What bubble?

Michael Temchine for The New York Times

The Columbia, above, formerly the Columbia
Hospital for Women, is a new complex of condos
in the Foggy Bottom section of Washington. An
owner who bought a two-bedroom unit in 2004
is facing having to sell it at a loss or rent it for less
than his monthly payment.

Buyers Scarce, Many Condos Are for Rent

By VIKAS BAJAJ
Published: January 16, 2007

WASHINGTON — David Franco’s illuminated model of a proposed 10-story condominium tower dominates a sales center that, in spite of the “Now Selling” banner still fluttering outside, is conspicuously closed for business.

“We could have waited it out and kept pushing and pushing,” Mr. Franco said about the decision to abandon plans to sell 180 luxury condominiums with floor-to-ceiling windows offering views of the Washington Monument and Capitol Hill. “But it would have taken significantly longer.”

After six weeks of failing to lure more than a couple of dozen buyers, Mr. Franco and his partner, Jeff Blum, joined the builders of nearly 6,000 condominium units in the Washington metropolitan area who have decided in the last three months to recast their projects as rental apartment buildings.

Since the middle of 2006, the frenzied condominium market here and in several other big cities like Las Vegas, Miami and Boston has collapsed. Once roaring sales have slowed to a trickle, sparse inventory has mushroomed into a glut and soaring prices have flattened out and started falling.

In many cities, banks have significantly scaled back loans to condominium builders. Some have demanded that developers sell half or more of the units in a building before even beginning construction.

In hopes of salvaging something from their costly plans, hundreds of developers like Mr. Franco are looking to the strong market for apartments, planning to rent their units for at least a couple of years while waiting for today’s condo surplus to shrink. Mr. Franco and Mr. Blum hope to break ground on what will be a somewhat less expensive building this spring.

In some cases, developers are even turning older buildings back to rentals after a brief or aborted attempt at condo conversion. Meanwhile, another 2,500 proposed condominiums in the Washington area have been scrapped altogether, according to Delta Associates, a real estate research firm.

The latest salvage operation on the part of condo developers is far from a sure bet, however. Condominium buildings generally cost more to build and operate than those built for apartments from scratch. And while rents are high and rising in most cities, in many cases they still are not sufficient to turn a profit.