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Chattanooga: Overbuilt condo industry fights 30% drop

By: Jason Reynolds
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Lolie Ward

Staff photo by Allison Kwesell--The Village at Greenway off Mountain Creek Road, which was foreclosed on in 2007, has a new owner and is nearly finished.

Chattanooga area condo sales in the first seven months of 2008 are down 30 percent from a year ago, but the medium price is up and some Realtors report signs of hope.

“We’re here for the long haul,” said Kathy Mittelstadt, of Crye-Leike Realtors, who is listing condos for sale at the Village at Greenway.

Last year, construction shut down at the Village at Greenway after the Marietta, Ga., developer was unable to pay on its loans. Atlanta-based Georgian Bank foreclosed on the development’s unsold units.

Staff Photo by Allison Kwesell
The Village at Greenway, off Mountain Creek Road, which was foreclosed last year, has a new owner and is almost finished with construction.

But now Georgian Bank has resumed construction and sales, Mrs. Mittelstadt said. Twenty-eight condos had sold prior to the foreclosure, she said. Mrs. Mittelstadt said she and business partner Lolie Ward expect to close on the first post-foreclosure unit next Friday.

Ten condos are under construction and seven are completed and ready to sell. Crye-Leike is holding an open house Saturday and Sunday from 1-5 p.m., Ms. Ward said.

Reversing trend?

The Mountain Creek Road project is trying to reverse a trend of falling condo sales in the area. Local real estate agents sold 240 condos from January through July this year, down from 344 in the same period last year, the Chattanooga Association of Realtors reports.

But the median price has risen. The median in July 2007 was $149,000, compared to $183,900 in July 2008.

Freddie Mac on Thursday reported 30-year fixed-rate mortgages fell to 5.78 percent, the lowest in seven months.

Mortgage loan applications for the week ending Sept. 12 increased 33.4 percent on a seasonally adjusted basis, the Mortgage Bankers Association reported this week.

Still, the Wellstone Creekside condo development, up the road from the Village at Greenway, is on hold because the lender is in bankruptcy, developer Rusty Criminger said.

Cornerstone Ministries Investments of Atlanta had planned to provide 50 percent equity for the project so developers could qualify for a bank loan, Mr. Criminger said.

The property has utilities mostly installed, he said, but roads, curb cuts and gutters have yet to be done. He does not know when construction will start.

“I wish I could put a date on it, but I can’t,” Mr. Criminger said. “As long as conditions stay as they are, we’re on hold.”

One real estate agent said the local condo market is simply overbuilt.

“It was saturated,” said Brandi Thompson of ReMax Properties North. “We went from none to several, several developments. And they were priced out of the market.”

Condo buyers should be aware they are only buying from the floor to the ceiling to the walls, not the exterior or land, she said. Also, they are responsible for paying the maintenance fee, which in some cases can rival their mortgage. The fee covers building maintenance and often includes paying for yardwork and amenities such as a clubhouse.

meltdown affects confidence

Another Realtor said this week’s Wall Street shakeup will not help consumer confidence.

“It’s a matter of the buying public feeling good about the economy,” said Darlene Brown, broker-owner of Real Estate Partners Chattanooga LLC. “The last couple of days have really shaken confidence. Things were really picking up because of Volkswagen.”

The local market will bounce back, she said, because there are plenty of baby boomers who want to downsize. Ms. Brown’s company will start closing in October on 107 condos at Museum Bluffs Parkview, across Riverfront Parkway from the Hunter Museum of American Art. Buyers have put down 5 percent to 10 percent deposits on condos ranging from $154,000 to the high-$400,000s, she said.

In November Ms. Brown said her company will start closing on six condos at BridgeView, priced from $352,000 to $750,000. The 35-unit mixed-use building is at the foot of the Market Street Bridge.

“Volkswagen is not the savior of everything, but those people (workers) will be interested in looking at the downtown market,” she said.

Another downtown condo project, Battery Place Condominiums, had five units sold in auction in March to clear out inventory. Several of the first condo buyers had filed suit, saying the project did not provide all that was promised.

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