RISMEDIA, July 25, 2007–(MCT)–Dorothy O’Mara’s condominium in the Montclair development in Mount Pleasant has been for sale for more than a year. The number of condos on the market in the Charleston area has nearly quadrupled over the past two years.
Weeks before Dorothy O’Mara put her Mount Pleasant condominium up for sale, the unit next door found a buyer in a mere four days.
More than a year later, O’Mara’s unit is still on the market.
The housing slowdown has crept into her neighborhood in the Montclair condo and townhouse development, where one in every six properties is up for sale. While her two-bedroom, 2 1/2-bathroom end unit has one of the lowest price tags at $175,000, it has been a struggle to attract buyers.
“It’s been kind of an impossible situation,” said O’Mara, who wants to move closer to her daughter in West Ashley.
O’Mara isn’t the only condo owner caught in the downdraft. The local market is full of units that are up for sale, nearly 2,000 in all, compared with less than 500 in a given month just two years ago, according to figures from the Charleston Trident Association of Realtors.
The upshot is that some condo sellers are cutting prices or offering incentives to lure buyers. Also, several new projects have been delayed, and plans to convert at least one apartment complex into condos have been scrapped.
The Realtors association estimated last week that about 1,970 condos are for sale in the three-county area. That total could be higher because the listings for some condos aren’t registered on the association’s sales database.
While the numbers are big by historical standards, some real estate optimists said they aren’t worried about the long-term prospects of the local condo market, thanks to Charleston’s diversified economy and its natural attractions from its climate to its history.
And for the right price, some condo sellers have been successful. About 160 units changed hands in June, according to the association’s data.
“The classic real estate factors have to be aligned: price, location and product,” said Collin Ellingson, senior vice president of sales for The Condo Store, an Atlanta-based division of Coldwell Banker that is marketing three local condo projects. “If one of those factors is off-kilter in this market, it can have a negative effect on sales.”
While oversupply is a natural part of any sector of the real estate market, the latest increase in the condo supply has opened some eyes.
During the boom times, a handful of area apartment complexes were converted into condos while buyers and investors looking to cash in on rapidly rising real estate values lined up to buy the individual units.
The first big conversion took place in early 2005, when the Enclave on James Island was renamed the Peninsula and was sold off to individual buyers. More than 800 people showed up to claim one of the 300 rental units, and the property sold out in a matter of hours, said Richard C. Davis, head of Trademark Properties Inc., which handled the sales.
“You couldn’t build ’em fast enough,” Davis said.
In Mount Pleasant, meanwhile, conversions became a popular option because of a town regulation that limits the number of building permits. All the while, developers continued to build new projects alongside thousands of single-family homes.
“This was the 100-year flood,” said Fudgy Brabham, broker-in-charge of Harbourtowne Real Estate.
The demand for condos began to fade in early 2006, just as the overall real estate industry started to pull back, experts said. Brabham said it’s probably going to take some time for buyers absorb the mass of homes on the market and rebalance supply with demand.
If condo conditions don’t improve by winter, Brabham predicts that buyers could find dramatically lower prices in some areas as investors cut their losses and sell at deep discounts. The danger with that type of selling, sometimes called dumping, is that it takes only a handful of deals to affect the values of nearby properties, he said.
Prices already are readjusting in some cases. For example, in the Montclair neighborhood, more than three dozen condo and townhouse units changed hands for prices between $175,000 and $200,000 during the market’s peak. The median price for a Montclair unit so far this year is $169,425.
County records show that one property in the development sold at a $14,900 loss in February. The previous owners paid $177,500 in September 2005.
Real estate experts are telling buyers to be on the lookout for discounted units. But some sellers are trying to avoid cutting prices by throwing in incentives, such as contributing cash toward the closing costs, waiving homeowners association dues and offering upgrades on new units. One Mount Pleasant couple is even offering a 1993 Mercedes-Benz convertible with their three-bedroom home.
But the competition remains tough. Older condos are not only competing for buyers among themselves, they also must contend with dozens of newly built units that feature modern amenities like elevators.
Affordable housing advocates would welcome a decline in prices, said Tammie Hoy of the Lowcountry Housing Trust. She noted that the condo conversion trend drove up values and made it harder for wage-earning renters to find housing at an affordable price.
Developers, meanwhile, are more cautious than they were a few years ago about building new homes.
Housing 2000 Inc. has put its proposed 314-unit project on Daniel Island on hold, partly due to market forces, said Fred Morgan, president. Instead, his Texas-based group is concentrating on the September groundbreaking of a large apartment complex near Charleston Southern University in North Charleston.
Atlanta-based home-building giant Beazer also has elected to wait for a market rebound before proceeding with its 182-unit Station West project at Albemarle and Folly roads.
“Once you start one of these things, you really can’t stop, so it’s a matter of picking the right time to start,” said Frank Finlaw, the company’s Charleston division president.
The slowdown has even affected some luxury condo projects. On the peninsula, the 400 Meeting St. development was put on hold for a second time in March while its Greenville-based investors wait for a market turnaround.
Also, the owner of Wild Dunes Resort has pushed back the second phase of its Village condominium project to mid- to late 2008. Work was supposed to start this past spring.
“We didn’t want to flood the market with another 50 or so brand-new condos,” said Frank Fredericks, the resort’s director of sales and marketing.
The condo conversion trend, meanwhile, has nearly come to a halt some two years after it took off.
Charleston-based Greystar Real Estate Partners and other investors originally planned to sell off the 360 units in Mount Pleasant’s Edgewater Plantation after paying $48 million for the property a year ago. Given the changing market demand, the owners have since decided to keep the waterfront complex as a rental property, for now at least.
“What we thought was going to be a 12-month sellout felt like it was going to take two or three years,” said Bob Faith, Greystar’s chief executive officer.
Meanwhile, sellers such as O’Mara are shocked at how difficult it has been to find buyers.
O’Mara said she has studied real estate television shows explaining the most effective ways for a seller to decorate a home. She has taken down family portraits but recently “rebelled” by moving one of her favorite coffee tables back into the house.
“Some of the neighbors have been forced into foreclosure, and it’s just been very sad,” she said.
Copyright © 2007, The Post and Courier, Charleston, S.C.
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