A number of lending institutions and banks are blacklisting condo developments, refusing to write loans to prospective buyers, according to Marketplace. South Florida has been particularly hard hit by this, adding additional strain to the overbuilt condo market. However analysts say other banks are drawing up similar blacklists on projects in Nevada, Michigan and California as well.
Making matters worse is that Fannie Mae has made getting a condo loan even tougher, requiring a higher percentage down payment than in years past. Before Fannie will write a mortgage in any new condo building anywhere in the U.S., 70 percent of units should be sold. It used to be just 51 percent.
This lending practice is discouraging development, and if banks follow suit it could put a halt to all condo development, because in this economy the likelyhood that the first 70% of buyers will not need financing is exceptionally rare.
In Cincinnati this could have a serrious impact on the new developments taking place in areas such as the gateway Quarter, and Downtown. As condo buildings come open for purchase it is my hope that the institutional lenders will recognize the strength and stability of the Cincinnati real estate market when they are reviewing loans applications.
Additionally condos have been a typical first purchase for first time home buyers, and those looking to downsize. Both of groups are looking for efficient and economical housing and if mortgages are not available to buyers looking at specific buildings it will distort the housing market artificially.
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Cincinnati already has quite an inventory of empty condos and private dwellings. Many units are located in the downtown area (including OTR). Even before the housing crash, it seemed apparent that, in order for one development to succeed, others would have to fail. Lenders are being prudent in this case. Even better, would be a transition from commercial funding for large condo developments to incentives for smaller single family townhouses and multiple dwellings, particularly for existing structures. We have plenty of those.
Perhaps converting the exiting empty downtown condo units into rentals would help the area to develop the type of critical mass that, even in good times is necessary for large developments like The Banks to succeed.
What I have been hearing from colleagues and bankers is that local banks are more willing to finance new construction condos than national banks. This may be a result of the fact that local banks know which markets are saturated and which will be more likely to retain their value or appreciate.
If Cincinnati’s real estate developers are having a hard time getting financing, I might be able to help.
We work with private lenders throughout the country who help developers fine the financing they need.
Feel free to contact me anytime.
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