That has changed, at least in some urban condo communities.  I have written before about certain urban communities where lenders are not willing/or are unable to loan money for purchases.  At the time, I suspected that prices would suffer greater at those communities.  Well now, it seems that there is evidence to suggest that is the case.

Edgewater at Hayden Ferry, in Tempe is one of my favorite urban communities.  I love the location and the style, the building seems to be extremely well-built, and it seems to be very well-managed.  Unfortunately, due to several things beyond the control of management, lenders will not loan money there to condo buyers.  Because of this, prices have gotten pummeled.  A good example of this is a two bedroom condo with over 1600 square feet on the sixth floor of Edgewater, with fantastic upgrades, that just sold for $220,000.  That’s less than $140 per square foot for commercial grade construction in one of the best locations (IMO) in the Valley!  The property originally sold for $835,000 less than four years ago.  Now, I don’t typically look at previous sales prices to determine whether a deal today is great or not, but in this case I think it is significant.  While we have seen many properties sell for 40 or 50% of their original sales prices it is unusual to see a Class A property sell for 26% of the original price.  Clearly, the reason for such a significant drop is because buyers must pay cash at Edgewater….fewer Buyers leads to lower prices.  I believe that it is just a matter of time, probably very little time, before lenders will loan money to buyers at Edgewater.  When that happens, I believe that prices will begin to trend upward.  Are we at the ‘bottom’?  I don’t know.  But for those of you who have cash to spend, buying a fantastic two bedroom condo with fabulous lake views for $220,000 sure makes sense to me.

Answer:  You’re not the only one.  Many prospective buyers are “sitting on the fence” and not buying now for this very reason.  But, more and more people are pulling the trigger.  Here’s why.

• The United States housing market just wrapped up its best season in three years and prices are up 3.6% since April.
• Talk of a new “wave” of inventory about to hit the market may be exaggerated.  We believe that the vast number of homes that are expected to come to the market as foreclosures are already on the market as short sales.  This means that the majority of these homes are already counted and will not contribute to a flood of new inventory.  “Authentic new “supply” (housing starts) currently hitting the market is actually quite low. In fact, it hasn’t been this low since at least 1959 (and probably a lot longer, but we don’t have data prior to then). This year, builders will begin construction on somewhere around 620,000 units, a number that’s about 32% below the old record low of 906,000 set–you guessed it–last year” (Home Prices: Sustainable Bottom or Dead Cat Bounce? By: Morningstar   Monday, October 12, 2009 7:38 PM).
• Most of the urban condos built early in the boom already “busted” meaning they sold as short sales or foreclosures.  In many of these buildings we are seeing price stabilization and/or price gains. 
• In some urban condo communities sales prices are low enough for investors to buy and rent the property out and net a positive cash flow.  We have seen an absolute flurry of buyers in some of these recovering buildings.  Competition is hot for the right condo in the right community.
• We expect interest rates to go up and soon for two reasons.  First, it is very likely that the US will experience high inflation in the not too distant future.  Interest rates go up during times of inflation.  Secondly, interest rates are currently artificially low due to US government influence.  Investors (other than the US government) are not buying mortgage backed securities because the rate doesn’t support the risk.  In other words would you yourself loan money today for someone to buy real estate if you were only going to earn 4.5 or 5% for the next 30 years?  Probably not.  But that’s the going rate today.  Would I feel better about loaning money if I was going to earn 8 or 9 or 10%?  Probably.  The problem is that mortgage interest rates are half that.  So “investors” like me aren’t loaning money for such purchases.  The US government can not loan money at these low rates 4.5 to 5% forever.  When the US stops loaning money rates will have to go up enough to attract other investors.  So, expect interest rates to go up for this reason and with the coming inflation.
• We believe that there is pent up demand for properties.  In many cases people stopped buying in 2005 or so.  Those folks have been sitting on the sidelines waiting for the dust to settle before they will buy.  However, there’s a point where people don’t want to wait, or can’t wait, any longer (i.e. pent up demand) and they buy.  There is strong evidence to suggest that things are getting there.  In downtown Phoenix, condo sales far exceed the supply (see chart below).  You’ll see that in 2008, inventory (the number of condos for sale) far exceeded the number of buyers so prices dropped and dropped and dropped.  In February 2009, the line representing inventory and the line representing the number of buyers intersected meaning that the numbers of buyers and the numbers of sellers were about equal.  Since then, dramatically more people are buying than people are selling.

