Phoenix Luxury Condos a Great Way to Spend the Winter!

Upscale condo projects in desirable locations throughout Phoenix epitomized the housing boom here.  They were also the most visible reminders of the crash.  In 2006 the Arizona Republic showed that there were 8,000 new condo units planned for the valley.  Only half of those were built!  Fast forward 5 years…

Several of the high-rise towers and other luxury-condo projects are filling up with buyers.

- Almost 90 percent of the 146 condominiums at One Lexington, a converted 1974 bank building on Phoenix’s Central Avenue, have sold.  Only 14 of the condos were sold before the project’s previous developer filed for bankruptcy in 2009.

- In central Scottsdale, more than 20 condos out of 50 planned have sold at the once-stalled Sage project along the city’s waterfront.  The Safari development, which is on the grounds of the once famous Safari resort, is also filling up.

- The brick minimansions known as Chateau on Central in Phoenix, once boarded up and stalled in foreclosure, are now open and selling.

Metro Phoenix urban-housing expert and broker Keith Mishkin estimates more than 120 new high-end condos in newer developments have sold so far this year, almost twice as many as last year.

“I wouldn’t say the new-condo market has bounced back, but it has definitely started to stabilize,” he said. “And it’s not just investors buying now. People who want the urban lifestyle and Baby Boomers are now the biggest groups of high-rise condo buyers.”

And why not?  These are not the condos of old.  They have everything a winter visitor would need: fitness rooms, cafes, valets, doormen, proximity to transportation, dining and shopping, golf courses and best of all LOW MAINTENANCE!  Who wants to pend their winter in the Valley of the Sun taking care of a yard?

Late last year, Phoenix architect Mike Hauer bought a one-bedroom condo on the 14th floor of One Lexington tower in midtown Phoenix.

“The price was right, and the location is great,” said Hauer, who paid about $180,000 for his condo and doesn’t have to pay homeowner-association fees for a year as part of the developer’s incentives to draw buyers. “I had friends over for Fourth of July, and we could watch the fireworks from my balcony. There aren’t a lot of Phoenix homes with views like mine.”  Hauer paid less than half of what his condo was originally priced at when Equus was developing the project in 2008.

Equus filed for bankruptcy, and its lender took over the project. In February 2010, after scouring the Phoenix market for the best high-rise condo deals, British Columbia-based Macdonald Development Corp. bought the tower from the lender for an undisclosed sum.  GO BC!

So far, Macdonald reports it has sold $30 million in condos at One Lexington. The tower was valued at $19 million in 2009.

“Some people thought we were nuts for buying One Lexington,” said Rob Hubbard of Macdonald Development. “But we came into the market at the right time. It cost the last developer $340 a square foot to build it. We obviously didn’t pay that much. Now, we are able to sell the condos for $225 a square foot and make a profit. Our buyers are seeing almost instant appreciation.”  Can you believe that?  Instant appreciation!

The same thing that crashed the single family market crashed the condo market in Phoenix.  Too much inventory and not enough buyers.  Things have definitely changed in 2011.  This market now has too little inventory and too many buyers.

According to Arizona housing analyst RL Brown, as many as 10,000 apartments were converted to condos in 2005-07, further adding to the supply of  housing  rarely, if ever, seen in the Valley.  As of today, 9/17/2011, there are only 19,319 properties listed as active in the Arizona Regional Multiple Listing Service.  That’s less than a 3 month supply!

Chicago based ST Residential bought the Scottsdale Safari condo project out of foreclosure in 2010.  This year, condos at that project near Scottsdale Fashion Square have been selling for $400,000 and higher.  The project is across the street from Scottsdale Fashion Square which is one of the largest malls in the western US.  It’s also walking distance from historic downtown Scottsdale.

So let’s take a look at what we might be able to expect from the future of this market.  I wish my crystal ball wasn’t on the fritz…

When Summit Properties started building a condo project in central Scottsdale in 2007, the least expensive unit was offered at $695,000 and the penthouse at $1.3 million.  But, there were few buyers, and Summit lost the project to its construction lender iStar, which finished building it and lowered prices.

Jan Jumet and his wife, who live in Pennsylvania but have been visiting Scottsdale during the winter for several years, recently purchased a condo in the project now named Sage.

“We have wanted a second home in Scottsdale for a long time, but we were waiting for the bargains,” Jumet said.  The bargains are here!  Condos are now selling at Sage for $370,000 to $530,000.

Chateau on Central, the luxury brownstone homes, could be the next comeback project for metro Phoenix’s urban housing market. The project, like several other stalled condo projects including Centerpoint, was financed by the now-defunct Mortgages Ltd., which left many private investors with big losses when it abruptly shut down in 2008 after the death of founder Scott Coles. Originally, the five-story minimansions with copper turrets, elevators and rooftop terraces were supposed to sell for $2.8 million to $4.5 million.  But, after they sat half-built and empty for more than a year, Wisconsin-based MSI West Investments paid $7 million for the 21 homes.  The buyer finished the project and is now marketing the homes for $1.1 million.

Real-estate analysts say there is a market for high-rise condos and lofts in metro Phoenix.  The problem a few years ago, was too many developers and investors jumped into the market at once.

This winter, when you are looking for a second home in the Valley of the Sun, consider a condo.  You might be surprised at how much you can get.

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