Market News

Landlords cash out as condo fever spreads



NEW YORK -- May 23, 2005 -- Low interest rates have lured renters into homeownership, forcing landlords to contend with low occupancy rates. So rather than slash rents or offer other incentives to attract tenants, many apartment owners are reaping large profits by selling to developers who plan to convert the structures into for-sale condominiums.

Lenders and Wall Street investment firms increasingly are providing financing for condo-conversion projects, going as far as packaging them into securities and selling them on the secondary mortgage market.

Lloyd Lynford of the New York-based research firm Reis believes condo conversions are responsible for higher apartment occupancy rates, as fewer rental units are available. He reports a drop in the apartment vacancy rate in 64 of the nation's leading metropolitan areas to 6.6 percent from 7.1 percent during the year-over-year period ended in March.

However, there are concerns that speculative buying among investors is fueling condo conversions. Developers in popular markets like Florida and Las Vegas ultimately could end up with a surplus of unsold units, forcing them to open their developments to renters and assume the responsibilities of a landlord.

Some developers are hoping to minimize speculation by requiring 20 percent deposits and limiting the number of units that can be purchased by investors.

Source: The New York Verdana,Arial (05/18/05); Pristin, Terry

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