Yesterday, Curbed tried to make sense of CA Assembly Bill 728 (allowing developers to accept binding non-refundable 3% deposits on pre-construction developments) and the current condo market; sales at the Watermark; and the relevancy of new sales centers to consumers. Unfortunately, we think they missed the mark on all three.
Curbed statement #1: “While no one’s saying, the likely reason for this change [AB728?] is the glut of condominiums on the market, selling slowly or not selling at all.” Keep in mind that AB728 was signed into law back in September 2003 by then Govenor Gray Davis (definitely no “glut” or lack of sales back then). And as far as a current market “glut”? We’re not seeing it (Yet).
Curbed statement #2: “The most high-profile and worrisome project being the Watermark . . . where six months after opening the sales office, only thirteen units have closed escrow, or ten percent.” As background, it’s important to know that while the Watermark sales office opened six months ago, occupancy wasn’t an option until last month. Would you close escrow and start making mortgage payments before you had to? Neither would we. The relevant statistic is that 65% of the units have either closed escrow or are currently in contract (with no speculative resales currently listed on the MLS). That being said, 50 units remain available, the pace of sales appears to have slowed, and we’ve noticed that marketing efforts are being ratcheted up.
Curbed statement #3: “These new sales centers don’t mean much to consumers.” Actually they do. As Damion Matthews writes, “condo buyers are going to have some dilemmas — do they commit to taking a fabulous brand new high rise condo with bay views and the works, which they can’t move into for another year or two; if so, which one do they chose (based only on floor plans, renderings and model interiors); and if not, what’s going to happen to the value of their place at the Metropolitan or Bridgeview once the inventory of all those new pads opens up in late 2007?”
And as far as our 2,700 number (Curbed: “Supposedly, 2700 units have yet to be built…”), that’s not the entirety of the new development pipeline, but simply the minimum number of units that we expect to be represented by sales offices opened by the end of the summer. And it’s a number, and a market, that changes every day, so keep ‘plugging in’!
∙ Doing it Florida Style [Curbed]
∙ Your Condo Here [democrats.assembly.ca.gov]
∙ 2,700 New Condos On Sale Soon [SocketSite]
Does your deposit go bye-bye if the developer goes bankrupt? Or are deposits held in an escrow account and merely used to indicate to potential lenders the viability of the project?
Colin – great question. Deposits are held in escrow. Run, don’t walk, away from any “new development” that tells you otherwise.
It looks like the Curbed folks are still a little confused on this issue. In talking about the market dynamics, they say realtors will be shut out of new developments. To the contrary, in a buyer’s market, a realtor is a new development’s second best friends. It’s the realtor who will encourage or discourage a buyer one sales office versus another — and they still get 2.5 or 3% commission, no matter what the buyer choses.
Time to revise those numbers!
I just received news that “The Odeon” is set to sart selling in June. Now this is a really interesting offering – it’s right above the H&M on Post Street. I think it’s about 30 residences.