Comments on: New Construction Bargains: Risks or Rewards? http://blog.franklyrealty.com/2007/09/new-construction-bargains-risks-or.html Fri, 27 Jan 2012 18:42:01 -0800 http://wordpress.org/?v=2.8.4 hourly 1 By: Jamie http://blog.franklyrealty.com/2007/09/new-construction-bargains-risks-or.html/comment-page-1#comment-2436 Jamie Wed, 11 Jun 2008 22:12:00 +0000 http://franktempblog.wordpress.com/2007/09/28/new-construction-bargains-risks-or-rewards/#comment-2436 Frank,<br/><br/>Good post. I think you should point out that any new product should be worth more than a used product, all else being equal. You mentioned The Phoenix in Clarendon and that they probably have 130 units left. So, let's say they'll be there for another 1.5 to 2.5 years selling. If you purchase and settle there today you would have the concern of a developer with a marketing budget and possible willingness to beat out any resale in the same building during that time frame. But, how would owning at 1021 necessarily be better (if you assume for sake of argument that the buildings are exact equals)? If Keating (the developer of The Phoenix) lowers their 2BR to $450,000 a year from now why would anyone buy a 2BR for $500,000 at Clarendon 1021 at the same time? <br/><br/>So, the effect is that the new construction prices (again, holding everything equal, which is never the case in real estate) set the market. If you agree the next logical question is why would anyone want a "used" or resale unit in a building 4 years older vs. a new unit? No matter which building you purchase in, you have the same problem if you have to sell in the next 1.5 to 2.5 years. If you purchase the resale you should also account for the fact that your asset is that much more depreciated (maybe not the land, but the structure - appliances, HVAC, etc.).<br/><br/>Just something to consider. There are definitely risks to buying new construction, but I think the main risk is buying real estate off a floor plan & rendering and putting down 5% for 2+ years while your home is being constructed. That scenario has already played out. If you may need to sell in 2 years or less while the developer is still selling in the community & can't stand to lose a penny you shouldn't be buying. But, if you need a nice new place to live we are in a rare time in the market when there is plenty of standing product, rates are good, we continue to generate jobs, etc. Now may be the best time to buy if you have a longer time horizon and desire the benefits of owning.<br/><br/>http://www.condoauthority.com Frank,

Good post. I think you should point out that any new product should be worth more than a used product, all else being equal. You mentioned The Phoenix in Clarendon and that they probably have 130 units left. So, let’s say they’ll be there for another 1.5 to 2.5 years selling. If you purchase and settle there today you would have the concern of a developer with a marketing budget and possible willingness to beat out any resale in the same building during that time frame. But, how would owning at 1021 necessarily be better (if you assume for sake of argument that the buildings are exact equals)? If Keating (the developer of The Phoenix) lowers their 2BR to $450,000 a year from now why would anyone buy a 2BR for $500,000 at Clarendon 1021 at the same time?

So, the effect is that the new construction prices (again, holding everything equal, which is never the case in real estate) set the market. If you agree the next logical question is why would anyone want a “used” or resale unit in a building 4 years older vs. a new unit? No matter which building you purchase in, you have the same problem if you have to sell in the next 1.5 to 2.5 years. If you purchase the resale you should also account for the fact that your asset is that much more depreciated (maybe not the land, but the structure – appliances, HVAC, etc.).

Just something to consider. There are definitely risks to buying new construction, but I think the main risk is buying real estate off a floor plan & rendering and putting down 5% for 2+ years while your home is being constructed. That scenario has already played out. If you may need to sell in 2 years or less while the developer is still selling in the community & can’t stand to lose a penny you shouldn’t be buying. But, if you need a nice new place to live we are in a rare time in the market when there is plenty of standing product, rates are good, we continue to generate jobs, etc. Now may be the best time to buy if you have a longer time horizon and desire the benefits of owning.

http://www.condoauthority.com

]]> By: Anonymous http://blog.franklyrealty.com/2007/09/new-construction-bargains-risks-or.html/comment-page-1#comment-2444 Anonymous Thu, 11 Oct 2007 09:57:00 +0000 http://franktempblog.wordpress.com/2007/09/28/new-construction-bargains-risks-or-rewards/#comment-2444 Frank: Wonder if I could get your take on the Monroe at Virginia Square? Is it a building that you recommend? Many thanks. Frank: Wonder if I could get your take on the Monroe at Virginia Square? Is it a building that you recommend? Many thanks.

