The flagellation of Nashville’s urban market for condominiums has become a sport over the past few months.
There are developers, even those with urban projects, who want to declare the market dead, except of course, their development, which happens to be the finest quality and better than all the others.
Of course there is more supply on the market than demand. That happens in real estate cycles.
With the way people are talking, you’d think catastrophe is around the corner.
Realtor Jon Sheridon has seen a few condo cycles and he said this one is nowhere close to the early 1990s when the real estate market collapsed in the wake of tax law changes.
“You couldn’t hardly give a condo away,” he said. “The word condo even got a bad name.”
Sheridon said he wishes the builders had gone a little slower during this run. “Of course, builders will build,” he said.
Real estate development tends to be about too much or too little. Rarely is there equilibrium. It’s brief when it happens.
Just a few years ago, everyone was screaming for condos downtown. There’s a shortage so build, build, build. And developers did.
Now, it’s “Gosh, they built too much.” Maybe there wasn’t that much demand. Maybe the investors buying units hid the true demand for urban living. Maybe. Maybe. Maybe.
Suddenly it all looks bleak because buyers aren’t streaming in and sucking up the units in a day or just hours. Buyers supposedly aren’t in the buying mood because of the general housing malaise and talk of recession, although agents say they are working like crazy in January, usually a slow month.
Still, there has to be a sales effort as opposed to helping buyers fill out paperwork.
When developers start handing the keys back to the lenders, then it’s time to worry. It doesn’t appear that anyone is hanging in the balance — anyone major anyway.
There may be developer units in the hundreds still left for sale. But many more have been sold and that means the developer’s construction debt is paid and the rest is gravy.
Some investors, particularly the amateurs, who bought into the condo frenzy will get stung. That’s life. Roll the dice and sometimes you get snake eyes, just like the stock market, if you don’t have the staying power.
Developers could have built a lot more in downtown, Midtown and elsewhere in urban Nashville.
Some pulled the reins either by choice or because of market altering factors. Had the downtown ballpark not died, for example, Struever Bros., Eccles & Rouse would have built a 214-unit condo tower.
The number of Viridian units up for resale still sounds alarms. About three dozen are on the market now, roughly 10 percent of the total number in Viridian.
Is that a lot? It doesn’t seem like a lot if you were driving a subdivision of 330 homes looking for the for-sale signs of 34 homes.
There’s also worry over what happens when “investor buyers” of Encore units put them up for resale, if indeed any do right away. Icon in The Gulch has everyone chattering as well about what may happen. The list goes on.
Inventory might not be such a bad thing just in case there is a sudden mass resurgence in a desire for urban living. A developer can’t deliver a big project for two or three years anyway.
Instead, buyers have what they like to have — choice. And prices will moderate some as the resellers’ unrealistic profit expectations are brought back down to Earth.
Meanwhile, the smaller ones — a dozen to maybe 50 units are infill projects — are expected to continue doing well. The danger sign there is specific to areas. There’s a noticeable “oversupply” in the area around Long Boulevard and 31st Ave N. off West End where several smaller projects combine with the big tower The West End to create a long for-sale list.
Still, developers differ on what will sell better and what will sit. Some say units less than $300,000 will sell better while ones more than that mark will sit. Others say buyers will focus more closely on quality.
Nobody knows what will happen until it happens.
All of this is President George Bush’s fault anyway. Five years ago, he pushed for increasing homeownership in America with programs for zero-down payment and loan programs targeting low-income borrowers.
It brought abuse, fed subprime lending and drew people in over their heads. The Democrats in Congress went along with the populist plan. So, it all catches up. The housing market tanks, somehow to everyone’s shock, and ripples through to cause many pain.
Perhaps with a new president, everyone will get warm and fuzzy again and start buying Nashville urban condos for $400 per square foot.
The Chatter Class appears Mondays in The City Paper. Comments may be sent to firstname.lastname@example.org