There is a condo complex on Dempsey Road in Milpitas that has attracted the attention of many first time home buyers looking to get a better deal owning than renting. Here’s some history to help.
This is a condo conversion that was done back in 2005-2007. A bunch of old 1970s vintage apartments worth about $70-120K each were given a lipstick makeover with new kitchens and bathrooms, the minimum required for a flip. The developer aptly renamed the complex “The Crossroads” and started dumping them onto the market at ridiculous prices of between $290K for a 1-bedroom and $440K for a 3 bedroom. At the time, these were the most affordable “new” units available on the market, even though you still felt like you were walking into a dingy old apartment complex. Actually, half the complex was unconverted old apartments at the time.
Unfortunately, with easy financing during the heights of the housing market in 2006-2007 and many greedy/clueless agents, lots of first time buyers got sucked into those units. Amazingly, even with the high sale prices and stiff HOA fees, the exteriors of the units have not been updated. A fresh coat of the original paint is about all you can see and not all of the units even have it. You can imagine what I think of the developer.
Today, those units have turned over as the whole complex is in deep distress. Prices have rationalized to about $120-220K, reflecting the original actual value of the units with a bit of valued added for the new granite slab and cabinetry. Dozens of first time buyers have lost out on their hard earned down payments and have seen their credit torpedoed.
With so many units in distress, I’m anticipating that the units will eventually bottom out near where they started, around $100-150K. If you get in at those price points, you’ll be getting a good value, but prices aren’t likely to appreciate for a very long time. The location overlooking 680 is simply not good and there’s still a huge overhang of distressed inventory. All the inventory may take until 2015 to finally clear. Otherwise, for a cash flow investor, those would make for solid investment properties at the right price.