The Saint Paul Condo Blog

As I mentioned back on the 5th, I was invited to a Realtors Tour of Gallery Tower Condominiums that took place yesterday.

I have two things to report back.

1.  The Homeowners really love living there, and there seems to be a great sense of community.

2.  They did not temporarily raise the association dues.  They raised them permanently.  It sounds like a few of their Board Members are working on a plan to reduce their dues (my guess an assessment would help).  As I get more information about this, I'll post away!

Wow, this has been a LONG time coming!  The city came by earlier this summer and laid the ground work, including the vacant side curbing.  The street itself, was just put in about two days ago.  Something I didn't know about the street, but makes sense after walking down, it's going to be a one-way street.

It seems like a little bit of a waste to have it a one-way, but I guess the residents of Printers Row might get upset if downtown workers were trying to make it a new short cut to the highways.

If I hear plans for a solution to the other side of the street, I'll post it here.  If you know what the plans are for over there, drop me a note!

Wow, the Metro 100 party was quite the event last night!  Metro Magazine had there 1 year anniversary in Hamm Plaza in Downtown (Not sure where Hamm Plaza is?  It’s that little triangle of a plaza across from the Hamm building, Travelers, and Landmark Center).  It was a pretty fun event with break dancing, basketball, and skateboarding as the entertainment for the evening.  They also had a DJ up on the huge platform overlooking the break dancers.  Then to make the music more “live” they had a guitarist and a cellist playing along with the music.

Who says there is no fun in Downtown?

With all the brew ha-ha in the news lately about all of the closing restaurants, I am hearing so much chatter about places getting ready to open, it's kind of spooky! 

I hear there are two different companies bidding on the space that was formally Fhima's.  The recently shuttered Margaux has a new suitor close to a deal, Key's in the Rossmor is looking to expand into the White Way Cleaners location, and the biggest news...

Pop and Pizza Lucé are looking for a space near Lowertown!  Pizza Lucé by far has the best pizza in town (no, I wasn't paid for that shameless plug)!  Their Selby Avenue location already delivers to Downtown, but I’m sure the drivers are getting sick of the trek and there is a lot of business to be had in Downtown.

I also noticed workers prepping the space on the North East corner of Mears Park, I believe a restaurant called "A knights tale" is hoping to open there.  I'll keep an eye on it, and report back in the next installment of the "Restaurant Rumor Report"

The Auction block that is.  October 4th at 6pm the developer is putting up the entire project up for auction.

Before you start thinking this will sell for super cheap, remember that the price point were from $500k to $1 Million+!  I plan to attend just to see what kind of prices these condos fetch.  The Armstrong Quinlan House has always seemed a little out of place, as inside Irvine park or up on the hill would have been better locations for this building.  I can't think of many upscale buyers who would want to live in a building where you get so much traffic right outside your front window and have no amenities close at hand.

It was back on the 21^st of August that I told you about three new business that opened in Fitzgerald Park.  Well, now there are two other businesses that have or are closing!  First off, Margaux, a nice little restaurant in the Rossmor building announced in Thursday’s paper that they were closing.  Then when I went to pick up my dry cleaning from White Way Cleaners, they informed me they are closing their Rossmor location!

I was just starting to believe that the leasing agent for the Rossmor was some type of miracle worker, but now I know better.

What does it take to successfully open a business in downtown and keep it running?  That sounds like a good future blog...

I normally don't syndicate other people's articles, but this one just resonated with me...

by Rich Levin

This makes me mad every time I see it. Either the National Association of Business Economists is full of people with no real business experience or fools.

This is a headline from a major online Real Estate publication,

"Economists See Credit Problems as Bigger Threat than Terrorism."

I know they were all alive just seven years ago when terrorism cost the lives of three thousand American citizens. That headline goes beyond sensationalism. It is rude and insensitive.

The article goes on to say that one in three members of the NABE, "...Said the housing boom can be described as a 'serious National bubble." Then later in the article three in four said they would "buy a house today if they intended to use it as their primary residence."

Would someone please tell these academic fools that housing is local in nature? While many major markets suffered and are suffering from the over-zealousness of investors followed by the over-zealousness of foolish sub prime lenders; there are many markets that are healthy and many more that are suffering a softening but nothing close to a collapse.

These gloom and doom headlines supported by a minority of questionable economist opinions feed the problem they are describing. While the facts support the opposite conclusion. Even the economists own research supports the opposite conclusion.

In the same article, "Asked to look five years into the future, 42 percent expected US home prices to remain flat, 41 percent said prices would rise." How did 34 percent of the same group call this a bubble that is fed by a threat bigger than terrorism.

Let's give credit where it is due. "59 percent still say there is no national housing bubble, only significant local bubbles. Another 8 percent said there's no bubble at all and that the market is functioning correctly."

