Housing Prices

[runawayjim]

Let's say you were in the market for a 1bd condo. The Westin condos ($459K) start about 14.75% above the entry level Waterplace condos ($400K) according to emails they sent me. The Westin is obviouslly nicer: you start on the 16th floor and go up from there as opposed to the 3rd floor in Waterplace, seems to have better materials and layouts... So my question is which would be a better investment going forward? And do you think either building will be forced to cut prices due to a soft housing market.

[Divot]

What do you find unappealing? If the Westin is like most hotel/condo projects you would have a separate entrance/parking area and unless the guests were really rowdy you probably wouldn't hear them from different floors.

One thing to consider is if you want to live in a hotel or not. Some people (including myself) find the idea of living in a hotel very unattractive. People who live in hotels tend to keep to themselves and have little involvement with the people/things around them. You also have hotel guest around you 24/7- Some people like this some people hate it.

[Divot]

the better investment really depends on what you're looking for. i don't know what amenities they both offer.

[provid]

For one ( unless this has changed ) you will be sharing the same gym/ pool.

Investment wise its hard to tell - I would guess neither are going to jump greatly in price for a little while -

[runawayjim]

I mean from a pure return on investment. It's impossible to know but I was just trying to get speculation as to which building's units will appreciate more in price.

[xine]

I wonder what affect the condo fees would have on the return on investment, and if the Westin involvement with the management of condo association board would make between the two projects (if Westin would be involved at all).

Does anyone know what the projected fees for the two projects are, or if they're much different?

If I were going to live there my personal preference would be Waterplace. I can't quite put my finger on it except that I really don't care for the Westin architecture, and I think I would feel as though I were paying for a lot of extras I didn't particularly need just because of the association with the hotel. Also Waterplace already seems to have that ethereal sense of "place" just by virtue of it's siting.

On the otherhand, if it were an investment I would probably go for the Westin, just because I would see the hotel as a stabilizing factor, plus the reputation of the Westin brand would make it easier to swap use of the condo for a nice villa in Tuscany or a ski chalet in Whistler in one of these luxury house-swap vacation deals.

[pete11]

For one ( unless this has changed ) you will be sharing the same gym/ pool.

Investment wise its hard to tell - I would guess neither are going to jump greatly in price for a little while -

[Divot]

I'm a fixed income analyst at a large investment firm, so don't talk to me like I'm an idiot since I'm pretty sure I understand investment concepts.

Looking at apartments in the downtown Providence area I can only find a handful that the professionals I know would want to live in that are within walking distance to the train station. Most are converted lofts and are priced $1900+ without parking (some prices I was quoted were higher then that). I'm not really a "loft" guy so these don't do much for me and there doesn't seem to be a whole lot of luxury apartments in the area.

To be cash flow positive on one of these condos you would need to rent it out at ~$2500 a month depending on the down payment, condo fees and taxes. Even if you couldn't get that right away, if you have a fixed mortgage I'm guessing within the next few years you'd be able to rent it out around there. There are more then a few building in Boston that rent smaller 1bd apartments for those prices. However, I'm not looking at a condo to rent out, I'm looking at it as a place to live. The investment aspect I was talking about was the capital appreciation down the road (~5 years). As someone looking to move to the area I've been shocked at the lack of places available that I'd actually want to live (no offense meant to anyone here) that are within walking distance to the train. If Providence is truly a "Renaissance city" they are going to need cater to all types of people not just college kids living on the third floor of a converted single family houses...

As an investment --neither. With the prices you mentioned, you could never rent that unit out in Providence, and cash flow positive. Looking at some of these condos as pure "investment" and taking into account condo fees and taxes, on a purely rental cash flow basis, their investment value is somewhere around $0. Now if you're talking about living in one, remember price is what you pay and value is what you get. It doesn't matter which is nicer...etc. If you have been paying attention at all and still believe condos are an "investment" then you are derilict in any financial understanding (not you specifically), and whatever lender would lend that money without a huge downpayment, deserves the nonperforming CDO.

Mike sorry but I picked your post to respond to, because it was sane.

[runawayjim]

I'm a fixed income analyst at a large investment firm, so don't talk to me like I'm an idiot since I'm pretty sure I understand investment concepts.

Looking at apartments in the downtown Providence area I can only find a handful that the professionals I know would want to live in that are within walking distance to the train station. Most are converted lofts and are priced $1900+ without parking (some prices I was quoted were higher then that). I'm not really a "loft" guy so these don't do much for me and there doesn't seem to be a whole lot of luxury apartments in the area.

