that developers pay the same amount for building materials/construction labor/permits/utilities ... as developers in those cities mentioned detroitbill. Yes the land may be cheaper but not always enough to offset the cost. | ||
Rugbyman Member Username: Rugbyman Post Number: 221 Registered: 06-2005 |
Someone on here probably has the expertise to answer this: What is the difference in a developer's profit margin on a for sale rehabbed condo over making the property a rental for five years or something before going condo like the Lofts at Merchant's Row (is doing in the future?)? It seems to me that you'd make a nominal sum over the first few years to recoup some construction costs, then selling out at a lower price than would have been originally necessary had you flipped it right away. Granted, it's not the quick buck you'd get otherwise, but let's face it- it's not like new construction is blowing up right now. Longer term profits sound a lot better than going under idle. | ||
Genesyxx Member Username: Genesyxx Post Number: 855 Registered: 02-2004 |
I'm confused: so sales of condos are up, but condo projects are failing because of not enough buyers? | ||
Danny Member Username: Danny Post Number: 7100 Registered: 02-2004 |
Downtown Detroit development news: The first corners of the concrete walls are put in place for the parking structure for the proposed Griswold Condos. Even through they scrapped the condo project. | ||
Livernoisyard Member Username: Livernoisyard Post Number: 4998 Registered: 10-2004 |
quote:What's so hard to believe. Developers (initially, at least) invest in projects in order to make profits. However, they are often heavily leveraged with debt that they cannot hang onto losing projects because of debt service (and property taxes) and their short-term notes becoming due. Therefore, they liquidate their unsold inventories so not to go broke. The same will eventually occur for those residential home-owners who haven't been able to sell their houses the past few years. The same occurred during the early 1980s in Detroit and Michigan as a result of the severe recession resulting from the Carter years. A high percentage of new home-owners simply walked away from their homes because the unpaid principal of their mortgages far surpassed their market value. | ||
Alan55 Member Username: Alan55 Post Number: 1183 Registered: 09-2005 |
"The same occurred during the early 1980s in Detroit and Michigan as a result of the severe recession resulting from the Carter years." Actually, the recession was due to the various actions of the OPEC oil cartel, including embargos and prices increases which cut car sales. But please, continue on, don't concern yourself with the truth. | ||
Mwilbert Member Username: Mwilbert Post Number: 82 Registered: 11-2007 |
1) I don't think there is any serious dispute that the early 80's recession was caused by the Federal Reserve under Paul Volcker raising rates sharply to reduce inflation. There is probably some dispute about what caused that inflation, but the main theory seems to be that during the 70's the Fed had allowed inflation to rise far too much, partly in response to increasing energy prices, and it got out of hand. I don't think there is any real way to blame Carter for that--inflation started rising under Johnson, and actually peaked under Nixon/Ford. Carter appointed Volcker, so I guess you could blame him in that sense, but Volcker didn't really have much alternative. 2) I'm no accountant, but traditionally, if you build/renovate a building and rent it at first, you can depreciate it, so that some/all of your rental income turns into capital gains when you sell. Sometimes that means you just sell the whole building when the depreciation runs out (the next owner can start over again), or you can sell it as condos. I don't know if this works differently with projects that use weird tax-subsidized financing to start with. | ||
Livernoisyard Member Username: Livernoisyard Post Number: 5001 Registered: 10-2004 |
About the only positive Carter happening back then was their (ICC) benign neglect of all the trucking tariffs dating back to FDR that essentially mandated that returning trucks couldn't pick up and deliver anything because of the millions of individual monopolistic tariffs. Ditto, for the states with their own version of the tariffs. [I get a kick out of those on DY who bend simple historical facts to their ends.] Carter didn't do much of anything until near the end of his first (and only) term. By then, it was too late for the country, and him because too many voters wouldn't reelect him. So, at almost any given time before, most trucks were empty half the time. The effects of Carter's non-enforcement of those trucking tariffs continues to this day because they were abolished--some forty years long overdue then. Unfortunately, Carter (following the leads of Nixon and Ford) didn't accomplish much else but stagflation. quote: | ||
Mikem Member Username: Mikem Post Number: 3567 Registered: 10-2003 |
Wait, condo sales are up because of Carter's non-enforcement of trucking tariffs? Who knew? | ||
Livernoisyard Member Username: Livernoisyard Post Number: 5002 Registered: 10-2004 |
Yup! Carter did good there! But you knew that... | ||
Llyn Member Username: Llyn Post Number: 1909 Registered: 06-2004 |
quote: This sounds like it should be true, but it's not. Case in point: A few years back I bid a project for the GM plant in North Tarrytown NY (when it was still open). Since I didn't know any companies in the area, I got five electrical bids for work that I know would've run me 120,000.00 to 140,000.00 in the Detroit area. The result? All five companies were within 20,000.00 of each other... at 365,000.00 to 385,000.00. Connecticut and Boston are in the same price range as New York. I know St Louis is less, but is still about double Detroit's cost. Not sure about the difference with Chicago, but I know it is more there than here. Again I don't know the price difference with California, but I do know that overall labor costs are considerably higher there than Detroit. (I can tell you, also, that Shreveport is noticeably cheaper.) All labor costs are not the same. The primary difference is not in the rate per hour, but in the kind of production you get from workers. Despite Detroit's reputation as a union town with expensive labor, when it comes to construction our labor force is very productive. So yes, you can (and do) build cheaper in Detroit. | ||
Hamtramike Member Username: Hamtramike Post Number: 482 Registered: 12-2003 |
Mwilbert/Rugbyman, Any of the the projects financed in part with national and state historic tax credits (Merchants Row/Kales) have rules that require the projects to remain rentals for at least five years. | ||
Rugbyman Member Username: Rugbyman Post Number: 222 Registered: 06-2005 |
I knew that, I was just curious what that mandate did to the developer's bottom line. That and why my voting Democrat hurts America. | ||
Emu_steve Member Username: Emu_steve Post Number: 562 Registered: 11-2006 |
quote: "I'm confused: so sales of condos are up, but condo projects are failing because of not enough buyers?" there are two markets: 1). Existing units might be cheap and mortgage money is cheap. That should mean a good market. 2). New units might be more expensive to construct/develop/renovate then they could sell for. That means they should be a no go. There are essentially two markets: new and resale. This is why there are not much new construction in cities like Detroit - it would cost more to build a new house then it would be expected to sell for. | ||
Eric_c Member Username: Eric_c Post Number: 1160 Registered: 11-2003 |
"This is why there are not much new construction in cities like Detroit - it would cost more to build a new house then it would be expected to sell for." That's interesting - considering Detroit has built more new homes than any other community in Southeastern Michigan since 2006. |
