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FrijolMalo

Condo bubble not yet fully deflated?

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So does anyone else think the condo market has further to fall? Fifth and Main's new owners are selling at lower prices, but on a $/sq ft basis, buying a condo there or in similar projects is still much more expensive than buying a single family home in the same neighborhood. While I could qualify for a loan for what they're asking (for a one bedroom at least), it would be at the upper end of what I could get, and the monthly payment would end up leaving me pretty house poor. On the other hand, there are plenty of nice inexpensive homes in close-in neighborhoods that offer the potential to rent out the extra rooms.

I'm a few years out of college, and I've got a decent job, but I'm not really finding that is true of very many of my peers. Do you think there are many would-be condo dwellers that actually have the incomes to support the asking prices of these projects? Do you think we'll see another round of falling prices in the Nashville condo market?

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When downtown is more livable with more shops, restaurants, less surface lots, and more walkable attractions, we will see more residential. Nashville has been a lot slower warming up to urban living than cities such as Portland, Charlotte, and others that have embraced urban living for decades. Public transportation will help as well. Developers will build where people tell them too, and with gas heading to $6 a gallon in a year, people will start leaving the suburbs if AFFORDABLE housing in the city is available. Right now, its geared toward the wealthy which is still a very small minority in Nashville compared to other cities.

Many suburbanites like myself are "stuck" and cannot afford to move in a buyers market. Right now I could not give my suburban home in Bellevue away, especially after the flood where the Harpeth River swallowed most of Bellevue. Even if you can sell a nice home in Bellevue for $225,000, one cannot get anything but a 700 square foot one bedroom in the city. The city is still too overpriced for 90% of Nashville. I have totally given up the idea of moving to the city. I am almost 48 and my wife is almost 59. When I am in my 50's and she is in her 60's, we will not be in any position to move into the city at that age. Urban living will be designed for the wealthy under 40 age group. ICON for instance is an amenity driven property. The monthly maintenance fees are $400 and up. That is a lot of money for two people in their 50's and 60's who are not going to use the party room(s), swimming pool(s), weight room(s), sundeck(s) and the like. The one time we took a tour of ICON, Terrazzo, and Velocity, we saw no-one our age. Not one.

Developers will need to consider all age groups and all incomes before people will flock to the city to live. With the exception of gasoline, the suburbs are still very inexpensive to live in.

BR

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Yeah, I agree, BR. I don't get it. Why are condos so expensive. Does it really cost that much or are developers greedy? I wonder what it would be like if it was "affordable." Is living in one of these condos always going to be expensive (I am thinking New York, not sure how people afford to live there)?

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Yeah, I agree, BR. I don't get it. Why are condos so expensive. Does it really cost that much or are developers greedy? I wonder what it would be like if it was "affordable." Is living in one of these condos always going to be expensive (I am thinking New York, not sure how people afford to live there)?

Yes it is expensive. the land values are many times more than land in the suburbs. The costs to build are much higher as well. There are numerous projects still going up if you look just outside the downtown core. New projects n Rolling Mill Hill (affordable housing) and Germantown are just a few. It all takes time.....

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Yeah, hopefully these will pan out to actually bring affordable living to the DT area. Would be something to check back on once these projects are up and running to get residents or anyone's view on how they have worked out so far.

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The best bet is one of going into a midtown or downtown condo with no debt or a mortgage and pay cash. My plan is too pay off my house, and then pay cash. Remember, the maintenance fee adds $250-$500 a month to your mortgage. If you want a second parkiing space, that is an additional $15,000 to $20,000 dollars unless you buy a two bedroom, and of those available per www.granthammond.com there are no two bedrooms available under $350,000.

Living in midtown, The gulch, and downtown right now is for the wealthy. If you do not make $100,000 a year or more, you are not going to able to afford a unit UNLESS YOU RENT, and that is select properties. I know some making less than that living downtown, but that is rare. For most, downtown is a second home for weekend excursions, entertainment, and parties.

Developers have done a poor job getting people to live in the area because they refuse to build condos in the $100,000-$150,000 range. In this case I am talking about entire buildings at this price point with a minimum of 1000 square feet. If a developer would build a condo building with 400 units at that price range @1000 square feet with a monthly maintenance fee of under $200, they would sell out in weeks. We don't need amenity driven condos downtown. We need simple living spaces that are not to obtuse and grand, just simple living spaces for those who wish to walk and shrink their carbon footprint. That would be a $60,000,000 building. That can't be done?

Developers at this point in Nashville are still interested in luxury rather than functionality and true minimalist living. This is why Nashville is so far behind many cities around the world. Developers keep going after a market that just is not there at the moment.

BR

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Developers have done a poor job getting people to live in the area because they refuse to build condos in the $100,000-$150,000 range. In this case I am talking about entire buildings at this price point with a minimum of 1000 square feet. If a developer would build a condo building with 400 units at that price range @1000 square feet with a monthly maintenance fee of under $200, they would sell out in weeks. We don't need amenity driven condos downtown. We need simple living spaces that are not to obtuse and grand, just simple living spaces for those who wish to walk and shrink their carbon footprint.

