Wednesday, October 28, 2009

Told Ya So

Nobody could have anticipated this:
In a bid to generate excitement in a struggling condo market, developers of the luxury Terrazzo building in the Gulch plan to offer one-fourth of the building via auction at steep discounts next month — a move that critics say will hurt existing owners.

"This is horrible,'' said Betsy McInnes, who is listed as an owner of a $373,000 one-bedroom Terrazzo unit with her daughter, Waller McInnes. The daughter rents out the Terrazzo condo to a tenant and is trying to sell it.

The mother said her 28-year-old daughter owns three properties and has three mortgages.

McInnes said she's afraid the Nov. 21 auction will drive prices lower and further hurt values for people who have already invested a lot. "This is pretty depressing,'' the mother said Tuesday.

But developers of the Terrazzo insist the auction will help condominium sales recover and prove beneficial in the long run.

Really? How do you figure that? If I bought a $375,000 condo in a building where similar units are now going for half that amount, I’d be very ticked off.

Sadly, I predicted this nearly two years ago. If only someone had listened. In February 2008 I wrote:

Just give it a few weeks. I have no doubt we are headed for a massive real estate bust, with all of those fancy downtown condos the first to go belly up.

Yes, they overbuilt. Yes, there’s too much inventory--or rather, too much of the same inventory. How many $200,000-$1 million units do we need downtown? Who’s supposed to buy these things, anyway? You can still get a nice house in Nashville for that kind of money, you know.

Plus, Nashville has no “downtown living” infrastructure. There are no grocery stores, dry cleaners and parks downtown. Public transportation in Nashville is notoriously crappy. This isn’t Chicago or Manhattan. You can sleep and work downtown and eat in a restaurant and go to a hockey game, but for everything else you’re going to need a car to schlep to another part of town. Downtown “living” is something of a misnomer.

I’ve never understood the massive building frenzy that has resulted in Viridian, Velocity, Encore and Icon, not to mention Terrazzo, Exchange, Phoenix, Westin and the Signature Tower. I don’t understand why there wasn’t some kind of plan for more diversity of housing options, a wider variety of price points to appeal to a wider variety of buyers. Nashville has a critical housing shortage--but not in these high price ranges.

So, have we learned our lesson? I don’t think so. WTVF’s Jeff Tang just interviewed Terrazzo developer Bill Barkley. Said Barkley:

"Other cities have an overbuilt condominium market of thousands of units. In Nashville there are only 600 and something units in this downtown area. That’s not an overbuilt, that’s an undersold situation."

Ah, it’s always good news when you’re the developer (or the trade association president). That “600-some units available” figure sounds awfully optimistic, especially when you remember what's happening down the street:

Velocity celebrated its finishing touches and opened Monday with 263 units, about a block from the Terrazzo. Seventeen of those units have been sold, according to records with the Davidson County Register of Deeds.

Oh, ouch. And I’d love to know what “this downtown area” means. If it means "The Gulch," then they're screwed. It certainly doesn’t include all of the condos and townhomes available in the West End Avenue area, where single family homes have been torn down for condos like nobody’s business.

I’m sorry for Mr. Barkley and everyone else who lost their shirts during the “clap louder!” Overweening Oughts. The past decade has been marked by wretched excess, no more so than in the real estate market, yet when a few of us raised our hands and asked if such overkill was warranted, we were called Debbie Downers and Negative Nellies. We were called people who Wanted America to Fail.

Sigh. So, here we are.

You know, it’s quite a feat for a city to be overrun with luxury condos no one wants to buy, and an estimated 2,200 homeless people needing a place to live. If only we could somehow put these two together.

We should be so proud!

(h/t, Pith.)