The Pavillions at Takoma, condo project is cancelled.
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No 100 percent financing available? Smart move on these builders part.
ReplyDeleteGreat news! Now maybe Montgomery County can put a road through there.
ReplyDeleteI just drove by that area yesterday along Blair Road.
ReplyDeleteHere's what happened in my opinion:
1. Greedy developer was looking to build "exotic", "upscale" condos starting in the $350,000 territory for one-bedroom units and at least $450,000 for two-bedrooms.
2. Greedy developer then realized that the DC condo market is tanking fast. Uh-oh.
3. Greedy developer then realized that he ain't gonna find many takers at those prices. Especially in a rock-solid middle-class, left-wing progressive neighborhood in Takoma Park where you won't find many upscale shopping luxuries.
Decision time: Do I sell condo units at a reduced fee with incentives (i.e. MICA condos) so actual middle-class people can afford something and I get some ROI? Or do I scrap the whole project all-together and cut my losses because I won't settle for anything less than having affluent yuppies paying top-dollar for real estate.
The greedy developer went with the latter choice. This is not a cause for celebration but rather this should be viewed as a tragic outcome of the greedy bubble mentality that has destroyed affordable housing in the Washington, DC region for many years to come.
"Decision time: Do I sell condo units at a reduced fee with incentives (i.e. MICA condos) so actual middle-class people can afford something and I get some ROI? Or do I scrap the whole project all-together and cut my losses because I won't settle for anything less than having affluent yuppies paying top-dollar for real estate."
ReplyDeleteThis is moronic. You're actually claiming that a developer chose to lose more money by not developing the condos because they were in a snit over the potential clinetele?
Nope, they scrapped it because it's early enough in the project to avoid a lot of costs to build something that may not cover the costs. That's all. There's no conspiracy. You're just being delusional.
...Developer didn't hook up with the right people...cue the current RealEstateRealist.com: "Inflated Appraisals...A Dirty Little Secret"...
ReplyDeleteThe appraiser/author admits its an industry-wide story--"not just sub-prime...inflated numbers on all types and amounts of loans. Bottom line--the lending situation is worse than numbers indicate."
I drive by this site on Blair road all the time - I suspected something was up as the "coming soon" sign started looking a little old. One more bites the dust!
ReplyDeleteGotta luv it. One more complex means increase supply which means lower price at which supply meets demand. A good thing for anyone looking to pay less ... as the BHs claim to be doing. Yet they cheer at its demise? The only one coming out ahead here is the developer who cut his loses ... And the BHs are, as usual, routing for that which is against their own self bests interest. Given their inability to know what is good for them and what isn't, is it any wonder that they haven't managed to become homeowners yet?
ReplyDeleteHey Lance,
ReplyDeleteThese guys "managed" to become homeowners. They seem really smart...
Money Magazine reports from California. “Bo and Ana Apostolache loved their three-bedroom home on a cul-de-sac near Irvine, Calif. when they bought it six years ago. Best of all, they could easily cover the $1,400 monthly payments on their $175,000 mortgage. Over the next few years, as interest rates dropped and their home price tripled in value, the couple refinanced several times and tapped $200,000 worth of equity to pay for home improvements, and a Barbados vacation.”
“By 2005, although they had doubled their loan balance, their payments had increased by only $400 a month. A year later, their rate adjusted up, adding another $400 in monthly payments, and Bo lost his job as a mortgage broker. Out of desperation, the Apostolaches took a $200,000 home-equity line of credit, in part to help cover the payments, but then quickly realized they were in over their heads.”
“‘It worked fine at first,’ says Bo. ‘Borrowing that much was the biggest mistake of my life,’ Bo admits. ‘I guess I just got caught up in the real estate frenzy.’”
“The Apostolaches sold their home last year, pocketing $35,000 after expenses. Bo, now working at his father’s electronics company, says he thinks they’ll be able to buy another home within a year or so. And the couple insist they have learned their lesson.”
“Says Bo: ‘The new place won’t be as impressive as the last house, but it will be one that we can afford.’”
