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The glut of unsold and foreclosed condos that paralyzed resort and urban markets two years ago has significantly eased in wake of price-cutting and discounting in a number of markets, signaling that the end of the bargain era is in sight and stable markets are on their way.

Price Cutting Eases Condo Glut

The glut of unsold and foreclosed condos that paralyzed resort and urban markets two years ago has significantly eased in wake of price-cutting and discounting in a number of markets, signaling that the end of the bargain era is in sight and stable markets are on their way.

Nationally, price cutting has lowered the condominium median price in the second quarter 19.6 percent from a year ago and sales are 10.1 percent higher than the 563,000 units sold in August 2008. The national median existing condo price was $178,800 in July 2009, according to NAR.

In almost every major condo market in the country, lower prices, low rates, the first-time buyer tax credit and available financing are draining down inventories as buyers snap up steals. New construction has slowed to a near stand still and discounts are clearing out the backlog of distress sales.

In Miami, where more new condos and homes were built in five years during the boom than in the past 30, the market is seeing signs of improvement as bankers take over huge condo developments abandoned by developers. Auction companies are keeping busy in South Florida, which has become a bargain hunter’s paradise. Prices in the Miami are forecast to fall an average of 24.2 percent this year.

Sales of single-family homes in Miami-Dade were up 22 percent in August versus a year ago as the median price slid 29 percent to $194,800, according to the Florida Association of Realtors. Condo sales also rose by 17 percent as median condo prices dropped 31 percent to $144,700.

In Fort Lauderdale new condo developers are selling off their inventories of unsold properties at fire sale prices. The bottom of the market may be close in Fort Lauderdale. Some forecasts predict prices on condos and single family homes will drop 11.9 percent this year.

Existing condominium and co-op sales in Florida are 10.1 percent higher than the 563,000-unit level a year ago. The median existing condo price4 in August was $179,300, which is 15.7 percent below August 2008, according to the Florida Association of Realtors. The statewide existing condo median sales price fell 32 percent, from $158,100 in August 2008 to $107,500 last month.

Inventories of Northern Californian condos are falling quickly, except for San Francisco proper. Last year, potential condo buyers in the East Bay could choose from more than 1,500 available units. Now, the number is down to about 800. However, demand is low and prices have fallen by 20 percent to 30 percent at several developments.

In San Francisco, the median price of a condo has fallen from $680,000 to $625 over the past ten months, but until July 1inventory remained high and days on market rose from 75 to 120. Over the past two moths, however, inventory has fallen about 100 units.

The Las Vegas market has seen a dramatic shrinking of condo inventory. In North Vegas, days on market (the average number of days condos are listed before they sell) has fallen from 101 in March to 33 in August. Currently the inventory is only a 3.5 month supply. Henderson County reports a 2.6 month supply and days on market has fallen from 86 to 75 since March. Vegas proper has seen days on market fall from 72 to 51.

In Boston, conditions have remained steady since spring. Monthly sales are about 1900, prices are being discounted only seven percent off list on average, the months supply has hovered between 4.33 and 5.60, and the average days on market has fallen slightly.

But in New York City, a serious glut remains and the prospect for a bigger glut is very real in light of a shadow inventory from new units under construction and those kept off the market by owners waiting for the market to pick up before they sell. In the first quarter, the Manhattan condo market hit at 18.6 month supply, three times the normal. Yet sales fell despite falling prices and the opening of new units to increase the glut.

“We are undercounting the housing stock,” Jonathan Miller, chief executive of appraisal firm Miller Samuel Inc., told Crain’s New York. “And when you have more inventory than the market can absorb, it places pressure on prices.”

In a report on Manhattan residential real estate this spring, Miller estimated that in addition to the 10,445 condominiums that showed up in unsold inventory, there were as many as 7,000 shadow units.

The Manhattan market, as measured by the median sales price of re-sale apartments, fell 25.6 percent as compared to the same period last year. The overall number of sales were 50.3 percent below the same period last year as a result of the tightening of credit, rising unemployment and a recessionary economy. Days on market are up (181) from a year ago (135). Inventory is up 12.2 percent year over year and Manhattan’s absorption rate is now 18.6 months, three times the rate of a year ago.

Chicago’s condo market, by contrast, is in much better shape. Spurred by price cuts sales of new units in the downtown market jumped up to 313 units during the second quarter, compared to a meager 55 in the first quarter, but were still down 35 percent from the second quarter of 2008, according to the Downtown Chicago Residential Benchmark Report by real estate consulting firm Appraisal Research Counselors.

The second-quarter sales cut into the bulging inventory of unsold units either recently completed or under construction. The number of such units fell 8 percent, to 3,527, compared to 3,840 in the first quarter of 2009. Condominium conversion projects are not included.

Despite the decline, in downtown Chicago the number of unsold, completed units remains at record levels, creating “even more competition in an already crowded market,” Appraisal Research says.

In Houston, the number of townhouses and condominiums sold in August fell compared to one year earlier. In the greater Houston area, 452 units were sold last month versus 555 properties in August 2008, however, that still represents the third highest month-over-month sales volume of 2009. The median price of a townhouse/condominium fell 10.3 percent year-over-year to $122,000. The average price dropped 9.7 percent to $153,184 from August 2008 to August 2009.

Price-cutting in the DC market has reduced inventory as well. Condo inventory is down 12.6% year to year, to 1200 units. Media price for DC condos fell slightly from $360,000 to $355,000.

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