Previously I noticed low occupation rates in downtown high rises by the number of lights in a building. In a recent visit on Thursday night, I noticed even less lights. Since I do not live there, I do not know if this is just an anomaly. However, I would like your opinions on possible outcomes for downtown housing market.

1. Builders are still building. Why?
If a building is already sold out, I can understand why they want to finish the project. But did they ask themselves that once the building is ready for occupation, how many people will show up? If people does not show up, do they lost their earnest deposit? How much are those deposits?

2. Who are the buyers?
Honestly the tall downtown buildings looks great. I am sure they have great views too. I think out-of-towners might be interested in them as vacation homes. That could explain why I do not see many lights on a weekday night. On the other hand, $500,000+ selling price plus $500/month in HOA is not exactly cheap, comparing to luxury hotels. 3% interest on $500K is $15K plus $6K from HOA and $5K for properties tax, that’s 26K a year. Let’s assume $300/night for a good luxury hotel, that could buy over 80 nights. Even taking in potential tax benefit, we take a third off, we are still talking about almost two months here.

3. What will the builders do?
If the building is not selling well, will the builder just declare bankruptcy and leave the headache to banks? Would they sell enough to pay their bills while waiting for a rebound?

4. What will the banks do?
I think banks will find private equity groups/hedge funds and sell to them wholesale price. But would the hedge funds hold them until the market turns?

5. Are there any opportunities for us small investors?
By my definition, small investors are those with $100K down and could afford mortgages up to $500K besides their primary residence.
Right now, rents in downtown are pretty steep. Little Italy is packed with people at night. But not every restaurants are doing well. The mood is much gloom compare to this time last year. Can we assume that rents will stay at this level?
I think rents will go down in spite of the stagflation. You can raise the rent to counter inflation, but if I have no job and could not afford it, I will have to move out and find some other ways.

Sorry for this long rant. But the situation in downtown both puzzles and fascinates me.