Was this the supposedly eco-friendly development in downtown TP, near the Metro station?
ReplyDelete-- sglover
Anon 6:37 said:
ReplyDelete"These guys "managed" to become homeowners. They seem really smart..."
hmmm ... they managed to live the bubbleheads' dream ... they used their home as an "investment". I can't see why YOU'd be upset about their behavior ... Or are you a actually a closeted housing head and think they would have been better off treating their home as a place to live and not tried to turn it into an ATM?
Yes, I understand how many bubbleheads advocate selling
"high" now to rebuy "low" later, and that this couple just instead extracted their money "ATM-like" along the way. But how is this any different. Your reaction reinforces a point I have made over and over again ... Bubbleheads are wannabe flippers who just got in the game too late and are whining that others did what THEY would have wanted to have done themselves. If you've read anything I've had to say (and actually understood it), you'd understand that I don't advocating looking at your home as a source of money but rather as an expense ...with the primary aim being to minimize this expense over the long haul. This couple you refer to didn't do this. They looked at their home as an investment and ended up spending some of their "profit" along the way ... leaving them less "home" ... Stupid move.
Lance,
ReplyDelete"The only one coming out ahead here is the developer who cut his loses"
So cutting your losses is coming out ahead? Sounds like "coming out less behind" to me.
But hey, it's different this time.
Poppa Bubble says:
ReplyDelete...on the "Apocolaches" et. al, WHO would do what de-regulated banks push you to do ?
Wow, I have to disagree with some commenters that this is a negative thing (or "tragic outcome"). Seems like if developers are cancelling projects in an oversaturated market, that's the market working as it should, right?
ReplyDeleteThis is not the eco-friendly housing by the Takoma metro (which is still going forward).
I found this on Prof. Greg Mankiw's Blog:
ReplyDeleteEnglish economist Andrew Oswald has shown that across European countries, and across U.S. states, high levels of home ownership are correlated with high levels of unemployment. More conventional factors such as generous welfare benefits or high levels of unionization don't explain unemployment nearly as well as the tendency to own houses. Renting your home and staying flexible do wonders for your chances of always finding an interesting job to do.
How about the fact that this is on Blair Mill-- and who the heck wants to live on busy busy Blair Mill right across from a gas station!??!
ReplyDeletejames said...
ReplyDelete"I found this on Prof. Greg Mankiw's Blog:
English economist Andrew Oswald has shown that across European countries, and across U.S. states, high levels of home ownership are correlated with high levels of unemployment. More conventional factors such as generous welfare benefits or high levels of unionization don't explain unemployment nearly as well as the tendency to own houses. Renting your home and staying flexible do wonders for your chances of always finding an interesting job to do."
You didn't need to research an economist's findings to know that being "footlose free" allows you to be mobile and find "interesting" jobs whereever they may be. All you had to do was drive down to the local Home Depot and see all the day laborers there to figure that one out! Of course, that may also help you realize that some people don't know how to link causation with correlation. Yes James, home ownership causes unemployment ... I certainly hope you were saying that tongue in cheek!
Anonymous said...
ReplyDelete"How about the fact that this is on Blair Mill-- and who the heck wants to live on busy busy Blair Mill right across from a gas station!??!"
Everything is relative. From what another poster said above, these units were priced fairly inexpensively. $350K for a one-bedroom and $450K for a two-bedroom. I guess living next to a gas station is a trade-off for buying cheap. Besides, think how convenient that is when you're gas gauge is on empty and you're already late for work! And you don't want to miss work since you better pay that mortgage! ;)
It would be interesting to know why they cancelled the project.
ReplyDeleteI find it difficult to believe they did so because they think they can sell a one bedroom condo for "only" 350K.
With so many condos coming on line at this time, I suspect it was more because they may be anticipating a far lower selling price than $350K.
And if so, they are probably right.
350K is probably seven times DC's median household income. It's about four times Montgomery County's median household income, and this house would be in the poorer half of Montgomery County (i.e., where incomes are on the low side of the median). And one bedroom apartments are often housing for those on the low side of median income.