]]> By: Anonymous http://blog.franklyrealty.com/2007/09/new-construction-bargains-risks-or.html/comment-page-1#comment-2443 Anonymous Wed, 03 Oct 2007 00:50:00 +0000 http://franktempblog.wordpress.com/2007/09/28/new-construction-bargains-risks-or-rewards/#comment-2443 NO NEW TAXES!! Here's what should happen. The county should seize these half-built complexes and auction them off to the highest bidder, with no reserve price. New developer will figure out what's the most profitable option. NO NEW TAXES!! Here’s what should happen. The county should seize these half-built complexes and auction them off to the highest bidder, with no reserve price. New developer will figure out what’s the most profitable option.

]]> By: Anonymous http://blog.franklyrealty.com/2007/09/new-construction-bargains-risks-or.html/comment-page-1#comment-2442 Anonymous Sun, 30 Sep 2007 15:56:00 +0000 http://franktempblog.wordpress.com/2007/09/28/new-construction-bargains-risks-or-rewards/#comment-2442 What about the detrius of the real estate bust -- what happens to the properties that were once scheduled for high-rise condos? Take a look near Clarendon and Rhodes, where a developer bought up houses and and an apartment complex, fenced it in, then left. It's now rat infested, and holes in the sides of the houses show that either bums are living there or shady people have been breaking in to take whatever they can find in the empty houses. Ditto on Lee Highway near Stuart where a (IMO absolutely horribly ugly instant slum) complex was stopped mid-stream, and the builders left Tyvex wrap exposed, and now being torn off by the wind. I think we need something like Superfund legislation, where additional taxes are placed on sales of houses and successful projects (perhaps just 5 percent of sales prices) to pay for the costs of these eyesore dump sites left behind by the boom. What do you think? What about the detrius of the real estate bust — what happens to the properties that were once scheduled for high-rise condos? Take a look near Clarendon and Rhodes, where a developer bought up houses and and an apartment complex, fenced it in, then left. It’s now rat infested, and holes in the sides of the houses show that either bums are living there or shady people have been breaking in to take whatever they can find in the empty houses. Ditto on Lee Highway near Stuart where a (IMO absolutely horribly ugly instant slum) complex was stopped mid-stream, and the builders left Tyvex wrap exposed, and now being torn off by the wind. I think we need something like Superfund legislation, where additional taxes are placed on sales of houses and successful projects (perhaps just 5 percent of sales prices) to pay for the costs of these eyesore dump sites left behind by the boom. What do you think?

]]> By: Anonymous http://blog.franklyrealty.com/2007/09/new-construction-bargains-risks-or.html/comment-page-1#comment-2441 Anonymous Fri, 28 Sep 2007 17:55:00 +0000 http://franktempblog.wordpress.com/2007/09/28/new-construction-bargains-risks-or-rewards/#comment-2441 Frank,<br/>Liked the article. Too bad I didn’t know this prior to my settlement on a new construction. <br/><br/>Regardless, I know for the future and have learned a lot through this entire process and I owe a lot (if not all) of it to you so I just wanted to say thank you. I just wish I didn’t get ripped off like I did but not too much I can do about it now. Thanks again for the good info and talk to you later,<br/><br/>Aaron Frank,
Liked the article. Too bad I didn’t know this prior to my settlement on a new construction.

Regardless, I know for the future and have learned a lot through this entire process and I owe a lot (if not all) of it to you so I just wanted to say thank you. I just wish I didn’t get ripped off like I did but not too much I can do about it now. Thanks again for the good info and talk to you later,

Aaron

]]> By: Kim Dillon, Creative Eye Home Staging http://blog.franklyrealty.com/2007/09/new-construction-bargains-risks-or.html/comment-page-1#comment-2440 Kim Dillon, Creative Eye Home Staging Fri, 28 Sep 2007 14:35:00 +0000 http://franktempblog.wordpress.com/2007/09/28/new-construction-bargains-risks-or-rewards/#comment-2440 You've certainly given us lots to consider! I guess it just shows that like any true investment, you need to be in it for the long haul! Thanks for the post.<br/><br/>Kim Dillon, You’ve certainly given us lots to consider! I guess it just shows that like any true investment, you need to be in it for the long haul! Thanks for the post.

