Thursday, March 27, 2008
"The condominum market is about to get worse as many new cities brace for a flood of new supply this year--the result of construction that started at the height of the housing boom. ... The new building comes on top of unprecedented supply. The U.S. finished 2007 with a supply of condos large enough to absord 10 months of demand, the highest level since the National Association of Realtors began the tally in 1999. ... Lenders of all sizes have $42 billion of condominium debt on their books, according to Foresight Analytics. ... Vulture buyers have started to circle, hoping to take advantage of foreclosed properties that banks may start dumping at fire-sale prices. Also, some condos are being converted to rental units, increasing suply for renters and putting downward pressure on prices. ... Some deposits were as little as 3% of the purchase price. The price of a condo has frequently fallen more than the amount of the deposit, giving the buyer an incentive to forfeit the deposit", WSJ, 22 March 2008.
What's the big surprise? 3% down is a "call option", not a deposit. The asset falls in price, the option is permitted to expire.