This is a guest post from a regular reader who had been looking forward to purchasing a condo downtown… until he saw the price list:
"Dear Sir/Madam:
My wife and I were very excited when we first heard
about the Arterra being built near downtown. The location has a
lot going for it with its close proximity to downtown, as well as the shops that
are along California Avenue. We feel that you’re offering some
very livable plans laid out in a way that makes the most use of the
space. We particularly like plans 2g and 2d.
We filled out the mortgage application to receive an
invitation to your first sales opportunity. We RSVP’d to your most
recent email indicating our desire to attend the sales event. Having now looked at the attached information sheet, we would at this
time, decline the invitation.
We currently live in a two-year-old home in
Northwest Reno near Somersett. Our home is approximately 3500 sq ft with a current realistic value of about $500,000. This reflects a
significant value reduction since last year. We intended to occupy
a unit at Arterra to gain a more carefree lifestyle.
We also own several investment properties in
Reno/Sparks and consider ourselves in touch with the current market in the
greater Reno area. All of the property we own was bought with the
intention of holding it long term, and we have never looked to turn a property
over quickly for profit. The proposed prices of Arterra units
reflect to us a negative gain for at least seven years.
I have lived in Reno most of my life and have
watched downtown go through several boom/bust cycles. Buying in or
near downtown reflects a calculated risk on the part of the buyer. Your property being the only new high rise does differentiate it somewhat
from other buildings, but I don’t believe it will be enough to justify the
prices. Based on projected mortgage, taxes, insurance and HOA
fees, it looks like the average Arterra owner will be paying out over $3500 per
month or tying up a large amount of money representing a significant opportunity
cost. I don’t think there are enough people living in the Reno
area willing or able to meet that obligation for a condo. I
further don’t see a demand large enough from potential out-of-town owners
willing to use such a large amount of capital with no return. Reno
is a nice area but does not have as much to offer compared to other markets.
I apologize for the length of this email, but we
wanted to let you know what we are basing our decision on. My wife
and I were seriously considering a move downtown and were disappointed to see
another project come in at a price point that is unrealistic to support a ‘family owner occupied’ downtown. Best of luck and success with
your project.
Sincerely,
Prudent Buyer"
Studios
644 to 766 Square Feet
From $325,000s to over $400,000
1
Bedroom / 1 Bath
824 to 1,112 Square Feet
From $369,000s to over
$500,000
1 Bedroom 1 Bath plus Den
1,094 to 1,130 Square Feet
From
$475,000s to $600,000
2 Bedroom 1 Bath
1,033 to 1,400 Square
Feet
From $419,000s to high $600,000s
2 Bedroom 2 Baths plus
Den
1,422 Square Feet
From $613,000s to high $700,000s
2 Bedroom 2½
Baths
1,693 to 1,865 Square Feet
From $699,000s to mid $900,000s
2
Bedroom 2½ Baths plus Den
1,978 Square Feet
From $798,000s to high
$900,000s
Chris
Just for giggles I looked up some Condos in Chicago (since I just moved to Reno from Chicago) and found this one: http://www.realtor.com/Prop/1073818860?lnksrc=00045
2 bed/2 baths on Michigan Ave across from Grant Park with a view of the Park and the Lake for $695k. Are you telling me that living in a condo in downtown Reno is comparable to this condo in Chicago?
I’m glad I’m renting for the time being.
Grand Wazoo
So, the typical Arterra condo is coming in at $500 per sq/ft. Ouch.
21 unsold units of the Palladio are in the hands of a realtor now. A year from now these units will have been sold at a price the market will actually bear (assuming they sell), and at the same time the unsold Montage units should be on the market with a realtor. At that time we should finally have a good idea as to what the actual going rate for a downtown Reno condo will be.
I bet it is something way south of $500 a sq/ft.
Reno Ignoramus
Let’ see Chris.
In Chicago, you have the Bears, and the Bulls, and the Cubbies, and the White Sox, and the Black Hawks, and the Art Institute, and the Joffrey Chicago Ballet, and the Chicago Symphony, and the theater district, and the Miracle Mile on Michigan Ave. and great restaurants downtown.
So?
In downtown Reno we have the , uh, um, well, let’s see, there are a couple little shops on First Street now, and there is a new Taco Bell or whatever, and a new Long’s drugstore going in underneath the weekly rentals at the Riverboat Motel. And they are going to open up a new bar across from where the old liquor store is currently boarded up. Cool, huh?
