Monday, May 15, 2006

Condos, Condos Everywhere?

The Sacramento Bee has an update on Sacramento's condo conversion ordinance. Maybe flooding the Sacramento housing market with condo conversions is not the best idea when inventory is skyrocketing. According to HousingTracker, inventory in the Sacramento housing market increased by an astounding 475 homes in the second week of May. That's an increase of 5.2% in one week.

Condos have become attractive to buyers who can no longer afford regular homes, but some say Sacramento's potential changes come as investor interest in new conversions is waning.

"That market is slowing its pace," said Marc Ross, an associate with CB Richard Ellis' Sacramento-based investment properties division. "But there is still great interest in seeing Sacramento update its condo ordinance. There are interesting opportunities if they would allow it to happen."

Ross said "hundreds of units" in and near downtown are candidates for conversions alongside planned high-rise construction that could bring up to 2,000 new condos downtown in coming years.

For the moment, Ross and others see declining interest in Natomas, home to numerous new condo construction projects and an estimated 8,500 apartments, and in the Pocket area, with more than 3,500 apartments. Climbing interest rates for investors in condo conversion deals, a market slowdown among homebuyers and still relatively cheap rents in both areas limit the conversion market there, said John Dailey, Sacramento-based senior vice president at CB Richard Ellis.

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