Condos, construction liability laws, etc.

[mattaudio]

Maybe.... Developers don't build condos... because they can make more money with less work by building apartments.

Maybe the best way to get condos developed is to develop apartments until they're no longer in a severe shortage, then condos will become more appealing to build.

[amiller92]

Let's face it, condos are a major luxury -- they're insanely expensive on a $$/SF basis and it's no wonder they're built more sparingly and/or in larger, more expensive or "hot" (speculative) markets. Condos in the Midwest (or South) never made a ton of sense to me, simply because of the economics of it: you could buy a home with 2X the SF and have a yard for the price of a condo.

This sounds like a description of where condos have been popular, not a description of the nature of condos.

Also, in a home you "get" lawn care, snow removal and maintenance issues and do not "get" amenities available at a condo. And there are lots of neighborhoods in this city that are not half the price or double the square feet as compared to condos.

Anyway, that condo have been more successful in the luxury segments of the market doesn't imply that condos are inherently a luxury. They are also a heck of a lot cheaper than a SF home in the same location would be.

So I get why most people don't see the value in that here or in this region. I also get why there are SOME condos, since there is enough of a marketplace for them here to fill up a few buildings per cycle, and there will be some people who love the downtown lifestyle but want to own the equity of their home.......but it's not going to be as mainstream as other places.

We all know that Minnesotans are special, but the closest analog to a downtown condo is a downtown apartment, and we're building those like crazy (not to mention Uptown). That tells me there's a strong market for urban multi-unit living and that something other than preferring a bigger home and yard must be driving the apartment/condo mix.

[Archiapolis]

Maybe.... Developers don't build condos... because they can make more money with less work by building apartments.

Yes, A developer can build the apartment complex , then sell it to a real estate investment company in virtually brand new condition. Much quicker ROI and less risk than attempting to sell condo units individually.

Nailed it!

[Anondson]

Nailed it![/quote]Yeah, this sounds the most plausible summary of what we're seeing based on all the evidence we've seen in this thread.

[TroyGBiv]

Agreed - there have been a bunch of recent news items about how the new apartment buildings are selling for record profits almost immediately after they are built.

[min-chi-cbus]

Let's face it, condos are a major luxury -- they're insanely expensive on a $$/SF basis and it's no wonder they're built more sparingly and/or in larger, more expensive or "hot" (speculative) markets. Condos in the Midwest (or South) never made a ton of sense to me, simply because of the economics of it: you could buy a home with 2X the SF and have a yard for the price of a condo.

This sounds like a description of where condos have been popular, not a description of the nature of condos.

Also, in a home you "get" lawn care, snow removal and maintenance issues and do not "get" amenities available at a condo. And there are lots of neighborhoods in this city that are not half the price or double the square feet as compared to condos.

Anyway, that condo have been more successful in the luxury segments of the market doesn't imply that condos are inherently a luxury. They are also a heck of a lot cheaper than a SF home in the same location would be.

So I get why most people don't see the value in that here or in this region. I also get why there are SOME condos, since there is enough of a marketplace for them here to fill up a few buildings per cycle, and there will be some people who love the downtown lifestyle but want to own the equity of their home.......but it's not going to be as mainstream as other places.

We all know that Minnesotans are special, but the closest analog to a downtown condo is a downtown apartment, and we're building those like crazy (not to mention Uptown). That tells me there's a strong market for urban multi-unit living and that something other than preferring a bigger home and yard must be driving the apartment/condo mix.

Can you provide any examples? I can't think of anywhere in the metro where condos on average are cheaper in cost/SF than comparable single-family homes (comparable cost or size or sub-market).

Prior to the Great Recession, condos were almost unheard of in Minneapolis or much of the Midwest. Why do you think that was? I'm not anti-condo or anti-urban living whatsoever, but I also don't believe condos are a better value than single-family homes per se.

[min-chi-cbus]

I should be clearer when I say prior to the Great Recession: prior to that housing bubble that brought much of the condos we have in the metro area.

Apartments aren't analogous to condos for one primary reason: the loan. When you buy a condo you're investing in a long-term commitment to home ownership, whereas those who rent can move every year if they wish. One of the big reasons renting is more popular today than it was during the boom of the 2000's is because people value having that flexibility in where they live -- in case they want to move, in case they lose their job or relocate, in case the value of the home plummets, etc. They also value their money and don't necessarily want to put too much into their home, or at least not as much as they did in the mid-2000's. There's a host of other reasons apartments are popular today, but the boom isn't being driven by the same things that drove the condo craze in the 2000's, which was largely driven by the notion of guaranteed returns on housing investment -- which certainly does not exist today.

[amiller92]

Can you provide any examples? I can't think of anywhere in the metro where condos on average are cheaper in cost/SF than comparable single-family homes (comparable cost or size or sub-market).

