There are several large high rise condo buildings about to complete construction and “be delivered” in the next several months in Phoenix and Tempe. These are all gorgeous projects and we’re excited to see them completed. We also believe that they will truly add to the urban experience in the Valley as a whole.
We do have one concern however. How many buyers do these buildings really have and of the existing contracts how many buyers will actually close their purchase. Afterall, we have to believe that many of the contracts were written prior to the beginning of construction, or shortly thereafter, which means that the contract price was established during “the boom.”
IF this is correct then how many buyers will want to close a purchase in 2008 at a price that was established in 2005 (for example)? Certainly the more earnest money the buyer has to lose the higher the likelihood the buyer will close. This is why TYPICALLY high rise developers require earnest money equalling 20% of the purchase price. I have even seen 30%. Unfortunately, some of the buildings coming on line now only required 5 to 10% earnest money.
In your opinions, have prices for high rise condos gone down more than 5 – 10% over the last two to three years and if so, how might this affect the success of these projects?