Mixed Messages on Washington

Fantastic 2 bed/ 2 bath Printer's Loft Coming Soon!

A Tale of Two Markets
I spent the past few days showing some cool spaces to 3 different out of town buyers.  Nothing abnormal.  

Something we used to see quite a bit when walking from building to building showing lofts was "run in's" with other Downtown Realtors.  This is the sign of 'hot listings';  it feels like a party, everyone starts showing up at the same time by chance.  It happens all over, but today it was happening downtown.  Clients getting frustrated by excessive showings, seeing agents rushing around with file folders and clients in tow, and working past midnight trying to catch up on paperwork;  these are the signs of a busy market.  While the weather today wasn't fantastic, the market seems to be on fire.  

So when I sat down tonight to review the 1st Quarter St Louis loft sales, my expectation was massive growth in the downtown market overall in the form of loft sales.  While the number of sales wasn't bad, they were surprisingly normal.

In 2008 when the US economy hit a wall and our local real estate market followed suit, our problem with downtown sales was very simple:  Lack of buyers.  There were hundreds of lofts for sale and very few buyers.  That problem has become progressively better as the years have passed.  

Today the issue keeping the loft market stable may vary, but the most interesting problem has been lack of inventory.  

Looking at the numbers, there's 64 Lofts on the

Fantastic 2 bed/ 2 bath coming soon!

market, so one may say, that's roughly 8 months of inventory.  Traditional real estate statistics would say that's still a buyer's market with plenty of available homes.....but wait!  Condominiums have an interesting quirk.  Out of the available 64 condos, approximately one third of the available units would not qualify for any conventional or FHA loan.  Not being able to get a mortgage on a home is sort of a big deal.  Cash buyers are out there, but I ask my cash buyers one question, "when re-selling, do you want to be limited to only cash buyers?"  Most of them buy a unit where financing is not a problem.  

Five percent of the units are luxury penthouses, which, are in a sub-market of their own - not something the 'average' buyer would be able to purchase.    

So just over half the lofts downtown wouldn't be an option for the 'typical' buyer, and of the remaining 30 available homes, 10 of them are 1 bedrooms.  So the 'typical' St Louis loft buyer, as of today, has roughly 4.15 months of inventory to choose from.  The penthouse buyer fares better, but the 1 bedroom loft buyer fares worse, with only 3 months of inventory available.  

So breaking the numbers down, its no wonder that buyer's have been struggling to find a place to call home downtown.  And it's no wonder that the sales have been 'level' at 20.  I've seen how home buyer's get when the see exactly what they like.  It's different than when they get tired of looking and settle.  Vastly different.  While it still happens, most home buyer's give themselves enough time to not have to settle for a home they don't LOVE.  

Before we move on to the individual sales downtown, one more point should be made.  In looking at the sales market, it would be incomplete to look at sales without looking at what's 'in the pipeline'.  Lofts 'under contract' presently number 21 -- 9 of these have been sold within the past 10 days, 7 of which sold since this Thursday.  Sales are picking up for sure!!!

Loft Education Revisited

November was a tough month. 


Having to live with a euphoric fog of having another World Series Championship in the bag, enjoying the unseasonably warm temperatures, then the beginning of the holiday season.  The whole month just flew by.


One of the events I missed was the Condominium Education Event held by the Partnership for Downtown Saint Louis and Wells Fargo.  This type of class being held downtown for free gets me giddy;  not because of its entertainment value - more of a life-long mission.


That mission starts with my belief that there is a good amount of ignorance pertaining to condominiums.  This theory applies to professionals as well as the general public.  Some people say this is a St Louis thing, since we're not as experienced as a whole compared to South Florida or Manhattan.  Many of the mortgage lenders, insurance brokers and realtors in St Louis just assume that working with lofts and condos is the same as dealing with a single family home, or a mutifamily apartment.  In observing and speaking with other professionals, I've gotten the sense that if they've never lived in a condominium or if they only work with them occasionally, that they have limited understanding of how they can assist their clients. 


I've seen more lenders attempt to finance a loft and fail, I've seen hundreds of underinsured condos, and I've worked with other Realtors that make huge errors that would have been avoidable with proper condominium education.  


As far as non-professionals go, the biggest mistake I see generally is not considering what a prospective home buyer or their buyer's agent would perceive of decisions made on condo bylaws or management decisions.  Crazy stuff can happen.  I've heard some condo associations have decided not to maintain their buildings FHA approved status because they think that status will allow Section 8 tenants to live in the building or less than stellar buyers needing government assistance will buy!   These are both 100% false, yet once the decisions are made with false information, they're hard to be reversed, and often times aren't even realized by anyone else in the building, due to the same ignorance.
   
