|Lenders are reportedly pulling back on lending standards for condo developers.|
NEW YORK (CNNMoney.com) -
Lenders are cutting back on financing and are tightening standards for condominium projects, according to a published report that could be the latest sign that the booming real estate market has reached its peak.
The Wall Street Journal reported Tuesday that lenders have been requiring developers to put more of their own money into projects, sell units faster, and provide proof of experience completing their planned condo projects.
"Lenders are looking toward more worst-case scenarios," Dwight Dunton, president of Bonaventure Realty Group LLC, a real-estate developer based in Arlington, Va., told the newspaper.
The latest figures from the National Association of Realtors show that condo and co-op sales over the last 12 months are up 35 percent from 2002, and their median price in the most recent month was $229,800, up 61.6 percent over the typical price in 2002.
But sales volume is off 10.4 percent since the record level hit in June, as sales have fallen in three of the last four months, one of the latest signs of a slowing real estate market.
Some lenders told the Journal they are pulling out of some markets.
"We are definitely slowing down and charging a lot more for it," Brian Harris, managing director and global head of commercial real estate at UBS, told the newspaper. "We are out of Las Vegas. We are very much out of Miami, and we are hesitant in New York City."
The tighter standards could limit the flow of new developers into the market, according to the report.
"What we saw in the last 12 to 24 months was so many people who had never done a condo deal in their lives getting into the condo market," Matthew Texler, a vice president with commercial mortgage brokerage Meridian Capital Group LLC, told the paper. Now, "it's becoming very difficult for the newbies to get their deals done."
The move is also making developers more cautious about promising units to potential buyers.
Dan Kodsi, president of Royal Palm Communities, a developer in Boca Raton, Fla., told the paper he typically would pre-sell units before going to lenders with the sales numbers to lock in financing. Now as he plans a 60-story, 500-unit condo tower in the hot Miami market, he's looking for financing first because of concerns that he won't be able to raise the cash for the project.
For the latest look at the drop in builder confidence, click here.
For a look at the real estate market and what it means for you and your investments, click here.