Sunday, March 23, 2008

"The Market"

I had no idea that my posts about the Sonata and Fennessy Lofts would generate such heat, especially about the "invisible hand of the market."

To lower the heat, I'll concede that each building's developer is reacting to market forces by lowering the prices of the remaining units. Market to owners who just saw their comps drop:

Or, more likely, je m'en fiche!

Let's kick it up a notch. The Metropole of "drop. dead. sexy... residents" fame is about a year late in delivering its units. I know many units were sold pre-construction back in 2005. Now that the developer's missed the market and the market says condos are worth less [see the Sonata and Fennessy Lofts], has s/he adjusted prices? If I had put money down in 2005, should I expect the Metropolis Development company to send me a letter telling me that they've adjusted my contract price downwards by, let's say, 10%? Is unit #222, which I've always lusted for, finally in my price range [and I'm not talking a range that can accommodate 6 zeros to the left of the decimal point]? Does anyone know?


Anonymous said...

No...they claim to have raised prices! If you recall, the first tactic used to avoid lowering prices is to give away options. They claim to have optioned up all the apartments.

It is often in the developers best interest -- and that of their lenders -- to not lower prices until after those units that have been contracted have settled. That way they get to keep the 5% fees usually charged and maybe sucker in a few others, even if they don't expect to get anything near asking price for the units. After settlement, they can then drop prices. That tactic can help to spur a mini-bidding war and find the bottom quickly, saving them the expense of carrying the units while paying interest to their lenders. Besides, they have better market information than we do, with studies indicating price per square foot of units sold by year(headed down), the number of units that will be completed, the number of units sold, and the vacancy rates at other buildings. This gives them the upper hand over the unsuspecting buyer.

Caveat emptor! But buy if the price is right for you.

Keith said...

Thanks for your comment. So it sounds like they're ignoring the "invisible hand" until it smacks them in the face.

If they've optioned all the units, why the incessant marketing emails and fancy sales office at 14th St and Church? Backup contracts, I guess.

I started this blog with the intent of leveling the playing field for buyers. I hope I'm somewhat successful with that.

Anonymous said...

By options, I mean going with the Suub-zero, Starck upgrades, etc. Not options as in got money for purchase option.