But I wouldn't somehow try to spin this as a significant reduction in supply. There have been so many new condos, apartments, and townhouses built in the last two years that even if every new project (and there are quite a few) stopped, supply is much greater than just a few years ago.
A Redskins fan
Speaking of supply, does "listing inventory" in MRIS count new units for sale too? I think some aggregate number might be useful there, since we're all arguing about inventory/prices.
ReplyDeleteLance said:
ReplyDelete"...these units were priced fairly inexpensively. $350K for a one-bedroom and $450K for a two-bedroom. I guess living next to a gas station is a trade-off for buying cheap."
If that is cheap, what is moderately priced? $500K for a one bedroom and $700K for two?
So the cheap one bedroom units will be sold to those earning about $70K a year. Right and live there. $350K could get you into Lofts 14 in Logan about 4 years ago, and that was for people with cash. Now it gets you crap in the middle of nowhere? There are few or no buyers for that at that price for that area.
Greater supply than a few years ago, but about to be negative growth year over year. Sorry.
ReplyDeleteShould we worry about liar loans? http://infohype.blogspot.com
ReplyDeleteInventory is starting to take off again, just like it did last year.
ReplyDeleteAlso, inventory is still higher than it was last year at this time, and that was when subprime buyers could still get loans.
Now they can't.
It's gonna get ugly.
Guys,
ReplyDeleteI pulled that $350,000 price out my behind. I have no real idea what the one-bedroom price was at the Pavilions at Takoma. I don't even think the developer advertised any purchase prices. I made a guess because the median one-bedroom condo price in neighboring Silver Spring is in the low-300s.
I am certain that it would take a serious amount of income to buy any new condo in Silver Spring or Takoma Park.
Where is the commentary regarding today's news from the Fed? Interest rate steady at 5.25%, and language suggesting that interest rate _declines_ are possible this year.
ReplyDeleteHow does that play into the bubblehead philosophy?
"Sorry losers."
ReplyDeleteYep, those poor sorry losers who bought in 2005. That must be what you meant, what with the YOY price decreases...
No, Keith, I meant those of you who spend their days hoping for others' misfortune. Unless something changes dramatically, the market has stabilized. You're through.
ReplyDeleteanon said. . .
ReplyDeleteNo, Keith, I meant those of you who spend their days hoping for others' misfortune. . .
no, actually those who wish for higher houses prices hope for others misfortune.
Lower prices mean more can afford homes and have more disposable income to have better lifestyles. The only one's who wish for higher house prices are those who gamble in the market trying to make a quick killing. Otherwise who cares if you're house now costs 400k, it just means if you try and move up you'll have to take on more even more debt than before.
Just like the idiots who say gas at $100 is good b/c we can develop "alternate" sources (i.e. ethanol . . . oh guess what, corn prices go up, duh)
saying the market has "stabilized" is like saying oh we've run 2 laps of a 8 lap course, and saying sure we are feeling it a little bit, but it's over, we'll win . . . hey buddy there are still 6 laps left!!! a lot can (and will) happen. When you're sucking wind on lap 8, then we'll see who wins.
ReplyDeleteHousing markets are generally 18 year cycles and we are done after a 1.5 year down cycle?????
Anon 8:01 said:
ReplyDelete"Lower prices mean more can afford homes and have more disposable income to have better lifestyles."
Ah ... you're one of those people who believe that it's a "zero sum game" out there! You're statement is completely true. The part you're missing though, is that it isn't obtained value a gloom and doom scenario that causes house prices to drop. Nope, the only winners in that scenario are the investors ... since they'll be the only ones with any money to spend under those dire circumstances. Your goal is instead more obtainable when people are doing well. The better they do, the more there is to go around and the easier you can afford that housing you want. A very simplistic example is that when companies do well, they pay their employees more who then bid up the price of available properties. So hint: you want the economy to do well (and prices to go up) so that you get an increasing share of that increasing wealth. And you not only get to buy the house, but get to live better too with all that is left over in a NOT "doom and gloom" scenario economy. Don't believe me? Look at any 3rd world country where the economies areN'T working ... and you'll see the only people with decent nice housing are the rich. So, the biggest irony, is that when you wish bad on others, you are also wishing bad on yourself ...