Gang, there are always exceptions to any rule.  But it is our opinion that there are great deals out there for those who know where to look AND who meet certain other criteria.  If interest rates do go up, and I strongly believe they will, then you might want to take advantage of today’s low rates, take advantage of the many sellers who really do need to sell (at lower prices), and get yourself a great urban condo now rather than later.  Don’t be one of those folks who years from now say “boy I really wish I had bought when I had the chance.”  Call us at We Know Urban Realty and get our help.  We don’t sugar coat stuff and we know where the deals are and can show you why they are good deals.

Denver-based Condo Capital Solutions, led by Peter Wells and Marcel Arsenault were able to purchase the luxury condos at an unbelievably low price, around $317,000 per unit.  The Denver duo is very pleased with their purchase as previous Suncor offers were much higher and it was a very significant discount from the original construction loan.  The construction loans for both Edgewater and Bridgeview totaled just over $210,000,000.  It is tough to get a precise comparison without a breakdown of all construction costs, but either way, this was a great deal for Condo Capital Solutions and an unfortunate reality for Suncor, a subsidiary of Arizona Public Service Company owner Pinnacle West.

This deal is highly indicative of the extremely poor nature of the luxury condo market in the valley, but great news for buyers with some capital.  Around town, most other bulk sales or full buyouts of unsold units in a community are going for minimal fractions on the dollar and is drastically changing the shape of the condo market as we speak.  We wont be seeing anything sold for over $500/SF for many years, as those prices are simply unrealistic.  At Bridgeview, units originally started selling at much more than the average price of the recent sale’s price per unit of $317,000, which is a clear indication on how much cheaper they can be sold for now.  Here’s an example of another deal near midtown Phoenix called Citi at Camelback, which was selling on average for $275,000/unit just in 2006, and the remaining units were recently purchased for just over $70,000/unit.

It is clear that the condo market here in the valley is at or near the bottom and while many have suffered, others will make huge gains in the near future.  It is unknown how much Wells and Arsenault will market the remaining units at, or even if they plan to market them now for sale.  Many other condo projects and condo conversions around town have been quickly changing or reverting to rentals ever since the market fell apart.  As for Bridgewater, it might be harder to lease them as problems could spark with the HOA, but either way, people with capital will have once in a lifetime opportunities all over town.

Here are some other distressed projects that have or will be sold in the near future:

Summit at Copper Square’s unsold 74 units will be sold at trustee sale on October 14, 2009, unless developer David Wallach, principal of W Developments can work out a deal with the new lender, Stearns Bank of Scottsdale.

Century Plaza developer Equus Development recently filed Chapter 11 Bankrupty protection, most likely to avoid foreclosure on a unpaid loan balance of $23 million with M&I Bank.  The original construction loan, in the amount of $42 million was for a conversion of an office tower into 145 luxury condominiums.  To date, only 14 units have been sold, and the property is assessed at $19 million.  Someone will come in and buy nearly 90% of the tower for an extremely low price, but it might not be in the near future as bankruptcy can elongate the process far more than a 90-day notice of trustees sale.

Biltmore Palms’ remaining 37 units were sold to a Canadian investor for $4 million, which equates to just over $108,000/unit.

As new bulk sales or remaining unit buyouts come to our knowledge, we will post and elaborate as soon as possible.  Opportunities are out there that will most likely never be seen again!

So what right?

Well in our opinions this could potentially affect the value of high rise condos across the Valley.  Here’s why.  The investor who buys the discounted note will have a number of options available to him/her (OK let’s go with the feminine from here on out for the sake of convenience).  She could sit on all the condos and wait for the market to rise but that is unlikely.  She could sell the note for a profit, but that is also unlikely.  She could rent all the units out, which would probably put downward pressure on rents of other high rise condos etc…  She could sell the units at half of what they used to sell for which would put downward pressure on prices of other high rise condos.  Or she could come up with some other brilliant solution but in all cases because she bought at such a discount it is very likely that she will undercut the competition PERIOD.

Now, also know that the lender at Summit at Copper Square just sold “in bulk” and at a steep discount the remaining 54 high rise condos it had.  The asking price had been about $20M but they only got $7M.  So here we go again, 54 units that can be sold or rented at steep discounts.

Now what happens to 44 Monroe?  IF it doesn’t go under in some way, it will have to compete with 130 units at Century Plaza offered at steep discounts and 54 units at Summit at Copper Square offered at steep discounts.  Well, 44 Monroe is already in big trouble having closed only 15 condos (rumored but not substantiated by us) out of the 202 units in that building.  So, IF sales have been slow there is there any reason to believe that the events at Century Plaza and Summit at Copper Square won’t make matters even worse?

