Market decline in VA and MD markets have affected even some of the more popular developments and communities in the area. Developments which saw Phases 1, 2 and 3 sell out in record time are now having a hard time getting those projects to completion. This is as more concerned buyers pull out and cancel contracts and losing their deposits. While researching information for this article, we found more condos were converted to rentals as that's become more profitable for the builders. This is all due to an increase in cancellations and buyers become weary of taking the plunge on a new construction condo.
The Odyssey is one of the more popular condos in Arlington, VA given the impressive views of the Washington Monument and the Capitol, quality high end architecture and sought after amenities. Who can resist that? Apparently, quite a few are resisting the Platinum Penthouse Suites with high end price tags that rival the Wooster and Mercer Lofts. Competition is fierce but the market simply won't support such pricing in a down market. Sellers need to be realistic or take the units off the market. Why? Condos here have been notoriously overpriced for some time and as the saying goes, what goes up must come down.
The Eclipse at Center Park
The Eclipse at Center Park converted to rental units in early 2007 due to cancellations and sluggish sales. Comstock sold a substantial amount of pre-sale units in 2005, however, sales started to slip and cancellations abounded, so the project headed down hill as they extended delivery dates due to slow sales. Their average sales for new orders decreased by $120,000 from $365,000 down to $245,000 which is a significant loss. The company was also especially hit hard in the Washington DC market where they experienced 122 cancellations on 625 contracts or 19.5%. Specific to the Eclipse project, they experienced 35 cancellations on 46 new contracts. Ouch! Still they state that most cancellations were related to contracts entered into during 2004. I'm not sure how much of a release that is because in 2004 the prices were lower given that many of those sales were lower do to those units being pre-sale inventory.
via Comstock SEC Filing
Fairwood, Bowie, MD
Some of Fairwood's "specuvestors" who got in early on the project made away like bandits, however those who got in to the market late are now feeling the pinch. Many of them unable to sell and break even, forget making a profit. And, that was in 2006-2007. Now, some sellers aren't able to refinance due to declining property values all around the Bowie and Glenndale, MD areas.
The DC Examiner reported: "No region in Maryland has been harder hit by the foreclosure crisis than Prince George's County, and no neighborhood in the county has likely been rocked like the Retreat in Bowie's Fairwood community.".
Those are pretty strong words but when you think that in just 2005 when this development was in its early stages, many potential buyers were being lured in with the idea they could own a luxury home just by signing a contract for an interest only loan or an ARM. Phases I, II, III and IV sold out in record time with prices increasing with each phase completion. Just three years later, many of them are in foreclosure, unable to sell or refinance. When talking with one of their Realtor's back in 2006, buyers were reassured that the market in DC was only on its way up because of all the developments in the pipeline.
Now, just 2 years later the Examiner notes... "In one four-block area, there are seven homes in various states of foreclosure, many others sit empty and others have sat with " for sale "e; signs on their lawns for months. Between 2005 and 2006, as developers Rocky Gorge and K. Hovnanian Homes put the Retreat's condominium-town houses on the market, they snagged many buyers with no-money-down loans that residents and Realtors now point to as the primary cause for the neighborhood's fast-falling market values.
I would also contend that greed got the best of all parties involved.
Clarendon 1021 is another popular community, now dubbed "Flop City" due to flippers having a hard time turning a profit, has been plagued by foreclosures. Many "specuvestors" started selling at a loss in efforts to avoid a foreclosure with little success. Given the market climate this was bound to happen and now many are paying for it in lower comps, missed payments, and lost opportunity due to the increase in foreclosures. "Specuvestors" saturated and inflated the market along with builders offering pre-sale units at a substantial discount. Add to that, the abundance of sub-prime mortgage activity and you've got the perfect storm.
What are your thoughts? Have you experienced a foreclosure in any of these buildings or communities? If so, please share your story in the comments area. Alternatively, you can meet with us to discuss your situation and we can answer any questions you may have around market concerns.