Yes, this project is on Blair Rd, on the DC side of Takoma and what actually happened was the previous developer, Centex, sold the plans to another developer. I believe they're planning on making it rental rather than condos.
ReplyDelete"Housing markets are generally 18 year cycles and we are done after a 1.5 year down cycle????? "
ReplyDeleteLoL, well, for your sake, I hope you're still alive by the time you can afford a house. I've already got one.
"Lower prices mean more can afford homes and have more disposable income to have better lifestyles."
gee, I thought renting was a dream come true for you people.
First, let me congratulate Lance on another brilliant parody.
ReplyDeleteIn the past, Lance has goine out of his way to insist that housing should be seen as an expense.
Now, he turns around and says that falling housing prices would harm people. But if housing is an expense, then lower housing prices mean that housing expense are lower, which is a good thing.
So once again, Lance really is doing a brilliant job playing an idiot. Keep up the good work, Lance.
anon said . . .
ReplyDeleteLoL, well, for your sake, I hope you're still alive by the time you can afford a house. I've already got one. . . .
And BH are the ones who wish ill on others??? Man you people ought to look in the mirror.
"And BH are the ones who wish ill on others??? "
ReplyDeleteYes.
Lance said...
ReplyDelete“Nope, the only winners in that scenario are the investors ... since they'll be the only ones with any money to spend under those dire circumstances.”
Hey “Lance”, I’ve got my down payment ready, and pre-approved for much more than I ever want to spend on a mortgage. Believe me, I can wait it out longer than any one of these FB’s going into foreclosure. Who are these “investors” going to sell to? BH’s? Sure, if the price is right.
“A very simplistic example is that when companies do well, they pay their employees more who then bid up the price of available properties. So hint: you want the economy to do well (and prices to go up) so that you get an increasing share of that increasing wealth. And you not only get to buy the house, but get to live better too with all that is left over in a NOT "doom and gloom" scenario economy.”
Gee “Lance”, I thought the economy was doing well? Well then I guess salaries have kept up with housing prices? If so, why the spike in foreclosures, toxic loans and lenders folding?
Click on my name and check out my blog...
ReplyDeleteBTW... Don't put too much faith in Friday's housing "numbers." They are annualized - There were actually 387,000 homes sold in February, for a rate of 4.6mm homes, the other 2 million is the "annualizing" factor, which is subject to interpretation (depending on which data the statistician wants to use)
We'll have a better gauge in the coming months... where the "annualization" factor is not so pronounced... based on current pending home sales, I wouldn't hold my breath for a good month!
The real big news, in my opinion, should be that the median sale price has declined 7.6% since last July... That's $17k of "paper equity" that's evaporated from the medium house... after closing costs, if you bought at that time, that means your $20,000 down payment, for now, is probably gone. That's awful.
The cover story of the latest Economist: The trouble with the housing market
ReplyDeleteCheck out "Cracks in the facade"
http://www.economist.com/finance/displaystory.cfm?story_id=8885853
For a decade, the fastest growth in America's mortgage markets has been at the bottom. Subprime borrowers—long shut out of home ownership—now account for one in five new mortgages and 10% of all mortgage debt, thanks to the expansion of mortgage-backed securities (and derivatives based on them). Low short-term interest rates earlier this decade led to a bonanza in adjustable-rate mortgages (ARMs). Ever more exotic products were dreamt up, including “teaser” loans with an introductory period of interest rates as low as 1%.
Higher payments and negative equity are a toxic combination. Mr Cagan marries the statistics and concludes that—going by today's prices—some 1.1m mortgages (or 13% of all adjustable-rate mortgages originated between 2004 and 2006), worth $326 billion, are heading for repossession in the next few years.
The harshest year will be 2008, when many mortgages will be reset and few borrowers will have much equity.