Hooray for those groups. They got it right. There are some local bubbles where there were hundreds and thousands of development parcels and homes developed and built in anticipation of future sales and the sales that were feeding that demand was investor speculation (Boise and Sarasota to name two).

In late 2005 and through 2006 the investors realized that the boom was being fed by their own demand so withdrew. This left a tremendous inventory in some cities or areas of cities.

Unfortunately, in 2006, the secondary market lenders realizing that they had allowed a foolish combination of underwriting standards for the previous five years or so immediately followed this. They were buying loans that allowed buyers to have both, little or no down payment and marginal credit. How this happened (and who should be prosecuted for it) is a mystery that will likely to remain such.

The result was that in some communities around the country, particularly where there were high priced homes and with less sophisticated buyers; many of these mortgages were used to purchase homes. That created additional pockets of excess inventory which stalled prices in those areas.

Now in the fall of 2007 the majority of lenders loaning jumbo loans, over $417,000 have stopped funding these high-end loans for some period. This will further increase inventory and dampen prices in some areas.

Notice the language, dampen prices in some areas. Most of the country is experiencing a normal buyer's market that normally follows a long healthy seller's market.

The latter group of economists put it perfectly. The market is functioning correctly. In 1986 after two to three years of a soft buyer's market not unlike what we are experiencing now (Although it was driven by different causes.) there was a long strong period of a healthy seller's market with steady appreciation.

There was a momentary softer buyer's market around the Gulf War in 1991 (although not caused by it) followed by over a decade of a healthy buyers market that lasted until 2006. If we learn from history strong seller's markets last longer than softer buyer's markets.

So again, the economists got this right. The same article said 58% of the economists predicted a 'meaningful' recovery in U.S. housing markets before the second half of 2008 or in the second half of 2008. The majority of the other 42% predicted the recovery in 2009.

This is completely consistent with history. This two or three years of soft buyer's market with slightly flattening prices will likely be followed by five or more years of a healthy seller's market with equally healthy price appreciation.

REALTORS® all learned in their first Real Estate class that the market is driven by supply and demand. As long as there is an increasing population of people with reasonable or better incomes, the demand will keep the market healthy.

Add to that the fact that the Federal government repeatedly states that they realize that the Real Estate market is critical to the health of the economy and they will do whatever is necessary to keep mortgage money available.

It all adds up to a principle residence continuing to be the safest and smartest investment for a person living in this fabulous nation. (Just be careful of areas that have experienced rapid appreciation for more than twenty-four months. There could be a windfall or just a fall looming.)

If you are associated with Real Estate, please separate the sensationalism from the truth. If you are in most communities in this country, everything is pretty normal. Prices are appreciating a little slower but still appreciating. Houses are on the market longer. Buyers are fussier. Yes, it is tougher to sell Real Estate. But you still have one of the best jobs in the world with more personal freedom and opportunity for success than any other business person or professional on earth.

If you are in one of those tougher markets, my heart is with you. You do have an uphill battle for another twelve to twenty four months. You have my strongest wish that you can survive and succeed through this. If not, come back to the business in a couple of years. I feel comfortable promising you that the good times will roll again in the not too distant future.

I love this business for what it provides to our society, the people in it, and the strong bright professionals that make me proud to be a part of it.

No joke, Mayor Chris Coleman made it official this morning at the site dedication for the Farmers Market Flats development.  The dedication went off without a hitch at 10:00am at the development site.  We really could not have had better weather for the event(OK, a couple of degrees warmer would have been nice).  Following the event, the Mayor took pictures with all of the buyers that were in attendance, besides the wicked-cool hats they all got ;)

Here are some photos from the professional photographer that was on hand.  If you took some yourself, please send them my way!

I was walking through a parking lot a couple of weeks ago, and had to take a picture of the sign, I thought it was very fitting for downtown and made me want to blog!

Well, when I stepped outside the other day for an appointment, I noticed about a half dozen cars that were immobilized with boots in the Saint Paul Farmers' Market lot.  This is the only lot I know of in Downtown that actually boots vehicles, so if you are looking for a place to park and don't have money on you, I'd advise staying away from that lot!

The statistics for July are pretty close to that of June.  There were a few higher dollar sales so I think my prediction of some of the bigger buyers coming out of the woodwork, might be coming true sooner than expected.

July of 2007...

These are the condos that actually closed in the month.

The Pointe of Saint Paul had two close for $124,000 & $128,900.
Gallery Tower had two close for $92,500 & 131,100.
City Walk had one close for $133,599
LOT270 had one comp sale for $217,900
The Essex had two close for $289,900 & $169,900
River Park Lofts had one close for 145,024
Lowry had one close for $225,100
Great Northern Loftshad one close for $369,900 (FINALLY!!!  This had been on the market for 982 days!!!)

Condos that went Pending.  Prices indicate list price, not sold price.

