Condos in Oakland $300,000 Below Asking Price

The San Francisco Chronicle reports:

The developer of the recently opened Eight Orchids condominium mid-rise in Oakland hopes to auction off nearly a third of the units, with some starting bids $300,000 below prior asking prices, as builders struggle to unload new properties in the current housing climate.

"It tells you it's a very weak market and the normal selling process is not going well," said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley.

To date, the strategy has mostly been used to move lingering homes in long-open suburban projects. But market uncertainty and tight lending standards continue to depress sales and prices, while elevating inventory.

A complicating factor in Oakland is the number of large condo developments near downtown that have opened or begun selling the past year, including AF Evans Development Inc.'s 86-unit Market Square II, Molasky Pacific's 134-unit Ellington and Signature Properties' 132-unit first phase of Broadway Grand. One-bedroom starting list prices range from $345,000 at Market Square II to $475,000 at the Ellington, according to the latest Mark Co. report.

Oakland condo developers are only selling a few units per month on average, said Alan Mark, president of the San Francisco condominium marketing and research firm. The developer, Oakland's BayRock Residential, began taking reservations for Eight Orchids in February 2007 and has sold 20 units, an absorption rate of less than two contracts per month.

In January, median resale condo prices in Alameda County stood at $360,000, down 19 percent from a year earlier, according to DataQuick Information Systems. Sales fell 47 percent. The La Jolla (San Diego County) research firm doesn't track new condo sales specifically.

The 157-unit Eight Orchids has generated interest among buyers, with about 2,500 registering at the property or on the Web site, said Stuart Gruendl, chief executive officer of BayRock. But most are withholding actual offers at the Seventh Street and Broadway property out of fear prices will continue to decline, he said. The heavily discounted starting bids and auction process itself should reassure people they're paying the fair market value, he said.

"I have a big pool of buyers, they're more than tire kickers and now, I'm going to create an event to create some urgency," Gruendl said.

He added that he isn't "desperate" to sell or under pressure from his lenders but acknowledged that the market is challenging.

The auction of 41 units is scheduled for March 30. The event will be conducted by Accelerated Marketing Partners using an auctioneer and paddles. The minimum bid for one-bedrooms is $245,000, down from as high as $520,888; two-bedrooms will start at $325,000, down from as high as $630,888; and three-bedrooms will begin at $475,000, discounted from as much as $805,888. There is no "secret reserve," meaning any unit that receives at least the minimum offer will go to the bidder.