I do not pretend to be a sophisticated real estate investor, but we all know the basics of pricing any real estate transaction is to look at comps. I am not sure what we looked at 5 years ago, but I do know what we are looking at today…there really aren’t any. How many high rise luxury condos are there in Uptown Charlotte? None. We do know, however, that there is a large amount of condo inventory in Uptown overall. And if sales in condos overall are not brisk, which they aren’t, how does that bode for the luxury condo market?
The buyers that are in the first wave, so I have been told, are going to be the ones that establish the comps. Depending upon how the units are appraised, what kind of negotations you are able to have (if any) with the Developer, the final price and therefore a comp will be established. But is this really going to produce a true comp?
Don’t you think if you have a sizeable down payment in a unit, that you are going to be in a different buying state than the potential buyer that doesn’t? Who is going to establish the lower price, you, the early buyer that put down 20-50K or more, or the new buyer, that sees the market as it is today? The fresh buyer who knows he is staring at a building that is probably going to be at least half empty with little hope in sight for new set of luxury buyers for possibly years?
We are taking it as an absolute given here that the product is every bit as good as advertisied. (If it isn’t we have another problem). The problem is not the product. The problem is the market. So taking this to the next stage, once all the folks that really want the Vue no matter what the price and others that feel compelled to follow through because of their down payments, the “comps” are established. Really? I doubt it. The comps will begin after that. As the “objective” new buyers have a look. And these potential buyers will have much more time and leverage to obtain a unit if they want one at what would truly over time establish the true market price. And doesn’t it stand to reason that the prices they are willing to pay are much less than the prices that the buyers who had a huge financial stake in the units were willing to pay?
No one knows, but isn’t it conceievable that the true market price could be significantly lower than what the prices were in the mid-2000’s? So could you be throwing more good money after bad? All purchases of real estate have risks. For those that do not have the means to close on their transactions, it is possible they may stand to lose the least. Because they won’t have the wherewithal to throw even more money at this transaction only to see the value of their unit sink in the months and years ahead.
There is, of course, another scenario. The units appraise at the prices of mid-2000, the product is fantastic, and once new buyers see the inside they clamor to buy a unit and will pay ever higher prices. This seems like a lower probability scenario, but a possible one. Everyone has their own sense of risk, but this seems to me to be a very high risk bet. We made it in mid-2000. We learned our lesson (hopefully) so that we are unwilling to take the same risky bets today.
My thinking is that all the Vue buyers should have the opportunity to meet with the Developer as we have in the past so we can run through all the issues and questions and concerns and then have all the facts to move forward with a decision. The Developer could organize one of these Vue events easily and I hope he does. If not, we will be left to means like this blog and the other communications channels the buyers have established to make a decision.
What do you think? Should the Vue organize a meeting before they send out letters asking you to close so that all the buyers can talk to each other and get their questions answered? Do you feel the prices we paid will turn out to hold up once new buyers come into the picture? How many of the “60% sold” units are going to be actually occupied 3 – 6 months from now? And what will the Developer do to prices, and what will his lenders make him do, if the 60% turns out to be 30%? Please share your thoughts, and if any of this thinking is misguided, let us all know!