Monday, January 16, 2006

"Cooling" Market May Chill Downtown Condos

This article from the Sacramento Bee explores how a cooling real estate market, among other factors, may threaten several downtown condo and office projects.

Downtown high-rise developers are racing the clock - and each other - to grab a piece of Sacramento's downtown skyline in what is shaping up to be a pivotal year for some of the region's biggest projects.

While several developers hope to put their stamp on the downtown with towers stretching up to 400 feet and higher, they say it's unlikely that all will succeed.

All have glossy renderings of what their buildings will look like. All have a vision for a new, vital urban core for Sacramento humming around their projects. But only one has firm financing and all face rising construction costs, soft markets for residential and commercial real estate and questions about when, if ever, the K Street retail district will revive...

Recent turns in the local real estate market could pose another problem to condo builders charging $500 per square foot and more for a chance to buy a piece of the sky.

Inventory of the most expensive homes in the Sacramento region has ballooned, sales have slowed and prices are flat at best. Meanwhile, high-end homebuilders are offering incentives such as free swimming pools and landscaping worth tens of thousands of dollars.

Saca says he and other condo tower builders won't be hurt by those trends. His wealthy buyers are drawn by the lifestyle promised by downtown living...

Taylor had a different take on the condo market. With the housing market cooling, the test for his project with Nassi will come when potential buyers have to commit their deposits with no chance for a refund.

"Recent changes in the market may cool buyers to the point where they aren't willing to buy," Taylor said. "I think there's some real risk there."

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