Gallery Tower had one for $95,000
City Walk had one for $175,000
Farmers Market Flats had one for $169,900
MarketHouse had one for $172,500
The Lowry had one for $200,000
The Rossmor had one for $139,900
The Fitzgerald had one for $86,000
Upper Landing had one for $699,900

Based on information from the REGIONAL MULTIPLE LISTING SERVICE OF MINNESOTA, INC for the period (6/1/2007) through (6/30/2007). 

OK, here's the latest from the rumor mill...

I've been hearing about this for awhile now, but the rumors of a hotel being added to the development look like that might be the option that saves the development.

The Penfield was designed with two separate cores, allowing the condos on one side and the hotels on the other.  I'm sure there would have to be some significant redesign to accomplish this, but if they want the Penfield to be built, I put my money on the hotel/condo mix. ***UPDATE - I've been told that this is an option for the development, but not the only solution, another option for the hotel (Now confirmed as a Hyatt) would be to have the hotel on the lower floors. ***

The other development add-on that has been talked about is the Lund’s grocery store.  The project has 6, million dollar townhomes that fronted Robert Street, that have yet to sell.  This seems the logical space in the development to place the grocery store, as Robert Street is mostly a commercial street from Downtown Saint Paul to Inver Grove Heights.

What does all this mean?

Sales were hurting and for the project to go forward in this market, you need to reduce the number of units the project has.  By adding a hotel, it will likely reduce the project total by half (150 from 300).  Also, adding a grocery store would remove  the biggest complaint I hear about why people don't like living in Downtown.

One thing still missing to move sales forward is the price point.  Upper bracket homes in Downtown are just not selling right now.  It's the $250,000 homes and under that are moving.

How much longer can they wait?

If they can't get the hotel/grocery store to work, I give them another 6 months before they pull the plug.  I just can't imagine them continuing to pay for a project that's not moving forward.

Sounds like I can’t put a sentence together!  I am of course speaking of the Bridges of Saint Paul mega development.  On Wednesday, the City Council gave the project its final blow, denying the developers request to rezone the property by a 5 to 2 margin.

Knowing the history behind the project, I thought it was just another setback for JLT.  Well the proof was in the pudding as they say.  This morning, 23 listings canceled in the MLS, all relating to the Bridges project.  I’d say that’s a good indication they have thrown in the towel.

This leaves the Penfield left on the ultra luxury high-rise horizon.  The Penfield has always had the advantage over the Bridges project in that it was fully city approved and embraced by the community.  The Penfield is however quite delayed.  Originally, they had planned to break ground in March 2007, and August 2007 at the latest.  Well, here we are, beginning of September and nothing has been done.  It’s my understanding they have asked the city of Saint Paul (who owns the land) another year to sell to their pre-sale level.

I’ve heard rumblings of some major changes coming for the Penfield, but I have not been able to confirm them.  As soon as I can, I will post them!

In an unusual fashion, the CONDO ASSOCIATION of Gallery Tower is hosting a Realtors Tour of the building.  In their August 14th letter to realtors, the president of the association explains the history and benefits of the building and that the building is not well known.

I think the building is well known in the real estate community but agents tend not to show the building due to the high association dues compared to other high-rises in downtown.  I applaud the association in trying to take a proactive approach to the loss in value to the building over the last several years (see bottom of post).  The main thing that will make a difference is LOWERING the dues.  It's my understanding that the building recently had a major expense; the fire panel for the building needed to be replaced and the project totaled nearly $200,000.  Rather than apply an assessment, they chose to pack the money in their association dues over a period of 2-3 years.

Not sure how close they are to paying this off, but it's been my experience that once the association dues go up, they don't come back down.

It's my opinion that Gallery Tower should assess the homeowners $1250 per home (that would bring nearly $243,000).  Yes, assessments are painful, but done right, it's like the pain of ripping off a band-aid rather than the slow pain of an infected wound.

From buyers that I have dealt with that are initially interested in Gallery Tower, are scared away by the dues, or they can't afford them.  At $100,000 and $385 for association dues, it can be difficult to get financed when you are at your top end approval.

I’ll report back after the event and give you the scoop!

MEDIAN HOME PRICES FOR GALLERY TOWER

2007    $99,900
2006    $119,500
2005    $124,200
2004    $97,900
2003    $109,750
2002    $113,500
2001    $95,750
2000    $86,500
1999    $49,900
1998    $40,250
1997    $40,000
1996    $37,000
1995    $33,000
1994    $32,000
1993    $45,000
1992    $43,500

Statistics compiled from the Regional Multiple Listing Service of Minnesota, Inc.

Updated September 6th, 2007

It's my birthday today, so I thought what better day to poke fun of myself (and my wife, sorry Leslie) than today.  We are thinking of using the following photo in all of our new marketing campaigns.  Let me know what you think!

Click for a larger image, if you dare!