Do We Really Need More Downtown Condos?
I don’t get this article in the Star today in which Christina Boveri, downtown realtor, and Kevin Collison, writer to the Star, make the assertion that we are going to be facing a shortage of downtown housing this time next year. The article states:
“This time next year, it might be very hard to buy or rent a place to live downtown.”
Say what? Now, I am admittedly no expert on rentals, but from what I see of the condo resale market I can understand why no developers are throwing their hat into the dark and dusty ring. In downtown Kansas City from the River Market to the Crossroads (zip codes 64105, 64106, 64108), we currently have over 12 months of condo inventory on the market. Anything over 6 months is considered a buyers market. This is a slow sales rate (a.k.a absorption rate – or the rate at which homes are selling in a given sample area). Not to mention this recent article published in the Kansas City Business Journal (via CNBC) which ranks Kansas City as the 10th emptiest U.S. city.
Part of the problem, other than the overall national real estate slump and economic downturn, is that it is hard to get a loan on a condo. Very few of them are FHA approved, and Fannie Mae and Freddie Mac have very strict requirements on condo loans, and therefore, so do all lenders. If you are curious about this topic and the specific requirements, this article in Habitat (a trade journal for condo board members and property managers) does a fantastic job explaining this issue in detail.
On a positive note, I do agree that the Kauffman Center for the Performing Arts will create more interest and demand in our downtown market. I may be putting my foot in my mouth, but I predict that the 2012 downtown condo sales will be better than 2011 condo sales. In addition, based on this article in HousingWire, there seem to be some lawmakers putting pressure on HUD to revise this strict FHA approval process. Perhaps this mix of factors will be a winning combination for downtown housing.
Find out here if your condo building is FHA approved
Photo: Gillham Row condo interior
THANK YOU!!! I thought the same thing when I read her article. I’m a board memeber for our HOA in the 64105 area. We are sitting on 6 currently on the market and a few that come and go. That’s about 8% of total units. While it’s not high, all of these units have been on the market since before spring. The only one to sell went for less than half it’s value. The writer must be hoping that readers will believe her and rush out to buy a condo. I would love it if that were the case. We could unload some of the rentals. (We currently sit at 50% rental.) Our HOA only qualifies for the HARP refinancing program. I don’t know if anyone can get a loan for our complex w/o a _good_ down payment.
I think it is more of an issue with rentals. We currently rent in a condo building. We would like to move eventually (next year), but we do not want to leave the core (i.e., we want to be north of 31st). There are very few reasonably priced rentals. Units that are available are either quite expensive (Wallstreet Tower, 909 Walnut) or are more of a loft style (3/4 walls, few windows). If someone would build some apartments such as the units in this picture: Pearl District Apartments I think they would be gobbled up over night (corner of 20th and Grand, anyone?). Look at the success of Market Station, by way of example.
That said, I think this same argument applies to the condo market. Sure there is a 12 month supply. But a decent portion of it is the wrong type of supply. There are very few “normal” condos on the market. Many are either quite expensive (again, 909 Walnut, Wallstreet Tower, both very nice buildings!), the wrong style (shotgun-style lofts a la Riverbend, Liberty Lofts, etc.), or are income-restricted.
This is, of course, just my opinion as some who currently lives downtown, would like to stay downtown, would like to rent for a bit longer and eventually purchase a place.
Also, that “10th Emptiest City” argument is dubious with regards to the downtown area which continues to gain in population as compared to the rest of the city. Using it in this context makes it seem like you’re saying the downtown area is “10th Emptiest” which is (no longer) the case.
Agree with your statements. And something must change with the financing requirements for loans on condo purchases; people who want to buy and are gainfully employed, with a good credit score, can’t get a loan. I can’t even re-f’i my condo because the building isn’t FHA approved and I won’t put down 30 percent for a re-f’i. I agree changes needed to be made for obtaining mortgages. But it’s gone too far for condos.
Check to see if you can refi with HARP. Our HOA is also not FHA approved, but we can get HARP.
It’s PR speak from someone who has a vested interest in creating the illusion of scarcity. I could refer you to good friends who have been trying to sell their condo for nearly two years.
There are plenty of units for sale. The only reason the market isn’t absolutely flooded is that developers gave up on selling and started to rent their empty units out. Several buildings intended to be owner-occupied are now more than 50% rentals.