I was recently asked about the state of the Phoenix condominium market, which we haven’t looked at lately. M pulled some numbers for us, and the numbers speak volumes about what’s happening out there. [So does this picture from the 3rd Avenue Lofts in Scottsdale]
Here’s what M had to say: [Numbers from 9/11]
Active 5,775 1,997
Under Contract 1,993 1,520
Sold (Past 30days) 860 528
The number in red is the total of REO and pre-foreclosure. 76% of the pending sales are "distressed", but only 35% of listings.
You and I both know the condo market was a haven for speculation and fraud. Some of the largest commercial defaults in the Valley are new condo projects and the conversions.
With the overwhelming majority of condo sales being foreclosures, it doesn’t bode well for the other 65% of listings out there.
M also sent me a list of the condominium defaults from the beginning of this year- there were 4546 of them. The value of the original loan amounts was nearly a billion dollars. When you consider that according to ARMLS, the median price of condo/townhouses was $170,000 in July of 2005 but only $96,600 in July 2009, you can see that there are going to be some serious writedowns.
Financing is exorbitant for second-home and investment condos — if you can even get a loan. Expect to pay 6.3 percent, for instance, instead of 5.3 percent for a primary residence.
In the worst-hit condo markets (Florida, Vegas, Phoenix), Fannie and Freddie are constantly concocting ever more stringent regulations.
Homeowners associations traumatized by rising foreclosures and owner delinquencies are shutting down luxury amenities to preserve cash. It may not be much fun to live in a development that has sacrificed its pool, spa, and golf course to the god of fiduciary responsibility.
Developers want out, out, out, which means that they’re cutting corners to finish up buildings. Lawsuits abound between dismayed owners of new, flawed units and developers whose projects don’t look like the sales brochures.