Glut of Condominiums Makes for a Tough Sell : But Price Cuts, Demand for Single-Family Homes Create a Buyer’s Heaven
Pssst. Wanna buy a condo?
For anyone with a few thousand dollars and a hankering to own a condominium, the San Fernando Valley is heaven.
For sellers, on the other hand, the Valley is less sublime. They must offer financing, price cuts and other incentives to unload the places they no longer want--or just finished building.
It’s all because a longstanding condominium glut in the Valley has depressed prices, discouraged some builders and made it tough to sell.
The soggy market is so notorious that it has spawned its own special gallows humor. A real estate broker jokes that the difference between a social disease and a Valley condo is that you can get rid of the disease.
Sellers ‘Just Want Out’
“The owner has to resign himself to not getting anything out of it” beyond what he paid, said broker Joffrey Long of Granada Hills. “Most sellers just want to get out.”
That is Bob and Sally Fentress’ attitude. They have been trying to sell their Van Nuys condo for more than a year now, and can’t even get the $107,500 Sally Fentress and a former roommate paid for it in 1981, when the condo craze was at its peak.
But there are some signs of hope for sellers these days. Realtors say the glut has eased a bit. “It’s a much more normal marketplace,” said Stan Weinscheink, general manager of SW Realtors, a Valley company.
According to the San Fernando Valley Board of Realtors, the ratio of condo sales to new listings, a measure of how fast condos are selling, was 32% last month, contrasted with 25% in March, 1984. (By comparison, the ratio of new listings to sales for single-family houses last month was 46%, about the same as a year ago.)
Selling Prices Declined
Offsetting the good news for condo sellers was a small drop in the average selling price. The average price of the 145 condos that changed hands last month was $109,000, contrasted with $110,900 for the 114 sold 12 months earlier. During the same period, the selling price of single-family homes rose from $149,900 to $150,700.
“The prime item that almost all people want is a separate, detached, single-family residence,” said Board of Realtors president Joan Knox. As house prices have leveled off, that first choice is more attainable.
Easing or not, the glut persists, and prospective condo buyers can choose from about 1,770 units listed with brokers, plus some more that aren’t. (The 1980 Census turned up 19,716 condo units in the Valley, and, although the number is surely higher now, no later figures are available.)
Pools, Jacuzzis, garages, multiple bathrooms and snazzy kitchens are taken for granted, and buyers can get these things with attractive financing. Down payments as low as 5% are not uncommon, forcing developers to buy mortgage insurance for reluctant banks, which normally require a much larger down payment.
All of which is small consolation to people like the Fentresses, who find themselves saddled with sky-high mortgages and condos they can’t sell.
For example, condo owner Bill Cowdrey has already abandoned the idea of profit, allowing for inflation. He bought his three-bedroom Panorama City condo for $87,000 four years ago, and he’ll take $89,900 for it now, since he and his wife have bought a house. So far no takers, and the Cowdreys meanwhile labor under a 15.75% mortgage.
“It was a very poor investment,” he said ruefully.
Not long ago condominiums were the hottest real estate properties in cities and suburbs nationwide, and buyers lined up to grab anything that came on the market. Condo building boomed from 1975 through 1980, and residential real estate of any kind was so hot in the Valley that prices doubled. The boom was such that by 1980 the Valley Board of Realtors had 11,000 members, against just 7,000 today.
“We were probably the largest board in the world,” Weinscheink, its past president, said with a laugh.
Condo Market Bad for Sellers
High interest rates, high prices and a sagging economy changed all that. For the past three years or so the condo market has been terrible for sellers.
Despite all the new condo complexes in the Valley, the glut also seems to be affecting builders. Numbers are hard to come by, but “it’s definitely slowing down the planning of our builders in that market,” said Ray Sealy, president of the Los Angeles division of the California Building Industry Assn., a trade group.
At one point, after months of futility, the Fentresses were even advised to let the bank foreclose on their 14.5% mortgage, an option that many others like them have already exercised.
But they rejected that, and now “we’re thinking of trying to rent and refinance,” Fentress said. Experts say that’s not a bad idea.
Condos Rent Fast
“They rent right away,” said Jenny Stabile, a Woodland Hills broker and developer who owns 40 condos that she says are always filled with tenants. She says rents usually fall $100 or $200 shy of monthly costs for most owners.
That shortfall is usually erased when the owner takes advantage of deductions for the mortgage, taxes, maintenance and depreciation.
But some people just want out. Walker Carpenter and his wife bought a house, and so they decided to put their Encino condominium on the market for $140,000. That was three months ago; now they’re down to $110,000, and they still haven’t sold, even though they’re offering an 11.5% assumable mortgage and will take 10% down.
“I had a broker on it, and he couldn’t sell it,” Carpenter said. “So I had an open house. I had lots of looky-loos, but no deal.”
Keeps on Trying
Carpenter says he has heard the market is getting stronger, and he keeps trying. “There seems to be a glut right now,” he said resignedly.
Realtors and sellers say the market is better in some places than in others. Warner Center and the areas near Ventura Boulevard are supposed to be easier to sell in than Panorama City and Sylmar, for example.
But individual sellers must also contend with the special financing and other incentives being offered by developers of new condominium complexes. Many new complexes, such as Kingsbury Condominiums in Northridge, advertise 5% down and low mortgage rates for qualified buyers. Some will even pay closing costs.
Incentives Make It Tough
Those incentives are tough to compete with, private sellers are finding.
“You’ve got all this bank financing through the developer,” said William Heaton, who regularly offers to lease or sell his Warner Center condo and who just as regularly ends up leasing. “It rents in one day.”