Buy one (condo), get one free?
6/4/2008:
In some markets, such as Southern California, developers have begun using creative tactics to move inventory, like giving away a modest home when you purchase a luxury home.
Would that ever happen in Hoboken? Like buying one high-end unit in Maxwell Place, get a 400k unit over on the west side?
Escondido: Buy one (house), get one free
In a sign of how difficult it is to sell new homes in Southern California right now, a San Diego developer is offering a “buy one, get one free” deal, pairing million-dollar homes with less expensive homes.
“We thought, ‘Why does it just have to be on Pop Tarts and restaurants? Why not buy one home, get one free,’” Dawn Berry of Michael Crews Development told 10 News in San Diego.
“Michael Crews Development is offering new, 2000-square foot cityscape row-homes worth $400,000 in Escondido for free — if you buy one Royal View Estate home in San Pasqual Valley starting at $1.6 million. ‘You know it’s a straight-up legit deal; no prices have been increased, there are no hidden costs. Michael is just giving away a free home for people that buy at Royal View,’ said Berry.”
“Adam Rossman of Michael Crews Development added, ‘People have been coming in saying, ‘How can you do this?’ Well, it’s our way of dealing with current market conditions to move some inventory.’ “
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June 4th, 2008 |
No
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June 4th, 2008 |
“Originally the deal was to last through May, but the developers are extending thru June to give buyers a chance to mull it over”.
Translation: they couldn’t find any people capable of financing $1.6M in shitty Escondido (I’ve been there).
When will these idiots realize the scam is over? Bear’s gone, and Lehman is circling the drain…soon to be another shotgun bride to some “better bank” courtesy the Fed and a guarantee of Lehman’s obligations.
The gravy train is over. It is time to start selling homes for a more reasonable average salary multiple. I’ll wait.
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June 4th, 2008 |
The “Buy 1 Get 1 Free” promo for San Diego/Escondido ended May 31. The row homes in Escondido are beautiful (Cali style, modern), and it’s a cool little town. The homes in San Diego are on a mountain.
Would Toll Bro’s do the same? Well, after years of “kill’n em” in Hoboken, why not? But then they could do what every other developer did and just rent out the unsold units. Depends on cash flow. Unfortunately for them, cash is the hammer and nails that keeps them in business. And they are public, so who knows. I’m sure they can’t drop the price since everyone who already bought would complain. So a freebie might be just right.
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June 4th, 2008 |
They don’t want to drop the price because they would have to take a huge impairment on existing inventory.
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June 4th, 2008 |
*** Deutsche Bank analyst Nishu Sood said Toll Brothers should more aggressively discount because “by holding prices the company is just delaying the inevitable as prices are unlikely to revisit boom time levels for a prolonged period.” The company hasn’t written off as much as other builders, and as such has a higher share of these charges to come, he wrote in a research
*** Net contracts, an indication of future business, fell by 58 percent to $496.5 million in the quarter from a year ago.
*** The company said the quarter’s backlog of homes ordered but not yet delivered totaled $2.08 billion, down 50 percent year-over-year.
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June 4th, 2008 |
Bob Toll the Capitalist (2007): “We’re killing them in Hoboken!”
Bob Toll the Socialist (2008): “Congress needs to pass legislation for tax incentives for people to buy homes!”
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June 4th, 2008 |
In response to MidnightRacer who said:
That’s sort of like complaining to your bank because interest rates dropped after you got your loan isn’t it?
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June 4th, 2008 |
I don’t think the buy one get free scenario is likely to happen.
But I do think that closing prices will continue to decline as the sellers realize the truth. There just are no buyers that can finance or afford at the current rates. Lenders won’t offer mortgages at the levels they used to.
New construction will see the larges price declines, since those are generally the largest mark-ups. But the question is, what is the market equilibrium? Right now, prices have room to come down, but at a certain price, these homes become attractive as a primary residence, or investment. (Note-this excludes any thought about Hoboken property tax issues)
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June 4th, 2008 |
hi
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June 4th, 2008 |
This will not happen. The real estate situation here and in Cali is completely different. Cali is one of the hardest hit in the nation and NY metro is the least hit at this time. There may be some incentives as Toll and other have over extended a bit (ie free maint for 6 months, toll will pay closing cost etc) but not to the point to give away free condo’s. There is not that much inventory out there. Also Hoboken has a great fall back, can always convert to rentals. New construction is in for some tough times, to much of the same exact layout design. Your competing with 10 other units exactly like yours. Condo’s in brownstones and smaller building have a huge advantage.
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June 4th, 2008 |
In response to Easy-E who said:
You tell me. I’m not a lawyer, but I think that the people who close on their 1125 Maxwell condos would hire their own lawyers to fight it. Not sure how the law works with advanced purchases, but imagine if two groups of people close on similar condos on the same date yet at vastly different prices. Like I said, I don’t how the law works, but in these days anyone can sue for anything.
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June 4th, 2008 |
In response to bri777 who said:
hello
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June 4th, 2008 |
In response to hobokenj who said:
And what kind of rent will be necessary in order to service the permanent financing on the project like Maxwell Place? A unit that was projected to sell for $750,000 can’t be rented at $3500 a month. The flip-side is that anyone that can afford $4000 per month will probably want to buy.
Maxwell was built to be sold as condo. Offering up rentals may bring in some short term cash flow but real estate is a leverage game, and Toll has debt service they need to meet. Monthly rental income won’t cover that. The DB analyst is spot on with his view of Toll. They are still carrying condos at original market price. Great for Maxwell owners, terrible for Toll share-holders.
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June 4th, 2008 |
I can see Toll Brothers actually offering row homes built somewhere far away, like the Poconos, as a freebie Buy 1 Get 1 Free promo while keeping 1125 Maxwell at same advance pre-constructions prices others paid. I’m sure the costs out there are a lot less. To give away something in Hoboken, no matter how far back, is a mistake.
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June 4th, 2008 |
Toll Brothers reported yesterday a third-straight quarterly loss of $93.7 million
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June 5th, 2008 |
In response to MidnightRacer who said:
imagine? it’s called negotiation skills. should i be penalized because some schmuck doesn’t know how to negotiate? hell no. i know someone who purchased recently and offered asking price. not even a penny below it. that’s called stupidity. it happens with cars all the time. it’s not like other car owners can band together and say the dealerships are hurting resale values because of negotiations or promotions they run.
that’s the most absurd thing i’ve ever heard.
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June 5th, 2008 |
In response to homeboken who said:
rent is still an option. if they were going to sell it for $750,000, you think that’s what it cost them? hell, given their reputation, it probably cost half that. they can rent it for 3500 or 4000 no problem. there’s plenty of condos not as nice in hoboken for the $3,000 range. it’s an alternative to the city…there’s plenty of people that throw money away on rent. just because you have the money to afford something doesn’t mean you have the financial savvy to do proper things with said money…
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