Like Robert Redford’s character in the movie “Three Days of the Condor”, some condo developers may feel like they went out to the deli to get a few things and, when they got back, found that the world had changed drastically.
Fannie Mae, the quasi-government agency that backs a majority of the mortgages in the U.S., announced that, effective March 1st, it would stop “guaranteeing mortgages in condo buildings where fewer than 70% of the units have been sold”, according to the weekly Property Report in WSJ, 3/18/09. The previous minimum was 51% units sold.
A N.Y. real estate firm “estimates that 93,000 new condo units will be completed this year, a 28% increase in new inventory from last year.” At the end of 2008, there was a 14 month condo supply, a decade long high. Some developers are turning their buildings into rental apartments. There is demand for the condos but a lack of financing. Some buyers, who put down deposits on unfinished condos, are walking away.
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“Sales of apartment buildings to condo converters reached a record $13.3 billion last year, up from $3 billion in 2003, according to Real Capital Analytics.” This was reported in a NY Times article in May 2005.
The article notes that “the trend is driven by low mortgage interest rates that have encouraged renters to become homeowners, leaving landlords in many areas with falling occupancy rates and forcing them to lower rents and make other concessions to keep their buildings full.”