Bargain Homes on Bank Foreclosure Listings Affect Condo Sales

by Donald Hanz on Foreclosure Crisis

A growing number of condominium developers are trying to stave off the effect of the growing number of discounted properties on bank foreclosure listings by auctioning off and offering discounts on properties.

But not all are trying to take matters into their hands and challenge the foreclosure market. Some condominium developers are banking on the recovery of the luxury market despite the low sales. Some of those hopefuls chose to wait for the recovery rather than sell the units at discounted prices just like those on bank foreclosure listings.

One good example is the 30-unit Terraces condominium development which opened in 2007. So far, there are still eight unsold units in the building, with prices reaching as much as $5.9 million per unit.

According to national statistical report, sales of luxury properties, which are categorized as those with price range of $750,000 and above, outperformed other sectors of the real property market until the latter part of last year.

Institute for Luxury Home Marketing chief executive officer and founder Laurie Moore-Moore said that the luxury market was the last real estate sector to go down when the crisis hits the industry. Walter Molony of the National Association of Realtors said that sales of luxury properties are really suffering right now due to the growing number of properties on bank foreclosure listings.

Nationally, unsold luxury homes accounted for 41 months of inventory. Industry experts estimate that if the current market pace continues, it would take about 3 years and 6 months to find potential buyers for all condominiums for sale. They noted that sellers are trying to compete with banks in unloading distressed properties.

Repossession rates on jumbo mortgage loans are higher than on conventional loans. Jumbo loans are those on $729,500 and higher.

Moore-Moore believed that the luxury market would not start to see some improvements until the last quarter of 2010. She said that complicating the problem is the drastic drop in the number of individuals who have high income.

She said that the number of individuals who have assets valued at almost $1 million or higher declined by 15 percent. She added that the few wealthy people who can still afford to buy have adopted a wait-and-see attitude.

In the first quarter of this year, Idaho was among the states with the highest number of properties on bank foreclosure listings.