I've been trying to ride my bike more and more lately, exploring all the various side streets of downtown, delaney park, colonial town, etc. If there is one thing thats consistent, it's all the "for sale" signs. I own a 1br condo up in DC that we're exploring our options on. The place rents out well since it's located in a really trendy neighborhood and in a great building. As you'd expect though, DC sales are fairly soft right now. When I bought, I researched the market considerably before making the move. I knew that we were obviously in a boom, but wanted to go past that and understand historic trends in the area. The information I've learned from buying, and now leasing (and maybe soon selling) is largely what I know about Real Estate.
Here in Orlando, the factors seem to be much different. In DC, space is at a premium and houses start at 500k and up. Orlando appears to be the opposite. We're a sprawling region with affordable housing (people may argue that, but compared to a lot of other places, its affordable). Condos up in the District (and really, any 'big' city) sell well because people can't afford houses (at least, in the neighborhoods they like). Of course there are anomalies (pimped out $1m condos, people into the 'lifestyle' thing), but ask most folks and they'll tell you they'd rather be in a brickstone. Here, great houses seem to be similarly priced and sometimes cheaper than condos in the same neighborhood. That blows my mind.
For example, there is a condo listed on MLS at the Vue (new building on Lake Eola) for about $440/sq ft. I believe it's two bedrooms, 389k or somewhere around there. Down the street from me (same area, Lake Eola Heights), there is a four bedroom house on a decent lot for sale by owner, for less than the condo at the Vue.
Hopefully, it's obvious why this strikes me as surprising. First, DC condo prices are between $400-$600sq/ft in most "desirable" neighborhoods (Georgetown, at the height, topped $1000sq/ft). Why the heck would Orlando condos rival DC's in price? Second, is that there are 4 or 5 new condo buildings going up downtown and plenty of units available in the 3 or 4 buildings that were recently built. There is ample supply, a high percentage of investors and tons more space to build new units when they are needed. Yet, somehow, they are more expensive then a house on decent land located downtown.
I can't possibly claim to be an economist or a real estate developer, but something just doesn't add up.. I've been tracking prices at the Waverly and watching them fall since I moved back in December. The only comparison I can find might be Miami during the 80s -- condo prices were cut in half by the end of the boom. That seems a bit drastic, but would it be possible to see 30-40% price reductions?
Any thoughts?
Comments...
(Page 1)1. Al,
Melissa and I Just bought a house up in Altamonte for about $182/SF. We looked all over for months to finally find that place. We were preferential to the Downtown Area and College Park. While I may still complain about my mortgage, the seller came down over 25% in 2 months.
I have a feeling the newer buildings downtown are under huge amounts of pressure to satisfy bank loans that may have been excessive. Add to the fire some of the builders that initiated and / or finished the larger projects downtown. Skanska, Brassfield & Gorie, Turner, and PCL.
55 West was delayed for years. Skanska was supposed to be the GC for the project, but after the project was delayed long enough, they collected their mobilization payment, and left. I don't know the exact figures, but I've heard that was as high as $250k to essentially do nothing. PCL has taken over, and may yet salvage the project from fiscal failure.
The Plaza (Premier Trade Plaza until Premier Trade pulled out), was done by Brassfield and Gorie. There are tons of stories about cost overruns and less than stellar craftsmanship.
The Vue has similiar rumors about poor project management. The budget overruns are 'supposedly' rampant on that project too.
My general feeling is that these guys (GC companies) came into these projects during the boom, and did a half-assed job of buying it out. The only company that's had a good reputation lately is PCL, but they aren't building everything. Add to this that most of the other contractors have probably passed their ineptitude to the developer in the form of change orders, and you've got several devlopers that have to sell these units for so much, or they're going to lose a lot of money.
It's all speculation on my part, but I still get to hang in construction circles, and that's what I'm hearing from them all of the time.
If anyone has anything to add to that, I'd love to hear it too.
12:58PM on Aug 22nd 2007 by Cory
2. Cory, great insight, and it seems to make sense to me.
Chris, very true. The question of course is, are there thousands of those people in orlando shopping for homes?
1:00PM on Aug 22nd 2007 by Alex Rudloff
3. Condos downtown are like iPhones--you buy one as much or more for the cool factor as you do for the utility. That's today's bad analogy :-) Just like there's always people willing to pay $600 for a phone, there will be people willing to pay a premium for a condo in the hip spot so they'll be hip. Not saying the prices won't come down but it may lag housing prices.