I'm not exactly sure what you're asking, but there are a few potential questions in there. Let me start with the hypothetical one, which by definition won't have specific examples, because there aren't any single family houses in the area. But if there were single family homes next to or instead of the Carlyle or Loring Green, for example, do really think they'd be cheaper per square foot? Nope, the land those buildings re on (among other things) is a big driver of the price, which is part of why there aren't single family homes there.

And, actually, I guess we can compare Loring Green to the Greenway Gables townhouses. Without doing a whole lot of math, prices look pretty comparable to me.

More broadly, you can compare a 2-bed, 2-bath condo at 1500-1800 square feet in the downtown luxury buildings to lots of houses in south and southwest Minneapolis from the '40s that are about the same square footage (generally varying bath/beds) and you'll find that the houses that have been updated and in the more desirable neighborhoods are in the same general ballpark price wise. If you're close enough to a lake, the house will be more expensive.

Prior to the Great Recession, condos were almost unheard of in Minneapolis or much of the Midwest. Why do you think that was?

I don't think it was. Even assuming that you mean prior to the housing boom before the great recession, all of the condos near Loring Park were there. Some of the loft conversions near the river too. The boom brought a lot more in the Mill District and North Loop, but they were hardly nonexistent before then.

But if you're asking, "what's with the big growth in urban living over the last 15 years or so?," much has been written on that topic, and I think you'll find better answers in changing preferences, amelioration some factors that drove white flight, de-industrialization of central cities, and, to a minor degree, some decline of the policies that have subsidized suburban sprawl before you get into anything inherent in the nature of the value of condos (which can exist at varying price points) and single family homes.

[amiller92]

There's a host of other reasons apartments are popular today, but the boom isn't being driven by the same things that drove the condo craze in the 2000's, which was largely driven by the notion of guaranteed returns on housing investment -- which certainly does not exist today.

No one factor explains either phenomenon, but I think they are much more closely related than you think, and I think the renters at LPM, for example, are probably a lot closer to being condo buyers in the neighborhood than they are to buying a single family home in Plymouth.

Of course, I say that as someone who has thought about selling his condo and renting, only to find the rents much too high to be palatable and is now thinking about buying a house.

[Didier]

Prior to the Great Recession, condos were almost unheard of in Minneapolis or much of the Midwest.

My parents had a condo in Roseville in the 1970s.

[Silophant]

A highschool friend grew up in a condo in North Mankato, of all places.

[min-chi-cbus]

Prior to the Great Recession, condos were almost unheard of in Minneapolis or much of the Midwest.

My parents had a condo in Roseville in the 1970s.

You're right....that completely debunks my point.

[Didier]

I think you have a very specific view of what a condo is that doesn't match reality. Condos are not a new concept.

[LakeCharles]

There are 800+ condos built before 2005 for sale right now, only counting those listed with edina realty (250 in Minneapolis alone).

[min-chi-cbus]

There are 800+ condos built before 2005 for sale right now, only counting those listed with edina realty (250 in Minneapolis alone).

What percentage of the marketplace is that? How does that compare to other regions? That was my point -- not that they didn't exist, but they were not a popular mode of choice for living and they still aren't, relative to the rest of the country. 800 units is a drop in the bucket.

[min-chi-cbus]

I think you have a very specific view of what a condo is that doesn't match reality. Condos are not a new concept.

Condos aren't new at all, but they're RELATIVELY new to the Midwest (relative to the coasts, for instance, where condo living was much more prevalent). Before 2000 or 2005 very few people in the Twin Cities considered condos as a living option. I don't care if your mom lived in one or not -- it just wasn't popular and it still really isn't. That can change.

[min-chi-cbus]

Can you provide any examples? I can't think of anywhere in the metro where condos on average are cheaper in cost/SF than comparable single-family homes (comparable cost or size or sub-market).

I'm not exactly sure what you're asking, but there are a few potential questions in there. Let me start with the hypothetical one, which by definition won't have specific examples, because there aren't any single family houses in the area. But if there were single family homes next to or instead of the Carlyle or Loring Green, for example, do really think they'd be cheaper per square foot? Nope, the land those buildings re on (among other things) is a big driver of the price, which is part of why there aren't single family homes there.

And, actually, I guess we can compare Loring Green to the Greenway Gables townhouses. Without doing a whole lot of math, prices look pretty comparable to me.

More broadly, you can compare a 2-bed, 2-bath condo at 1500-1800 square feet in the downtown luxury buildings to lots of houses in south and southwest Minneapolis from the '40s that are about the same square footage (generally varying bath/beds) and you'll find that the houses that have been updated and in the more desirable neighborhoods are in the same general ballpark price wise. If you're close enough to a lake, the house will be more expensive.