Obviously we have to see what the new owners of the note at Century Plaza do and what the new owner of the condos at Summit at Copper Square will do.  So everything I have said so far is just congecture.  But, if I was smart enough to have the  $20M to buy the note at Century Plaza I think I would discount the heck out of the condos and rent them or sell them ASAP.

Anyway, it was for these reasons that I encouraged potential buyer to pause.  Having said that, I still think that if you are looking to buy foreclosure properties you MIGHT be OK.  I say “might” because the answer really depends on your specific needs and objectives and where you are looking.  In some cases we do NOT recommend buying and in other cases we do recommend buying.  Call us if you want help.

And yes, I expect to get some negative comments on everything I just wrote, from the blog haters of the world.  But gang, if you are going to blast me, at least support it with numbers and not just emotional venom.  I really appreciate others’ opinions if they are thought out and reasonable.

Since few people seem to be buying anything but bank owned properties it only makes sense.  If you’re interested in learning more or registering for the tour please go to our urban tour page and then e-mail any questions you might have.  See you in a couple weeks.

It’s been about four years since prices first began sky rocketing and two and a half years since those prices slowly began floating back down to earth. Many of the urban “boom buildings” that came to market first have busted and great units are now owned by banks and priced where they should be.

BUT be careful. Althoug we like prices in some buildings there are others that are just now starting to adjust downward and we think it is too early to buy there. We like the buildings that APPEAR to have bottomed out. These are buildings that were completed three years or more ago and have had the opportunity to go through the short sale, auction, foreclosure process with MULTIPLE sales of bank owned properties. Don’t be the first person to buy a bank owned property in a high rise or loft building without knowing the history.

If you are looking to buy in a high rise or loft building then check out our resource and then call us. Although we can not guarantee to get you in at the bottom (BTW, don’t believe anyone who says that they can) we follow this market nich (high rise and loft condos) specifically and we can increase your chances of getting a great deal. Call us (480 510-8755) or e-mail us (MoreInfo@WeKnowUrban.com) if you want to learn more.

Our “Classifieds” section allows owners and agents of high rise and loft condo properties to advertise those properties on our web site. You write the ad, you upload up to 7 photos and/or a video clip, and you post the ad. All this takes approximately five minutes per property.

Each month almost 8,000 unique visitors view over 66,000 pages on WeKnowUrban.com making it one of the top high rise and loft condo focused sites in all of Phoenix, Scottdale and Tempe. With these kinds of numbers it certainly makes sense to advertise your high rise or loft condo on our site especially since its FREE.

Yes there is a catch…but a painless one. The free ads display our contact information; meaning that my team and I field the calls and e-mail inquiries for the ads on the site. However, if you really want to field your own calls you can do so for a $100 fee.

For now, all ads placed on the system are free and we’ll even post your contact information if you want at no charge. This offer is an introductory offer only and will expire in 30 days. So, if you like the idea of posting your property on WeKnowUrban for free for 30 days then visit our classifieds page.

Biltmore Square, located at 1701 E. Colter Street (just north of Camelback) in Phoenix was one of the very last developments to squeak throug the real estate boom door before it slammed shut hard. It was approximately December 2005 that investors lined up and fought one another for the opportunity to buy at this apartment building turned condominium project. Friends and mothers and daughters and co-workers jumped at the chance to turn a quick profit.

Within days of closing on their new “investment” the anxious investors put their properties back on the market either for rent or for sale or both. Unfortunately, it turns out the hundreds of other investors had the same plan. Needless to say things got ugly fairly quickly.

Today, two years later, things are still bad. The photo above is real and is clear evidence of the challenge that oweners at Biltmore Square face. Out of the 377 units in the community, at least 84 are currently for lease or for sale. That constitutes 22%! And that does not count properties that are already leased out so aren’t advertised on the MLS (actually this also doesn’t count anyone who may be advetising on Craig’s List etc. without using the MLS).

Because of this I think that it is very conservative to say that at least 30-50% of Biltmore Square was bought up by pure speculators (I’d bet the number is closer to 70%).

So, what’s the upside to all of this? if you are looking for cheap rent, check out Biltmore Square. We are showing condos there about twice a week. If you are looking for a place to rent, give us a call at (602) 476-1881. Not only can we help you at Biltmore Square but at other properties walking distance from great amenities and parts of town.

