Always good to see more units coming down the pipeline. I do wonder why it's always skewed so heavily towards rentals with little or no housing available for *purchase* in walkable areas. It seems like there would be a market for it, but maybe I'm wrong? Or maybe the demand is there but no one can afford them, so developers just don't build any?
I wish there as more condos available as well... I assume when the economy is this good, the risk of having unfilled apartments is low enough, they take the risk of apartments versus condos. If the economy dips I imagine some could be converted to condos to reduce risk for the builder and/or property mgmt. That is at least what it seems. I wonder if you compare the condo projects versus the apt projects you might see smaller companies or companies not associated with property mgmt, so they instantly sell for profit and don’t have any risk of having to lease out space. Just my best educated guess though. I really want more people living downtown, especially long term.
The reason there is a lack of condos generally has to do with 1) financing, and 2) the project is usually not sellable afterward for a large premium. For a lot of these investors it doesn't make sense to build Condos, and if they do, there is a lot of personal risk.
That said, financing is getting easier. Austin Lawrence Partners 1 City project is a good example, plus the other smaller projects around the area.
But if you want to see a failed project, check out 539 Foster a condo project, which has now been replaced with Foster on the Park.
More condos will come though, as they have been successful in the area.
She said the location on Foster Street is great, and that BH “loved the condo idea,” but, because financing for condos has remained, as she said, “very difficult,” the group’s lender decided to take a different route.
I guess it's hard to finance because it's simply more predictably profitable to own rental apartments than to sell condos then?
Really? I feel like there are SO many condo projects in Durham, especially compared to Raleigh. There's The Barlett on Main St, The Grove (townhomes), Mangum Flats, One City Center, Yancey Street Condos, The Callista (ultra high end), Leyland Post, The Eleven, one other in the Central Park area that I can't remember, and a couple of other townhome projects all coming into the market within a pretty close timespan... I almost wonder how they'll all sell, but they seem to be doing fine.
The majority of these are smaller scale projects, but perhaps that's why they're doing so well. They're all reasonably well-designed compared to the horrid mega-block apartment buildings that keep getting built, usually by out-of-town developers.
True--there are a number of ongoing developments, but like you said, they're small in scale. 8 units here, 20 there. Yancy Street will be 60 units. But, all combined, all the developments you mentioned may even total less than the numbers of units in a single apartment development (e.g. Liberty Drive-In is 246 units).
In addition, the condos are pretty expensive. In searching all of the developments you mentioned, I didn't see any units listed at less than $434,000, which is twice the median home value in Durham, and most of them were $500k-$600k or more. There's one place I know of that plans to offer 400 sqft studios for $200k (actually, I thought this was the Yancy Street development, but I didn't find it by googling), but I think that can be quite a tough sell when you can buy a 3br/2ba SFH <10 minutes from downtown for $175k (though it will be 20 years old or so).
I guess it's more of a question of: why are there are affordable options to rent downtown, but not to buy? There is demand to live downtown, evidenced by the people renting. I know many people who would buy downtown if they could find a place where the mortgage wouldn't be double what they pay in rent. Shouldn't there be some sort of economies of scale in building multi-family housing that brings the prices down? Why are they more expensive than SFHs?
Edit: Sorry, I guess this is all beyond the scope of this topic/forum!
I understand what you're saying, and it makes sense.
You're correct, those smaller units will be at the Yancy Street condos. And there were sub-400k condos in both One City Center and at Mangum Flats - at the latter, 450 sq ft studios started at $180k, and 800 sq ft 1 bdrms were $310k.
Regarding the question of affordability, I'm not sure I agree with you. New entry-level 1 bedrooms downtown typically rent for around $1400. If you look at a direct comparison to a condo, so let's say, 800 square feet, you're looking at $1700 for rent. I'm not a homeowner so I'm not sure how accurate my assumption is, but wouldn't this put you right in line for a monthly payment on a condo, including all the extras like HOA and insurance? Surely the mortgage payment by itself on a 300k condo would be less than rent for an apartment assuming an average down payment.
I guess it depends on the assumption you make. If you assume a mortgage of $282K ($300K total, minus the average first-time home buyer's down payment of 6%), average mortgage interest rate of 4.39%, PMI payments and property tax (state rate of 0.88% + Durham country+county combined rate of 1.3565%), I'm getting an estimated mortgage payment of $2,170/month using this calculator and that doesn't include HOA fees. But maybe some of my assumptions are wrong?
Either way, I'm assuming these $300k condos aren't being bought by the average young first-time home buyers. Based on how quickly these are sold, there are probably people with much better credit and bigger down payments, so I doubt the above-detailed buyer would even be competitive if they could qualify.