A Crackdown on Condo Lending
As questions about the state of the real estate market continue, lenders are cutting back on financing and tightening standards for condominium projects. The Wall Street Journal reported Tuesday that certain lenders have been requiring developers to put more of their own money into projects, sell units faster and provide proof of experience completing their planned condo projects.
“Lenders are looking toward more worst-case scenarios,” Dwight Dunton, president of Bonaventure Realty Group LLC, a real-estate developer based in Arlington, Va., told the newspaper.
The latest in condo sales
The most recent figures from the National Association of Realtors show that condo and co-op sales over the last 12 months are up 35% from 2002, while their median price in the most recent month was $229,800, up 61.6% over the typical price in 2002.
However, sales volume is off 10.4% since the record level hit in June, as sales have fallen in three of the last four months, one of the latest signs of a slowing real estate market.
Some lenders told the Journal they are pulling out of some markets. One of them, Brian Harris, the managing director and global head of commercial real estate at UBS, told the newspaper that his company has basically removed itself from Miami.
The tighter standards could limit the flow of new developers into the market, according to the report. Matthew Texler, of Meridian Capital Group LLC, agrees with this assessment.
“What we saw in the last 12 to 24 months was so many people who had never done a condo deal in their lives getting into the condo market,” said one of the vice presidents of this mortgage broker company. “[Now] it’s becoming very difficult for the newbies to get their deals done.”
The move is also making developers more cautious about promising units to potential buyers.
Dan Kodsi is president of Royal Palm Communities, a developer in Boca Raton, Fla. He told the paper he typically would pre-sell units before going to lenders with the sales numbers to assure financing. Now as he plans a 60-story, 500-unit condo tower in the hot Miami market, he’s looking for financing first because of concerns that he won’t be able to raise the cash for the project.
