With Housing Prices Down, Is It Time to Check Out the Options?
Eric Richardson
[Flickr]
The under-construction Concerto tower is a new stop for this weekend's housing tour.
DOWNTOWN LOS ANGELES — The last year has been a tough one in which to be a real estate developer. The economic downturn and the collapse of the financial industry have sent housing prices tumbling, and new projects entering the market have softened the prices commanded by rentals.
But has the market reached a point where the developer's loss is a resident's gain?
Though certainly not a neutral observer, the Downtown Center BID thinks so. At a media event unveiling the group's 2008 demographic study, DCBID head Carol Schatz told reporters that developer discounts have created some impressive deals.
"It's sort of a good news, bad news kind of situation," she said. "The bad news is that the developer takes a very significant haircut in terms of what he pro-forma'ed and what they expected to get. That has reprocussions in terms of having money to invest at a later time, so it's not a good thing. But the good news is that ... with discounts, they are selling units and they are renting units."
Twice each month, DCBID puts on a housing tour that takes potential buyers and renters through various Downtown properties. Schatz said that recent months have seen demand for the tour pick up.
The next tour takes place this Saturday, and will pay visits to the South Park Lofts, Great Republic Lofts, National City Lofts, Biscuit Company Lofts, The Rowan, and the newly-opened sales center for Concerto. Those interested in finding a new place to live (or simply gawking at the places other people will soon live) can sign up on the DCBID website to attend.
bromike666 on April 16, 2009, at 10:56AM – #1
25% discount on a loft that was 100% over priced is still 50% too high. Value is determined by what someone will/can afford to pay, not how much you spent to build it.
They do that trick at Macy's all the time. Mark it up stupid high and immediately put it on sale for 20% off so it looks like a deal. Until owning is cheaper than renting there's no reason to buy. My checkbook will be in the drawer until 2010, then we'll start to see some proper pricing. Though, it might be fun to take a tour for information gathering purposes.
Beware of real estate agents and false prophets bearing "good deals."
RLK on April 16, 2009, at 11:27AM – #2
Actually, construction cost and land value are a very good indicator of what a property is worth. High rise buildings cost more than a house for obvious reasons so those who think that concrete and steel construction units should go for 200K are just unrealistic.
Ask your home insurance company what the replacement value is and you will get a very high figure. Most homeowners are under insured because they are not insured for the replacement cost.
Johnny Lee on April 16, 2009, at 12:16PM – #3
On a related note, what's the latest scoop on more affordable office space? Are there any good resources for this other than scanning CL or talking to real estate agents? Thanks.
JM on April 16, 2009, at 02:24PM – #4
Personally, I'd wait a year. Until speculators ease off, the prices will stay higher than they should be. Downtown shouldn't be for people who want a "nest egg," but for people who want to live there. Until it's more affordable, there's no point in buying. The big bubble's over for a few years.
bromike666 on April 16, 2009, at 04:18PM – #5
Actually, construction cost and land value are a very good indicator of what a property is worth
I believe you meant "an indicator of what was spent on a property", correct? It might NEVER recoup what was spent to build it. Maybe some developers should have waited until labor, materials and building purchase prices fell as far as they have (and will) before joining the stampede.
The next round of developers are the ones who will make a killing. Buy high, sell higher never works as well as "buy low, sell high."