Trammel Crow is auctioning off 32 two bedroom brand new two bedroom condominiums ranging from 1,439 to 1,716 square feet at a starting price of $195,000. At one point these same condos were priced up to $485,000.

There are 3 three bedroom condos for sale with an opening bid of $265,000. They had previously been priced at up to $552,500.

At about $135 per square foot these may be a very good buy. To learn more give us a call at (602) 476-1881.

Gang this is a huge step in the right direction. Currently and for MONTHS prior, short sales were a major pain in the neck and often times did not pan out. Here’s what would happen:

The home owner who was behind in his or her payments would hire a real estate agent to sell their home. The agent would have the horrible responsibility of telling the homeowner that the home was not worth even as much as was owed to the bank. So the homeowner would either have to write a check for the difference between the amount owed and the lower sales price OR the lender would have to agree to take less than the full amount owed. This is called a short sale meaning that the sale price is short of the amount owed on the home or condo.

If the owner did not have the money to pay the difference then often times a short sale was the only option. To do this, the agent, on behalf of the financially struggling home owner, has to approach the lender to see if the lender would even be amenable to a short sale. After a ton of the “run around” and an inordinate amount of time and frustration, the agent might get the lenders preliminary approval (meaning it can change its mind if it wants to later). The agent then lists the home for sale, markets it, shows it, hopefully finds a buyer, negotiates a contract and gets acceptance between buyer and seller. Then the agent has to submit the contract to the lender for final approval before the deal can close.

Well, the department at the bank that handles this (the Loss Mitigation Department) is often times so back-logged that they never respond to the short sale contract. I mean they literally never approve the deal. The buyer ultimately walks away, and the owner and the agent are left sitting there, really ticked off, and what’s worse, the property ultimately goes into foreclosure instead have being sold to the buyer above.

Insane isn’t it!!!

Now in defense of the lenders neither they nor anyone knew just how bad things were going to get and the banks were ill prepared for this downturn. Afterall, prior to the last couple years, very very few homes ever went into foreclosure. The banks didn’t really have foreclosure departments or if they did they were very small. I would think all the talented bankers wanted to be in the lending side of the equation where all the business was being done and NOT stuck in the boring and slow foreclosure department. So now, every bank needs talented and experienced foreclosure (loss mitigation) people and few exist. So, deals that should get done, don’t get done because they are buried under thousands of other deals.

So, the short sale doesn’t get approved, the property goes to foreclosure and auction (which costs the bank a ton more money) and nobody buys the property at the auction so it goes back to the bank. [Why do so few homes and condominiums sell at the auction? Becuase unlike the scenario above where the realtor found someone who probably wants to live in the home and has emotional reasons to buy it, the guys at the auction are stone cold businessmen looking for a steal. Well, the banks don't yet get that...or if they do they're too slammed to do anything about it so the auction price is set higher than the auction attendees are willing to pay. Heck, what's sick is we have seen properties that had been marketed as a short sale with a bonafide buyer get ignored or rejected or passed up, and then go to auction for a price LOWER than the short sale amount and still not get purchased!].

After the property gets ignored at the auction and goes back to the bank, the bank then has to spend even more money, time, energy, and personnel to sell the property. Believe me when I tell you, in a depreciating market, the bank is losing a ton of dough by not selling these before foreclosure as a short sale.

So, if Harney is right and Fannie Mae is making a commitment to streamline the process and make it more efficient then this is fantastic news for everyone. According to Harney, “Investors like Freddie and Fannie want to speed up the pace of short sales because — to put it bluntly — it saves them a ton of money. They avoid the crushing costs of foreclosures. Plus, they generally get a much higher payoff percentage of what they’re owed.”

Right now, its estimated that 20% of all sales in the country are preforeclosure sales (e.g. short sales or something similar). We expect this number to go up. If the banks make the process more efficient then more sales will occur and we will have a chance to sell our way out of this economic
mess. But gang, when we do get out of this mess, be conservative with your money; treat your home like something precisous and pay off the mortgage rather than leverage it up to the hilt. I know I will.

Finally, if you need help with the sale of a property, ANY property (we don’t just do high rise and loft condos) then give us a call. We can help you get through these tough times (just don’t forget us during the good times To see a sampling of the short sales and foreclosures out there visit www.WeKnowUrban.com/Short-Sales_Foreclosures_Distressed/ .