Save Griffintown!

Can the condo market absorb more supply? by ajkandy
March 23, 2008, 10:53 am
Filed under: economics, housing bubble, news

Interesting WSJ article, from the US bubble meltdown perspective:

The condominium market is about to get worse as many cities brace for a flood of new supply this year — the result of construction started at the height of the housing boom.

More than 4,000 new units will be completed in both Atlanta and Phoenix by the end of the year. Developers in Miami and Fort Lauderdale, Fla., are readying nearly 10,000 total new units in a market already struggling with canyons of unsold condos. San Diego, another hard-hit region, will add 2,500 units, according to estimates provided by Reis Inc., a New York-based real-estate-research firm. […]

Regulators have been sounding the alarm for weeks about the exposure of small and mid-size banks to commercial real estate, which mostly means construction loans to developers of condos and single-family housing.

Lenders of all sizes have $42 billion of condominium debt on their books, according to Foresight Analytics. In just three months — between the third and fourth quarters of last year — the delinquency rate rose to 10% from 5.9%, says the Oakland, Calif., research firm.

When the US financial meltdown eventually affects Canada, we may find ourselves in the same situation. Anecdotally, real estate professionals we’ve talked to feel that there is already a glut of unsold condos on the market in Montreal, and that the next wave of demand (generation Y kids buying their first home) isn’t set to come for a few years yet. This gives more credence to Jean-Claude Marsan’s observation that there’s still plenty of room for commercial real estate and new residential construction in downtown proper, so to create a second downtown that may be subject to a financial collapse seems like a riskier proposition.

If the economy tanks and we go into a years-long depression before that, then I think people will be thinking more about staying home with Mom and Dad a while longer. The idea of converting McMansions into proper extended-family dwellings, or changing zoning laws to permit outbuildings, granny flats, etc. will probably come back into vogue.

(via Atrios)