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VOL. 126 | NO. 164 | Tuesday, August 23, 2011

‘Modified and Decreased’

Developers drop prices to spark sluggish condo market

MICHAEL WADDELL

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The Memphis condominium market is hoping to gain some positive momentum through the rest of this year thanks to historically low interest rates and decreasing condo supply across the city.

The Laurels, at Central Avenue and Highland Street, has helped spur condo sales east of Downtown Memphis, a sector that leads the market.
(Photo: Lance Murphey)

Condo sales in the Memphis area in 2011 are down 27 percent compared to 2010, with 310 sales through July this year versus 422 sales in the same time during 2010, according to real estate information company Chandler Reports, www.chandlerreports.com.

The average sales price dropped 12 percent during the same time, to $109,828 this year from $124,272 in 2010. Total sales volume is off by 35 percent, dropping to $34 million this year from $52.4 million in 2010.

Sales in the first half of 2010 were buoyed by a first-time buyer tax credit that ran until April 30. There is no such tax credit in place this year, but agents are hopeful that extremely low interest rates and a more relaxed lending stance will lure potential buyers in the coming months.

Downtown remains the Mid-South’s dominant condo submarket, with a county-best 67 sales in 2011 that have averaged $150,801 and totaled $10.1 million.

“We’ve had more interest picking up lately because some of the mortgage companies are starting to loosen up on their lending. Since we are going to have such good accessibility with the mortgage companies, I look for prices to start climbing a little bit,” said Downtown Condo Connection principal broker Sue Tines, who has watched pricing fall for the past few years. “We’re also working on getting (Federal Housing Administration) approvals for five Downtown condo buildings, and that will mean less down payments for buyers.”

Just last month, Tines sold the last of the 36 condos at 420 S. Main St., where sales were sluggish over the past two years as the final eight units sold.

Right now the supply of Downtown condos is much lower than average, totaling between 100 and 120 units, and that trend is not likely to change any time soon. Inventory has dropped over the past 12 months thanks to no new construction and fewer foreclosed condos coming onto the market.

“We’ve been waiting to see condo inventory shrink Downtown because we felt like we were too flooded before,” said Tines, who pointed out that at one point in 2006 there were 279 condos available Downtown. “Currently there are only 60 units available within the most popular price point between the $150,000 and $250,000.”

Jason Durston, managing broker of the Downtown office of Crye-Leike Realtors Inc., said he believes that compared to the condo boom years from 2004 to 2006 activity is definitely down, but he thinks the number of Downtown condo sales this year is impressive considering the current economy.

“Individuals are able to get their condos sold without having to compete against bank-owned properties, so prices Downtown are staying as steady as possible right now but are still down substantially from where they were at originally,” he said.

For sellers that can’t get the price they want right now, many have converted their properties into rental units until the market bounces back.

“The rental market has really taken off Downtown,” Durston said. “There is very little inventory right now in the Downtown rental market.”

Sales of Downtown condos cooled as the summer heat intensified. In July only seven condo sales were registered Downtown, down from 15 in July 2010 and 22 sales in June. Overall for the year to date, Downtown condo sales are down 29 percent from 94 sales through July 2010.

Plans to develop condos with new construction on the south end of Downtown remain on hold. Capital One is still searching for a buyer to take over The Horizon project on Riverside Drive, which would have featured as many as 300 condos. Capital One bought the project out of foreclosure from developers The Bryan Co. and Riverside Bluffs LLC in July 2009, after they defaulted on a $58.6 million construction loan. Roughly 90 percent of exterior is complete, but the interior remains unfinished.

Though Downtown is typically the busiest condo market in town, East Memphis is one of the hottest right now. The 38117 ZIP code near Poplar Avenue and Perkins Road has experienced 31 sales in 2011, and the 38119 ZIP code near Quince and Ridgeway roads has seen 29 sales.

“We’ve already sold more homes so far this year (14), than we sold all of last year (12),” said Allison Beldick, director of sales at 40-unit The Laurels, at Central Avenue and Highland Street, a project developed and owned by Makowsky Ringel Greenberg LLC. “We have modified and decreased pricing by 10 percent to 12 percent in 2011 in order to reset to the current market conditions. Because of all of the inclement weather Memphis had in the second quarter of this year, we think the spring selling season was delayed until the summer.”

This year’s price cuts come on the heels of much more substantial price slashing that happened between 2009 and 2010, when pricing on some floor plans was slashed by $50,000 to $100,000 at several East Memphis projects.

Halle Whitlock, lead salesperson at The Laurels, said she wrote four new sales contracts just in July. Pricing ranges from the $170,000s to the $330,000s.

Other popular area submarkets for condos this year include Germantown’s 38138 and 38139 ZIP codes with 30 sales and Collierville’s 38017 ZIP code with 17 sales.

Chandler Reports is a division of The Daily News Publishing Co. Inc.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 0 133 1,342
MORTGAGES 0 131 1,047
FORECLOSURE NOTICES 20 39 190
BUILDING PERMITS 0 305 3,056
BANKRUPTCIES 17 135 753
BUSINESS LICENSES 0 53 329
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0