1:02PM on Aug 22nd 2007 by Chris Scott
4. Your mention of Miami was right on. The issue down there, and it is happening again, is that there was a large amount of investor ownership of the building. somtimes 75 to 90%. That means that the values are rising because there are sales but they are in staggered lots to look like activity on paper. These were meant to be short term investments and when they bailed it killed the market.
In the case of Miami it ran a lot of elderly out of buildings, low income areas were converted to condos. It was scary ugly. Downtown Orlando is different in there isn't anybody in them yet.
There is truth to the construction woes. Materials and labor prices went up faster than the prices of the units. That is what killed a few in financing. A few architect friends have told me about projects recently in Orlando that had the upscale items gutted from plans and the prices stayed the same and some even went up.
The issues with empty condos and cheap houses are jobs and the inverse relation Floridians have with amenities and location.
There are not enough jobs and nightlife yet in downtown to support the condos. Many were touted by the City when trying to attract business, "hey, look people can live here like a big city". There is not enough parking for them either. Until there is a decent commuter system or enough reason to not own a car downtown, there are too many wrinkles for most.
Also, the suburbs have a huge draw. In big cities, being close to "stuff", grocery, gas etc., means a lot and can drive up price. Buyers here view that as traffic, noise and congestion. Prices have seen the biggest growth in outlying areas over the last ten to fifteen years despite the fireworks of downtown. Phil Rampy created the downtown market and it blew up quick but has had a slow burn for a long while now. Windemere has seen just as high of growth, but it has been slow and steady. The popularity is now playing a part and prices have dipped there too.
I know that many for sale signs in my neighborhood (Colonialtown North) is suburb flight. The statistics I see every year show that when a couple has a kid they leave with in a few years. They only bought for the investment to afford the big house in the burbs with kids. It is killing me when I hear it. There are other social reasons but nows not the place.
They can't sell the condos for less than what it cost to build them while the homeowners have seen 100 to 250% growth in value to cushion their price. A home owner can cut 25% if they are still walking out with a profit. The condo owners held on to high prices too long and they are going to have to cut prices to such a point to attract the loss needed to write it off and get out. I won't be surprised to see it really low but it has about a year though, I think.
2:42PM on Aug 22nd 2007 by Tim
5. Cabe,
Very interesting take, thanks! It'll be really interesting to watch
all this unfold -- I'm trying to pay as much attention as possible and
learn where I can. I figure it's bound to happen again (albeit in a
potentially different way) at some point in my lifetime.
I grew up over in Melbourne, graduated from UCF and then moved to DC
for a bit. I just returned back in December with my fiance (who never
lived here, from Ohio.. met in DC).
Always great to hear from other orlando folks. There's a growing group
of us now that have been trying to get together for occasional happy
hours -- you should join us some time!
Best,
Alex
4:20PM on Aug 22nd 2007 by Alex Rudloff
6. Hey Alex, came here from consumerist and started reading around your site. Always interesting to find a blog from someone else here in Orlando (when not looking, that is). Not sure how long you've been here but the subprime meltdown is largely part of the skewed pricing around here. Typically (with the exception of Baldwin park) many ARMs,80/20 and various other subprimish loans were not taken on condos and multi-family dwellings in Downtown Orlando. I think it had a lot to do with people wanting to own land, but as yourself, I'm not exactly a real estate expert. With the subprime drop off, a lot homes have been foreclosed on which then drove the price down in the general area. This shift doesn't seem to effect condos since not too many of those (according to stats) have been foreclosed on. I'm not sure if it was a preference from subprime borrowers or if lenders just didn't like giving subprime loans on Condos.
At least that's my understanding. Take it for what its worth.
Cabe
7:55AM on Aug 24th 2007 by Cabe
7. My view is that housing may be flat for some time. The Fed has ignored the old rule that the economy follows the the real estate market. When the R.E. market falls so does the economy. I don't see why that wouldn't be the case now. Prior to the "contrived boom in my view" and the loan sharking by the lenders the real estate market hadn't moved much in several years prior to the boom. Based on present housing costs, and incomes that are not keeping up, it may be quite a dry period ahead. However, each event creates a new opportunity. Lke everything else [stock market etc.] one should be looking for the low point and then buy.
8:39PM on Aug 24th 2007 by Ernie
8. Great artical! I've been acually looking for a place in Orlando for the past month. I'm transfering to UCF in spring and trying to buy a condo and/or townhouse some what close to the campus. Where would you recommend looking?
Sicerely,
Daniel Dickey
FullEffectz1@aol.com
9:38PM on Aug 29th 2007 by Daniel