To be cash flow positive on one of these condos you would need to rent it out at ~$2500 a month depending on the down payment, condo fees and taxes. Even if you couldn't get that right away, if you have a fixed mortgage I'm guessing within the next few years you'd be able to rent it out around there. There are more then a few building in Boston that rent smaller 1bd apartments for those prices. However, I'm not looking at a condo to rent out, I'm looking at it as a place to live. The investment aspect I was talking about was the capital appreciation down the road (~5 years). As someone looking to move to the area I've been shocked at the lack of places available that I'd actually want to live (no offense meant to anyone here) that are within walking distance to the train. If Providence is truly a "Renaissance city" they are going to need cater to all types of people not just college kids living on the third floor of a converted single family houses...

[pete11]

I'm a fixed income analyst at a large investment firm, so don't talk to me like I'm an idiot since I'm pretty sure I understand investment concepts.

Looking at apartments in the downtown Providence area I can only find a handful that the professionals I know would want to live in that are within walking distance to the train station. Most are converted lofts and are priced $1900+ without parking (some prices I was quoted were higher then that). I'm not really a "loft" guy so these don't do much for me and there doesn't seem to be a whole lot of luxury apartments in the area.

To be cash flow positive on one of these condos you would need to rent it out at ~$2500 a month depending on the down payment, condo fees and taxes. Even if you couldn't get that right away, if you have a fixed mortgage I'm guessing within the next few years you'd be able to rent it out around there. There are more then a few building in Boston that rent smaller 1bd apartments for those prices. However, I'm not looking at a condo to rent out, I'm looking at it as a place to live. The investment aspect I was talking about was the capital appreciation down the road (~5 years). As someone looking to move to the area I've been shocked at the lack of places available that I'd actually want to live (no offense meant to anyone here) that are within walking distance to the train. If Providence is truly a "Renaissance city" they are going to need cater to all types of people not just college kids living on the third floor of a converted single family houses...

[BBascule]

Divot,

Judging purely by location, I'd be inclined to go with the Waterplace condo.

- you're further from the barren highway interchange

- you've got a great urban "yard" in Warterplace Park

- closer to the train station

- you won't share amenities with people who don't live there

- less obstructed views

- close to the festivals/concerts at the park - if you're into that

[AriPVD]

Pete, I don't want to get into an economics shooting match with you, and I trust that you know your stuff pretty well. However I too am trained in real estate economics, so I do feel comfortable sharing my opinion on the intersection of real estate economics and city planning.

I think the one, major thing you discount in your various analyses is evolution of place. Five to ten years ago people would not pay $100,000 to live downtown, nevermind $1,000,000. Today, there is a healthy market for condos in the $100,000 to $500,000 range, and a limited but still present market in the $500,000+. Providence as a whole and downtown in particular have evolved in spectacular ways over the past decade. Change in the built environment has created new value for investors and developers. Markets exist that did not exist several years ago. While I'd agree that the highest-end market can seem rather limited, I wouldn't underestimate the potential for further value creation based on the continued evolution of downtown. I do have the benefit of doing this every day for a living and relying on a healthy bit of optimism. But I think you'd be as foolish to bet solely on yield curves than I would solely on the new residents, shops and businesses I see locating in my buildings on a monthly basis.

[runawayjim]

- close to the festivals/concerts at the park - if you're into that

[pete11]

Pete, I don't want to get into an economics shooting match with you, and I trust that you know your stuff pretty well. However I too am trained in real estate economics, so I do feel comfortable sharing my opinion on the intersection of real estate economics and city planning.

I think the one, major thing you discount in your various analyses is evolution of place. Five to ten years ago people would not pay $100,000 to live downtown, nevermind $1,000,000. Today, there is a healthy market for condos in the $100,000 to $500,000 range, and a limited but still present market in the $500,000+. Providence as a whole and downtown in particular have evolved in spectacular ways over the past decade. Change in the built environment has created new value for investors and developers. Markets exist that did not exist several years ago. While I'd agree that the highest-end market can seem rather limited, I wouldn't underestimate the potential for further value creation based on the continued evolution of downtown. I do have the benefit of doing this every day for a living and relying on a healthy bit of optimism. But I think you'd be as foolish to bet solely on yield curves than I would solely on the new residents, shops and businesses I see locating in my buildings on a monthly basis.