So why shouldn’t condos in downtown Reno go for what they cost in downtown Chicago?
BanteringBear
After reading the letter and looking at the pricing structure, I think Prudent Buyer went a little easy on these greedheads. These prices are simply outrageous. There is not a snowballs chance in hell that they will find enough end users at those price points. Seriously, I almost choked when I saw them. A 2 bedroom 2 bath at 1422 square feet in the high $700’s?! In downtown Reno? Have these people ever walked around downtown at night? Yeah, I’m gonna spend that kind of money to rub elbows with the crackheads, drunkards, and homeless people every night. NOT! Are they hoping to unload them on a bunch of brain damaged “investors”? This is mind boggling. There is no value in the market right now. I know that Reno has a lot to offer, but it is no San Francisco, nor will it EVER be. Housing prices need to reflect local wages in any given area in the US. They are so far detached right now it is laughable. This is precisely why we see a more than 2 year supply of homes in the $500k-$1000k range and it’s still the dead of winter. Inventories will keep growing and growing until builders and resellers become more realistic with what people can afford. The profit built into those units is most likely more than 70% per unit (conservatively). Gosh, build one tower and retire for life! These guys have forgotten that these last few years of easy money were an anomaly. I won’t shed a tear should they go bankrupt. I am quite sure that these prices will be much lower as the units near completion (whenever that is) but still, they should be priced appropriately from the start. It is not unusual to see a billboard at a new development change from “starting in the high $500’s” to “starting in the high $400’s”. There is an avalanche of inventory in the form of condos waiting in the wings. Most will never be sold. Strange days indeed.
Paul
Prudent Buyer is right $900,000 for a 1,978 sq ft condo is way to high, but as Grand wazoo brings up the Montage, and Chris is comparing the property values in Reno to those in Chicago, I to looked at these issues.
In Chicago at the corner of State Parkway and Goethe, there is a remodeled condo project with units on the market. The developer on this project just happens to be the same one doing the Montage. According to information at:
http://www.newhomeschicagoland.com/NHNew/Columnists/debatJune2005.htm
the prices are between $1.5 and $6.5 million for condos ranging from 2,031 to 5,913 sq ft. That would make these condos value come in at around $1000 per square foot. Am I mistaken or is that double what the Arterra is asking, and the Chicago project is a remodel?
http://www.ambassadorchicago.com/
My point? If people who move here form Chicago expect costs to be comparable between Reno and Chicago, what is it going to cost to get a condo at the Montage?
Mike Van h
Ok I feel like I need to come to the defense of downtown Reno here. First, I walk my dogs every night in downtown Reno and there is simply no more crime or bums roaming the streets than any other downtown area. I have been harassed more by bums in posh neighborhoods in S.F. and L.A. than here.
There more than ‘a couple of shops on First Street’ in fact over 30 stores opened their doors in 2006 alone downtown.
Second, downtown Reno has the best restaurants, the best night clubs, a movie theater, a whitewater park, it’s the center of most summer events.
Take it from somebody who lives and works downtown, the people who live down here like it. Love it, actually.
That being said, Arterra is ridiculously overpriced. Even though Chris Nelson has had other successes in Reno (museum tower, Village at Idlewild), I just don’t see enough people buying into Arterra. It’s too darn expensive. Buying into the artsy side of Reno would be a good idea if we had more than just the Nevada Museum of Fine Art across the street from it.
Tim Hazard
I’m glad people want to build high-rise, high-end residences in Reno’s downtown. The energy in the area is changing for the positive. I enjoy the art museum, eating at La Familia or the Eldorado or Blue Moon Pizza, and having a drink at Chocolate Bar. Stopping at Dreamer’s for coffee after a walk along the Truckee River is, for me, a singular pleasure. And have you been to the Whitewater Park? Good stuff.
I’ve lived in luxury buildings in New York and San Francisco, and it’s a great lifestyle, but not everyone wants to live in big cities. It seems like Arterra and some of the other condo projects downtown are a chance for Renoites to have the best of both worlds.
As for the prices? Newsflash: nice things cost money. The cost of these condos is half of what it would be in the cities mentioned above, maybe even less. Anyway, as has been pointed out, the market will have the final say, but I won’t be surprised if the prices go up.
Kara
Wow, I never thought a 1 br condo in Reno would make my 3 br home at Lake Tahoe look like a bargain.
A round of applause for Prudent Buyer, that’s just the type of letter Arterra needs to read.