Condo Troubles Further Squeeze Property Lenders

The Wall Street Journal reports:

For the nation's real-estate lenders, the other shoe may be about to drop: condominiums.

Already plagued by rising home-loan defaults and foreclosures among overstretched consumers, major markets across the country -- including parts of Florida, California and Washington, D.C. -- are seeing rising foreclosures and bankruptcies of entire condo projects.

The problems are emerging as some buyers who signed contracts to buy new condos two to three years ago, when construction was just starting, seek ways to back out as they encounter trouble getting financing in the suddenly dicey mortgage market. Falling prices are forcing appraisals down, so banks aren't willing to lend the full amounts that people committed to in the sales contract.

"Closings that are scheduled to take place are not taking place," says Marvin Moss, a North Miami Beach real-estate attorney. He is suing several developers to help clients get out of contracts.

A lot of the demand for the new condos really wasn't there.