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Downtown condo market falters after strong 2007
Economy » Recession, credit problems, consumer pessimism hamper sales.
By Paul Beebe
The Salt Lake Tribune
Updated: 01/23/2009 01:32:22 AM MST
A year ago, condos in downtown Salt Lake City were selling at a fast clip, averaging more than one sale per day.
The average time a condo was on the market before a buyer snapped it up was 28 days, according to figures from the Salt Lake Board of Realtors.
Sellers were in the driver's seat. Sale prices were 100 percent of list prices, suggesting buyers had little ground to negotiate a deal.
Twelve months later, the condo market is upside-down. It's a buyer's market -- except there are no buyers.
Sales "went from full throttle to a standing halt," said Babs De Lay, a downtown real estate agent.
Last month, condo sales fell 61 percent year-over-year downtown, to 14 units, according to preliminary Board of Realtors data. Condos that did sell languished 101 days -- almost four times as long as last year.
Although list and sale prices were the same in December, both were down about 8 percent from December 2007, when the U.S. recession officially began.
Condo sales began to weaken 12 months ago after a strong 2007, said Alan Wood, who built The Metro, a 117-unit project at 350 S. 200 East.
It was a precipitous reversal. Wood sold close to 80 units in 2007. In one month, February, he raked in $20 million. Then the bottom fell out. Last year, Wood sold 16 units.
"We were still selling units through 2008, but at a much slower pace," he said. "We started to see nervousness by the buyers with regard to the
subprime credit crisis, prices and recession fears.
"I would say it hit last August and September, and it's been very slow since then."
De Lay, a 25-year real estate veteran, said the market is as bad as it was in the early '80s, when mortgage interest rates shot as high as 22 percent and homes took as long as a year to sell.
One reason, De Lay said, is a new rule that says a condo building must be 51 percent sold before lower-income buyers can get loans insured by the Federal Housing Administration.
"So buyers have to go for a conventional [bank] loan and put 10 percent down or more," she said. "A buyer in an entry-level price range does not generally walk around with $15,000 or $20,000 in his pocket."
Barry Preusz, a realtor who assists condo buyers, said he continues to get inquiries from shoppers, but many people can't get mortgage loans because banks have tightened their lending standards.
Then there are people who would like to step down to condos but can't sell their homes for what they think they are worth, Preusz said.
"I get a lot of 'lookie-looks,'" he said.
Richard Gordon, who developed Westgate Lofts on 200 South between 300 West and 400 West, said the first 56-unit building sold so quickly last year that he didn't need help from real estate agents.
The second building, with 17 units, isn't selling as fast. One unit is occupied. Two or three others are under contract. To move the rest, Gordon is offering discounts on units that range in price from $239,000 to more than $1 million.
"People seem to be holding up," Gordon said. "We get excellent, qualified prospects every day. People come through, and they rave about them, [but] nobody is making decisions. They are just kind of sitting."
What effect the recession and credit crunch are having on the LDS Church's plans for 700 condos and apartments it plans to build in its City Creek Center project in downtown Salt Lake City is unclear.
Although the church has not released details such as pricing, spokesman Dale Bills said Richards Court, City Creek's first two residential buildings with 91 units, will be finished in early 2010. Additional units will be ready in 2011 and 2012.
"We've not concluded any sales," Bills said. "We are just starting."
He declined to say how much buyer interest there is for the Richards Court project.
Cowboy Partners, a Salt Lake City real estate developer, plans to build 100 condos in City Creek. Although the company officials said construction won't begin until around 2010, principal Dan Lofgren said the timing has never been precise.
"We continue to be in a posture of assessing the opportunity," Lofgren said. "It's a time to be very cautious, and we are taking that to heart."
Even so, the company continues to be "huge believers" in the downtown condo market.
"I have not lost faith in the downtown [market] at any level," he said. "It's still a compelling residential proposition."
pbeebe@sltrib.com
