Condo conversions in the Charlottesville area

Let me start with this – the doom and gloom depicted in the WSJ article are not necessarily applicable in the Charlottesville/Albemarle market. However, to a lesser degree, we may have some “growing pains.”

From Saturday’s Wall Street Journal (temp free link):

For the nation’s real-estate lenders, the other shoe may be about to drop: condominiums.

Already plagued by rising home-loan defaults and foreclosures among overstretched consumers, major markets across the country — including parts of Florida, California and Washington, D.C. — are seeing rising foreclosures and bankruptcies of entire condo projects.

The condo market, while tied to the housing market overall, behaves differently under stress. While a single-family home builder generally constructs units as orders come in, a condo developer builds all at once and hopes for the best, adding risk. So while the speculative overhang of newly constructed single-family homes may have peaked in many markets across the country, the full force of the condo glut is starting to hit now.

With single-family homes, “you put up a couple of model homes and build the rest as you get sales contracts.” says James Haughey, director of research at Reed Construction Data in Norcross, Ga. “But you have to build the entire…building before you can sell a single condo.”

Hessian Hills. Riverbend. Barracks West. Walker Square. The Greens at Hollymead. Villas at Southern Ridge. 1800 JPA. Carriage Hill. These are most of the condo conversions in the Charlottesville/Albemarle area; no doubt there are a few others I am sure to be forgetting, not least the odd duplex that was converted to “condos”. There are a few on the market right now.

Questions that I would ask on any of these conversions (make sure you have your own buyer’s agent) –

– How many units are there in the development?
– How many have sold?
– When did the conversion become official? (when was it registered with the Commonwealth?)
– How many of the sold units have been sold to owner-occupants?

To give a very high-level (and admittedly somewhat inaccurate due to GIGO) overview  of the Charlottesville condo market, here are the results of a quick MLS search with no status attached:

Condos in Charlottesville/Albemarle marked as new construction: 313
Not marked as new construction: 3,333

Conclusion – there have been far fewer new condo developments built than have been converted to condos. New condo developments should be (much) less susceptible to what may be coming to the condo conversion market. Might a reversion be in the offing? (ironically, one of the condo conversions in Charlottesville appears to be advertising on Yahoo for “condo reversion Charlottesville.”

The CR’s post has some excellent comments, including this one:

…  we have the mostly unrelated condo conversion issue, which was nothing more than an arb of the overheated housing market vs. relatively low rents.

But too many of these “conversions” were nothing more $1000 of new paint and countertops slapped into formerly rental units and that was supposed to support valuations 20, 30 even 50% over the income property valuation (even at today’s crazy cap rates). That arb play has failed, and the “developers” behind them are going down, and good riddance.

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These are a few of the Charlottesville Condos on the market right now:

[idx-listings linkid=”62828″ orderby=”Price” orderdir=”DESC” count=”7″]

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  1. Mark August 28, 2007 at 08:58

    Not sure that anyone really cares, but the local company advertising on Yahoo is almost certainly just advertising on the phrase “condo charlottesville” and that ad is being broad-matched to similar phrases such as “condo reversion charlottesville.”

    Replace “reversion” with pretty much any word and the ad will still come up.

    Sorry for being such a stickler here, but it appears that this is unintentional.

  2. Jim Duncan August 28, 2007 at 09:02

    Mark –

    Thank you so much for clarifying this (and for commenting).

    I sincerely appreciate your taking the time to explain this (I don’t use adwords, so don’t have the familiarity with them).

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