Pinnacle on the Park

[phaster]

after reviewing news about the stock market turmoil caused by people/government in china looking for alternatives to their ghost cities and the domestic equities market, have to wonder where/when the next hot money panic is going to happen (and what will the effect be on SD)

started thinking about this because got a call a few days ago from a broker to see if I was interested in a rental property just listed in bankers hill

basically told him I think the local (and for that matter the global markets for RE is priced pretty high WRT to historical norms of the past 30 years)

then the conversation turned toward the big new apt tower in east village which is a reflection of what is happening in hot urban cores around the world…

my own thoughts on the luxury tower apt-condo issue are:

1) Developers have no incentive to build quality products that last because of the short term max profit motive (economic strategy used to achieve this goal is to put make-up on a pig!!!)

2) Owners who buy condos from developers are mindful to max out property re-sale value, so curb appeal is given a priority over infrastructure (owners follow developer concept of “make-up on a pig”)

3) Condo owners lose re-sale value if there are known construction defects, therefore condo owners have an economic incentive to say there are no isses with building infrastructure (and/or financials of the condo association)

4) A condo board “corporation” is headed by individual volunteers (who too often have little or no technical knowledge about construction) so over time there is a high probability for a downward management spiral (issue 2 leads to issue 3 REPEAT)

seems in a global economy, urban luxury apt-condos are functioning like a commodity investment purchased by people who (too often) do not have ties to the neighborhood and I’m guessing prices w/in this sector are likely to fall dramatically sometime the next few years because its an unsustainable situation

checkout the article/graph of rent affordability (which includes data for SD)

http://www.multifamilyexecutive.com/business-finance/luxury-apartments-galore-at-what-cost_o

[FlyerInHi]

I absolutely agree with the article you linked.
As a small investor, I buy B and C condos, remodel them and rent them out at good, affordable rents, but still more than my competition.

I have my own system to make my condos look like A type condos, at least on the inside.

I also agree at the construction projects are mainly on the luxury side, and that there is shortage of good, clean, affordable apartments/condos.

[Author]

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