Prior to the Great Recession, condos were almost unheard of in Minneapolis or much of the Midwest. Why do you think that was?

I don't think it was. Even assuming that you mean prior to the housing boom before the great recession, all of the condos near Loring Park were there. Some of the loft conversions near the river too. The boom brought a lot more in the Mill District and North Loop, but they were hardly nonexistent before then.

But if you're asking, "what's with the big growth in urban living over the last 15 years or so?," much has been written on that topic, and I think you'll find better answers in changing preferences, amelioration some factors that drove white flight, de-industrialization of central cities, and, to a minor degree, some decline of the policies that have subsidized suburban sprawl before you get into anything inherent in the nature of the value of condos (which can exist at varying price points) and single family homes.

And I think they are driven by two completely different, polarizing priorities: the condo boom driven by excess -- over-leveraging by banks and home owners, and the notion of guaranteed (6%-7% annualized) returns in a marketplace that was desperate to ride any kind of wave it could find; and compare that to today's boom driven largely (not entirely, Didier, or anyone else who has a one-off example) by conservation -- conservative investing and leveraging, conservative lending practices by banks after getting burned by their excesses from a decade ago, conservative job market that isn't showing much in the way of wage growth and employee confidence, and conservative living standards (like walkability and sustainability, and the maximization of limited resources), which is more popular today than ever before.

I don't expect you to agree with me, but my opinion is that condos make less sense in the Midwest region and any region like it where the cost of housing is still quite affordable and achievable for most people looking for home ownership, and as such it's not going to be as popular of a living choice until certain economic factors dictate change. So if developers are sort of gun-shy right now and they're saying that condos have to be selling for a least $225K-$250K on average to be profitable enough to develop en masse, then I'd argue that home values are a big driver for condo construction, and most of the Midwest has very affordable median home values. That doesn't mean condos don't make sense for anybody, they just aren't yet at a price point where a much larger segment of the marketplace needs to be supplied.

Conversely, my entire immediate family is in SF right now and living expenses are astronomical. Rents, are ~$4,000/month on average, I think. With $4,000 per month you can get a mortgage on a home for approximately $750,000 with 4% int. and 10% paid down. In SF, condos are an affordable way to live and are cheaper to buy than any comparable single-family home. It's the most affordable option to own a home, for sure. Average rents in the Twin Cities are about $1,000 or $1,100, which equates to a $200,000 home at 4% APY and 10% down. I think once rents get closer to that equilibrium where the cost to rent is at or above the cost developers require to build condos profitably, condos will become hot again. The Twin Cities is also one of the most expensive Midwest markets, so condos make more sense there than say Cleveland, where I am now. Even within the Twin Cities, there are sub-markets where condos make more sense, like parts of greater downtown. That doesn't negate the fact that condo living still just isn't as necessary in the Twin Cities as it is in other, more expensive, markets.

[David Greene]

I think you have a very specific view of what a condo is that doesn't match reality. Condos are not a new concept.

Condos aren't new at all, but they're RELATIVELY new to the Midwest (relative to the coasts, for instance, where condo living was much more prevalent). Before 2000 or 2005 very few people in the Twin Cities considered condos as a living option. I don't care if your mom lived in one or not -- it just wasn't popular and it still really isn't. That can change.

Sorry but that's just not true. There are condo buildings dated to the Victorian era in the Twin Cities.

[min-chi-cbus]

Didn't say they didn't exist, I said they were relatively unheard of. They were not popular. They were not one of the top living choices for residents. If anybody can point to a statistic that shows me that people in Minneapolis considered condo living as a viable option -- say by the # of units as a percentage of the marketplace, and if that # is fairly substantial -- I'll give in.

[min-chi-cbus]

Let's face it, condos are a major luxury -- they're insanely expensive on a $$/SF basis and it's no wonder they're built more sparingly and/or in larger, more expensive or "hot" (speculative) markets. Condos in the Midwest (or South) never made a ton of sense to me, simply because of the economics of it: you could buy a home with 2X the SF and have a yard for the price of a condo. So I get why most people don't see the value in that here or in this region. I also get why there are SOME condos, since there is enough of a marketplace for them here to fill up a few buildings per cycle, and there will be some people who love the downtown lifestyle but want to own the equity of their home.......but it's not going to be as mainstream as other places.

Here's my original argument again. Read it carefully. I'm saying that condo living isn't as practical in the Midwest and in the Twin Cities as it is in other, more expensive markets. I even say that condos DO exist here, and there are some sub-markets where they make more sense, but they're not as mainstream here compared to other cities. I didn't deny the existence of condos prior to 2005. I didn't say they were unheard of (I said practically unheard of, relative to today, for example).

I'm not really sure what the argument is, but I'll continue to defend mine. I think you guys just like to nitpick/argue.