[Divot]

If you bought a condo in miami a year ago with a pay option arm odds are you're in trouble. However, there are zero high end condos in providence right now. Two buildings with ~300 units are coming online over the next year with one other building planned. Do you really feel that Providence can't support any? The prices are well below what you would pay in boston and it's an easy commute on the train. I know my company is forcing my group to move to Providence. That alone is a few hundred "rich people" coming over the next few years.

I could talk about the global savings glut... investment from asian central banks... new and innovative carry trades... etc etc etc... but I'd rather not turn this board into my work.

[pete11]

If you bought a condo in miami a year ago with a pay option arm odds are you're in trouble. However, there are zero high end condos in providence right now. Two buildings with ~300 units are coming online over the next year with one other building planned. Do you really feel that Providence can't support any? The prices are well below what you would pay in boston and it's an easy commute on the train. I know my company is forcing my group to move to Providence. That alone is a few hundred "rich people" coming over the next few years.

I could talk about the global savings glut... investment from asian central banks... new and innovative carry trades... etc etc etc... but I'd rather not turn this board into my work.

[Divot]

No please do. The thread is investment. Oh and wether I believe Providence can support any high end condos and if anyone that could afford one would buy one knowing they will depreciate is another story,

Remember this is a town where 200k a year is real money, and would that person really buy a 1 bedroom, in a recently gentrified area?

[pete11]

No please do. The thread is investment. Oh and wether I believe Providence can support any high end condos and if anyone that could afford one would buy one knowing they will depreciate is another story,

Remember this is a town where 200k a year is real money, and would that person really buy a 1 bedroom, in a recently gentrified area?

[Divot]

As an aside, anyone else notice people with very few posts starting threads about how great an idea it is to buy some new condos?

[pete11]

Well I started the thread and people's beliefs on the area's ability to support high end condos is exactly what I want... Not a thread on the yield curve. Clearly if you feel that the price of these condos will depreciate you don't believe that the area can support any condos at these prices. You very well could be right. But I'm telling you that given the alternatives (there aren't any) for my personal situation I would seriously consider one of the two buildings. How low do you think prices in the buildings will get and in what time period?

[Divot]

No clue, but 8X the median salary of the region for a 1 bedroom seems a metric that might be unsustainable, but what do I know.

[provid]

Clearly a lot depends if people make the switch from Boston to Providence- start taking the train. Will that happen? It should, but its the unproven factor that can tilt the salary of the region and drive or sink prices faster than almost anything.

Using logic we do know the group of possible people will shrink very fast as the price of the unit climbs. $750,000+ units will have to be sold to people who aren't going to ride the 1hr+ MBTA into Boston everyday. Thats when you start crossing fingers that people sell houses on the east side to live downtown. It will be tough.

I'm going to assume Divot you work for Fidelity and want to pick up a unit before they flip the 3 year lease downtown and move to Smithfield and which point you can become a commuter or sell the condo. Unless you are just probing /trolling for information.

[pete11]

Right, and if there were alternatives I would totally agree with you (if you know of any please let me know). But they rent out these lofts at $2000 a month + $200 for parking and there are no high rise luxury apartments to be found in the area. By definition half the population makes more then the median and there are only 300 units coming online of which probably half are 1bds. This of course also ignores you can commute to Boston easily from the area and assumes that no one will do this.

[runawayjim]

Mike dead on about salary driving housing costs. I keep hearing the Boston thing mentioned. If you drive around Boston, and especially the periphary there is a ridiculous amount of new vacant condos.

Wow Mike. I've been trying to say this for nearly 2 years, and that sentence captured it. You are a genius.

[Divot]

Thanks, I'll keep an eye on that site. My group's not moving to the Providence area (from Boston) until the summer of 2008 so I do have time. My point bringing up those lofts was that someone is renting them at those prices and if there are people willing and able to do that there might be some that would buy a $400K+ condo. I hope you're right and prices do fall over the next 6-9 months cause at $350K I'm definitely a buyer.

I'm with you. What really sucks is some of those "lofts" were government susidized, and they're charging that much (great state huh?) Look on the East side, when the RISD dorms went up it really softened the rental market and these condos should also do that.

http://www.brown.edu/Administration/Auxili...tings/index.php Check this site out there is usually some quality stuff here.

My advice (free so no returns) would be to wait until Q3 of '07 to buy anything, you'll get a better view of whats going on. Plus if you're new to the area, you' ll figure out where you'd like to be. There's a lot to like.

Mike dead on about salary driving housing costs. I keep hearing the Boston thing mentioned. If you drive around Boston, and especially the periphary there is a ridiculous amount of new vacant condos.