This brings me back to the event hosted by the Partnership and Wells Fargo.


I ran into one of the partnership folks a few weeks back, and they boasted of the success of the Condo Education event in November and said they were looking at another one soon.   Its a great event for Realtors, Loft owners, condo association memebers, board members, and property managers.  


The event will be held at the Laclede Gas Building in the New Yaeger 1st floor conference center.  NEXT TUESDAY (January 31st) at 6:30pm.  


While I'm not 100% sure of the topics involved, I know that this is information that will benefit the Downtown St Louis neighborhoods and can ultimately lead to better price appreciation and overall market stability.  


BE THERE! 

Amazing Grace!

The Grace Lofts were built in what was known as the Lesan-Gould Building, a historic building significant due to its patented use of reinforced concrete. Located in the anchor blocks of Downtown West, its surrounded by shops, restaurants cafe's and galleries.

It was originally planned as condominiums, but upon completion, plans were changed and the building was held and rented instead. Now, conversion is underway.

Compared to many of the other buildings, the lofts tend to be more open and spacious. With only four units per floor, its a boutique building.

The building is Priced to Sell! Special financing is available and there is a SPRING SPECIAL for contracts approved by June 30th of $10,000 off the loft or $10,000 in developer upgrades.

The Grace Lofts are being held open this coming Sunday, May 22nd from 1-3pm!

New FALL PRICING as of 9/1/11!  Other specials apply!  Check out the fall frenzy special at 4SaleStLouis.com/grace_lofts.html

Great News for Leather Trades!

The Leather Trades Building, long time dormant building should finally be getting its long awaited facelift!  The building, listed on the historic register, will be converted into apartments by large apartment manager Dominium out of Minneapolis. 



The Tudor Building Scared People.

 This is great news for the 15-16th blocks of Locust which have had to look at the building in its current state ever since Pyramid Construction started doing preliminary work for its planned condo project.  It was a reminder of the effect the Tudor Building had on prospective buyers at the Lofts at 2020.  People would look at the ragedy building and ask if the neighborhood was stable.  After Pyramid started pulling windows out and doing some demolition, the Leather Trades had the same effect on people looking at the Printers Lofts, the Annex, and Terra Cotta. 


The New Tudor added density and businesses!



After the Tudor Building was completed, it added a whole new dimension to the area with more density, and some sorely needed commercial space.  The additional buildings across the street add even more.

 

More density and one more completed building to downtown at 16th and Locust is just what the doctor ordered!

FHA Approves Lofts at 2020!

Congratulations to the Loft Owners at 2020 Washington in getting their building FHA approved! 

Last week the FHA Commissioner, David Stevens was in town to speak to a group of Realtors.  We were there for a few reasons;  a free lunch, a pep talk, and to impress upon the FHA Commissioner how lending restrictions on condominiums need to be revised. 

For review:  an FHA Loan is made available to allow new home buyers to buy a home with a 3.5% downpayment (instead of the 20%+ that conventional banks require).  In February 2010, it was required that only FHA Approved Condo Projects could receive FHA loans.  Since FHA financing was practically non-existent when most of the downtown condominium projects were built, but now accounts for nearly 40% of the available lending, many of the buildings that were not originally approved had to go through the process.  We had been encouraging that since May 2008 (see My Day at the FHA part 1 and part 2). 

Despite all our encouragement, only the Syndicate Condominiums and the Dorsa Lofts have become FHA approved since February and they did mainly because of continued involvement from the developers.

When the topic came up at the luncheon about improving access to FHA for Downtown condominium projects, there was a loud applause from the crowd.  Most Realtors want better opportunity to sell in Downtown St Louis but have had to tell buyers with less than a 20% downpayment to look elsewhere.  That has been HORRIBLE!  Unfortunately, the Commissioner Stevens answer was not terribly inspiring.  He said that due to condos having the highest default rate and pressure from right wing groups to reduce federal loan programs, "no further liberalization of lending terms can be expected." 

While that news stinks, it forces the issue even more that CONDO ASSOCIATIONS NEED TO GET FHA APPROVAL!!! (Especially Printers Lofts, Annex Lofts, Terra Cotta Lofts, Railway Lofts, Bankers Lofts, Westgate Lofts, Garment Row Lofts, Lucas Lofts, & the Marquette Building).  Also Knickerbocker and BLU, coming up for expiration next month, need to get re-approved.