Kim Dillon,

]]> By: Janie Coffey - Equestrian Real Estate http://blog.franklyrealty.com/2007/09/new-construction-bargains-risks-or.html/comment-page-1#comment-2439 Janie Coffey - Equestrian Real Estate Fri, 28 Sep 2007 14:34:00 +0000 http://franktempblog.wordpress.com/2007/09/28/new-construction-bargains-risks-or-rewards/#comment-2439 if you are buying cooking cutter to live in as your primary residence for a LONG time (ie 5 years plus) then maybe the price slide isn't as important and other things balance it out (ie location, amenities, etc) but if you are buying for investment, or short term occupation, RUN... what do you think is going to happen to prices over the next SEVERAL years with so much oversupply in an area with no differentiation in product? Down, down, down.... and not just in the short term, but for years. I typically tell buyers if they are buying as their prime residence, be a LITTLE less concerned about the "deal", but if you are buying for any other purpose at all, then be very wary of anything where it is a commodity... if you are buying cooking cutter to live in as your primary residence for a LONG time (ie 5 years plus) then maybe the price slide isn’t as important and other things balance it out (ie location, amenities, etc) but if you are buying for investment, or short term occupation, RUN… what do you think is going to happen to prices over the next SEVERAL years with so much oversupply in an area with no differentiation in product? Down, down, down…. and not just in the short term, but for years. I typically tell buyers if they are buying as their prime residence, be a LITTLE less concerned about the “deal”, but if you are buying for any other purpose at all, then be very wary of anything where it is a commodity…

]]> By: Anonymous http://blog.franklyrealty.com/2007/09/new-construction-bargains-risks-or.html/comment-page-1#comment-2438 Anonymous Fri, 28 Sep 2007 14:33:00 +0000 http://franktempblog.wordpress.com/2007/09/28/new-construction-bargains-risks-or-rewards/#comment-2438 It is mind boggling that you really don't know the REAL price. Real estate is a crazy market. Thanks.<br/> <br/>N It is mind boggling that you really don’t know the REAL price. Real estate is a crazy market. Thanks.

N

]]> By: D'Ann http://blog.franklyrealty.com/2007/09/new-construction-bargains-risks-or.html/comment-page-1#comment-2437 D'Ann Fri, 28 Sep 2007 11:35:00 +0000 http://franktempblog.wordpress.com/2007/09/28/new-construction-bargains-risks-or-rewards/#comment-2437 Good article and especially important right now. I actually heard the commercial on the radio about a builder who is doing an "auction" on their inventory homes. Of course, builder can determine starting bid price, but I'd be interested to follow up with them and see how well it worked.<br/><br/>Another point about new construction is that this is a time of the year where buying from a large, publicly traded company can get you a great "deal" because the end of their fiscal years are coming up. A couple end in October, a lot in November and then a few in December. They are willing to do whatever it takes to move inventory right now because they've got to report numbers to the big dogs at corporate. After 3 years working as a new home sales consultant, I can tell you they are a lot less to wheel and deal the day after their fiscal year ends, regardless of the market. Good article and especially important right now. I actually heard the commercial on the radio about a builder who is doing an “auction” on their inventory homes. Of course, builder can determine starting bid price, but I’d be interested to follow up with them and see how well it worked.

Another point about new construction is that this is a time of the year where buying from a large, publicly traded company can get you a great “deal” because the end of their fiscal years are coming up. A couple end in October, a lot in November and then a few in December. They are willing to do whatever it takes to move inventory right now because they’ve got to report numbers to the big dogs at corporate. After 3 years working as a new home sales consultant, I can tell you they are a lot less to wheel and deal the day after their fiscal year ends, regardless of the market.

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