There’s a neat article in the weekend Wall Street Journal about the impending flood in the condo market. It looks like one of those “perfect storm” problems: developers got financing to build a bazillion dream-condos in hip locales a few years ago, but they’re all nearing completion just as the mortgage market is collapsing, real estate prices are dropping and no one knows how much these properties are really “worth.”
The article describes some interesting aspects of the economics of condo-developers, where the money comes from, how much is self-financed, and why it makes little sense for them to convert the units into apartments. But most importantly, it explains why the condo boom couldn’t be stopped:
The rising supply is a reflection of the picture in 2004 through 2006 — a time of huge demand for condos. Speculation was rampant as investors believed empty nesters and young professionals seeking an urban experience akin to what they watched on “Friends” would prop up the condo market for years.
And you wonder why I read all these business and finance articles.