Several months ago, I stepped into Pearl District Properties to meet a chipper real estate agent. I tried to inquire into how many people were getting into adjustable rate mortgages. She could only refer me to a flyer with a sleek looking mortgage broker advertising several interest only mortgage plans. Love those things!
The next thing I knew the agent blurted out the one thing I didn’t want to hear: “it’s been so weird. We only had 10 condos for sale and now we have like 70.” Well, now they have 253.
Let’s look at Pearl District Properties’ total outstanding condo inventory:
|< $350K||$350-450K||$450-600K||> $600K||Total|
In July, I started tracking the condos that Buying Pearl Real Estate had for sale on their website:
|Total||Number||Percent||Less Than||Less Than||Less Than|
If we assume that the average condo sells for $500,000 (conservative estimate if you can believe it), then Buying Pearl Real Estate has around $240 million in inventory at a time when inventories are rising like CO2 levels.
They are still building these things like mad. The John Ross by the new tram. The Wyatt will add another 245 units to the Pearl. The Strand is going up where I-5 crosses the Willamette. Their website claims an additional 1,335 condos are going up along the Willamette. Local 296 has been out protesting because the developer is using low-wage workers on overpriced condos.
This dollar amount of inventory sitting around can cause big problems for our regional economy. Bear in mind that construction costs have increased significantly over the last couple of years. Nearly all commodities like copper, aluminum and steel have doubled and tripled over the last 5 years thanks to easy Fed money. Bubble #3!
There’s a lot of money sitting on the table with these condos at a time when inventories are rising rapidly, multiple projects are too far along to stop and the developers need hefty prices to compensate for higher construction costs.
Will all these condos sell? Or will developers, real estate agents and lenders take it in the asphalt?