At Premier Realty Exclusive, we have resources to help in the process, but the Condo Associations of these buildings have to do the work, otherwise they limit the buyer's able to buy to those having a 20% plus downpayment.  These days, that's a tall order.

Life As We Know It

Downtown St Louis saw an investment of 4.4 billion dollars in reinvestment between 1999 and 2008.  During most of that time, the acronym "FHA" used in conjunction with home loans was mostly unheard of (see My Day at the FHA part 1 and Part 2).  Having been developed during that time, there was no percieved need for loft buildings to be "FHA Approved" at that time.

FHA insured home loans have always treated condominiums different than single family homes, having an complicated approval process.  Once approved, FHA loans could be done on a building with "limited review," meaning that the underwriting was simplified and minimal information from the association was required to complete the loan. IN THE PAST, if a condo buildning wasn't approved, but was acceptable, it could go through the SPOT APPROVAL process, by which most loans downtown were done.

In life, the only guarantee is change.

In a past life, watching the ripple effects of government decisions trickle down often meant watching how the affected businesses would respond to the governments mandates.  When the FHA changed thier guildelines, it seemed as if they were trying to make things easier overall.  After all, why should EVERYONE wanting to buy a condo in an acceptable building have to go through a "spot approval" process over and over instead of just doing a bit more work and approving the whole building?  Their goal was to simplify the approval process, stating that any Direct Endorsement lender could do the approval.  What we're hearing is that these same Direct Endorsement lenders are passing the buck to condominium associations. 

In 2008, when I visited the FHA offices, I asked why a condo association or realtor couldn't just arrange for the approval.   My question seemed to be confusing.  "Why can't the lender just do it?" was the confused response.  Of course, knowing lenders, I couldn't think of too many lenders that wanted to go through the public service of having a whole buildng approved just to do one loan. 

The attached picture file shows the requirments needed and most of the buildings downtown should do EVERYTHING THEY CAN to try to comply with these requirements to get thier building FHA APPROVED!  

Looking at the requirements I have some questions.  More will be revealed when I get the answers. 

The basic fact that seemingly alludes condo associations is that the more difficult a condominium is to purchase, the longer it can take to sell and the stronger the buyer's chances of getting a better deal. 

While some buildings will have more buyers looking for FHA loans than others, it would benefit ALL buildings and downtown as a whole if condominium associations act now to get FHA approval for the next two years.

FHA Approval and Buying a Loft

We had our open house at the Ballpark Lofts yesterday and for a while it seemed as if the housing market was back in full swing! Getting so much interest there was almost enough excitement to make up for having to postpone our trip to Cancun scheduled for today.

Someone asked me a question that I take for granted as a realtor and someone who specializes in St. Louis lofts: "So how does this being 'FHA approved' benefit me?"

Back in May 2008, when all of the sudden FHA loans were a big deal in lending again, we did 2 posts to Lofts in the Lou (My Day at the FHA part 1, My Day at the FHA part 2 )that addressed some aspects of FHA financing and some of the flaws in the approval process.

The basics of getting any loan that seems to be more relevant today is that the money lender has to approve of 3 things before loaning money: the borrower, the buy, and the reason. To get any home mortgage, the bank begins the process by approving the borrower (checking credit, income, assets & liabilities). Once the buyer selects a home, regardless of it being a house or condo, the lender must approve the property too. This usually comes with an appraisal.

Condominiums can be complicated. Appraisers don't have the time or access to obtain enough information about the condominium association, its funding, etc. so the bank usually takes care of that. It can be difficult at times. There are several different types of bank reviews that occur when dealing with a condo, but the two basic options are "limited review" and "full review". Buying a condo or loft in a previously FHA APPROVED building helps the process because then your lender would be able to obtain a speedy approval through a limited review.

Most home sales take roughly 30 days to complete. Often times home buyer's think that the process of getting a loan mostly involves shopping for the best rate and everything else falls into place. NOT TRUE! The process of getting financing is only begining during the initial consultations. Usually a good lender can make the process seem like everything falls into place. Getting lenders not fully competent in financing condos can make the process seem like an arduous nightmare.

So my answer to the buyer's question: "How does FHA approval benefit me?" would be that having one fairly big piece of the puzzle already in place will give a borrower more options in financing, a smoother transaction, significantly less down-payment required, and an assumable loan (another story, but a great benefit when selling).