Monday, May 28, 2007

real-estate blinders

As Condos Rise in South Florida, Nervous Investors Try to Flee - New York Times -- There's a parallel here to Cleveland -- in both places, they keep building new, regardless of what the markets are telling them.

In Cleveland, they add the extra incentive of tax abatement. City Council recently voted 20 to 1 in favor of continuation of tax abatement, even though since 1997, the tax-abated properties have been directly offset by the number of unsold, vacant, abandoned, and foreclosed existing properties--the number is in the 10,000 to 12,000 range, and nobody has yet done a study that mentions this fact. It seems that the big picture is what we should focus on first but, hey, around here we ignore the numbers and focus on the hype, the feel-good proposition.

Our Ward 15 councilman Brian Cummins was the lone holdout, and we're proud of him for speaking out against an unfair imposition on long-time residents. But, to put him on notice, some sneaky little scuttling bureaucratic creep allowed a typically Cleveland+ "oops!" to happen, and a house Brian had lined up for renovation on Riverside Avenue was demolished, in a snafu, on a Saturday.

Anyway, here's the after-action report on the insanity in South Florida:

“I get two or three of these calls a day,” said James Ryan, a lawyer in Boca Raton who said he had 40 clients looking to get out of condo contracts. One, Mr. Ryan said, abandoned a $340,000 deposit rather than close on a $1.6 million unit that lost its appeal as the market faltered. The numbers suggest that it will only get worse. In Miami-Dade County alone, 8,000 new condo units will be completed this year and nearly 12,000 more in 2008. But demand has dropped markedly, and people who thought they could “flip” condos — buying, then selling for a steep profit before construction is done — are parting with that fantasy. After years of stunning price increases — 25 percent in the West Palm Beach-Boca Raton area, for example, from March 2005 to March 2006 — condo prices have started dropping.

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