BR

Indeed. Probably the only examples of this would be Metro Manor and the Cumberland. Both are rentals however. I agree that there would be a nice market for non-"luxury" housing in the downtown area. That's probably how most cities around the world are built out.

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There is also the Capital Towers building, which I think is technically a condo building, but with mostly units that are serving as rentals. From folks I knew who stayed in corporate rentals in that building several years ago, the units are very hit or miss AND there are some serious issues with the mechanical systems in the building! Too bad, because a capital hill view from one of those units would be pretty sweet.

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The best bet is one of going into a midtown or downtown condo with no debt or a mortgage and pay cash. My plan is too pay off my house, and then pay cash. Remember, the maintenance fee adds $250-$500 a month to your mortgage. If you want a second parkiing space, that is an additional $15,000 to $20,000 dollars unless you buy a two bedroom, and of those available per www.granthammond.com there are no two bedrooms available under $350,000.

Living in midtown, The gulch, and downtown right now is for the wealthy. If you do not make $100,000 a year or more, you are not going to able to afford a unit UNLESS YOU RENT, and that is select properties. I know some making less than that living downtown, but that is rare. For most, downtown is a second home for weekend excursions, entertainment, and parties.

Developers have done a poor job getting people to live in the area because they refuse to build condos in the $100,000-$150,000 range. In this case I am talking about entire buildings at this price point with a minimum of 1000 square feet. If a developer would build a condo building with 400 units at that price range @1000 square feet with a monthly maintenance fee of under $200, they would sell out in weeks. We don't need amenity driven condos downtown. We need simple living spaces that are not to obtuse and grand, just simple living spaces for those who wish to walk and shrink their carbon footprint. That would be a $60,000,000 building. That can't be done?

Developers at this point in Nashville are still interested in luxury rather than functionality and true minimalist living. This is why Nashville is so far behind many cities around the world. Developers keep going after a market that just is not there at the moment.

BR

John,

You can't wish for something to happen that is financially unfeasible for those who put up the money. IF you run the numbers on cost of land, construction, etc. it clearly points to the neccesity for private developers to aquire TIFF financing to even get these units out of the ground. That is in the most desireable locations. If you are willing to move a bit to the fringes you will see there are numerous units like Harrison lofts, or Rolling Mill Hill, 5th and Main, etc. that are much closer to the price points you want to see. You are not going to find anything in the $100,000 range in the City unless you qualify for low income housing. But there are plenty of folks who live downtown who are not rich and do not make 6 figure salaries.

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P2, I am sure you are right. I just remember when I was in Chicago staying right off Michigan Avenue. I was five blocks from Lake Michigan. There was a new skyscraper condo with units in the $150,000-$225,000 range that were designed for a minimalist lifstyle while at the same time being in the heart of downtown. Unfortunately in downtown Nashville, some of the condos you speak of are stick frame buildings, and I, along with many others, do not want to live in a multi-unit stick frame building. The Viridian had units in the $140,000 range pre-construction price. I would like to see an entire building like that in the 20-40 story range. My families background was the insurance business, and insurance companies do not like writing policies on stick frame buildings like Velocity, Bristol on Broadway etc... the risk of fire is very high.

It would seem by your assessment that developers MUST have TIF to build, along with getting the zoning they need to be profitable, so why not more units like Metro Manor and Capital Towers? Why have those buildings not been retrofitted?

I would love Fifth and Main if it were not sandwiched between interstates, crime, and near a truck stop. Its not walkable, and not near anything except a convenience store.Better planning could have been utilized for that building as well.

Toronto also had some nice units in the core that were very reasonable. That is why 2.2 million live in the city of Toronto.

The debate continues!

BR

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I feel like the condo market is beginning to pick up again. If you look at the Q4 2010 and Q1 2011 sales.. and take out the big Velocity sale and Rolling Mill Hill sale.. there are still quite a few units that closed in several of the downtown condo buildings, especially in the Gulch.

Plus, those huge sales of Velocity and RMH instantly took away several hundred units from the market.. leaving a much smaller inventory, thus more stabilization of prices.

Sure the prices are still pretty high.. but there will always be a premium for living downtown.. and I don't feel like they're all that far off now (as in not so bloated relatively speaking).

Just my two cents...

Oh and i'm not sure the Velocity should be considered purely 'stick frame construction'.. the entire garage in the center (all 5 stories) is concrete, as is the majority of the first floor... so its more like half and half. But I do agree that stick frame is not the most desirable way to construct a building (trust me, I live here). I have not done any research on construction costs.. but I would assume wood is significantly cheaper than concrete.. and in some cases is probably a necessity to drive the price of the building down. (although I could be wrong)

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The building in Chicago you are talking about is called the Aqua and it is the first and largest condo project ever designed by a woman. The units you are referring to are 1 bdr. studios in the 500+ square foot range and on the lowest floors and are currently priced starting at $299,000. Nice project but you are still talking a studio for $299,000 with no parking which isstill way higher price wise than nashville. Most of us are still stuck with a suburbs mentality in this city. If we feel that all of our goods and services have to be within a couple of hundred yards from our residences then we are missing the point about city living.

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If we feel that all of our goods and services have to be within a couple of hundred yards from our residences then we are missing the point about city living.

Maybe I'm missing your point, but actually, isn't that more the point of city living? Not that everything you could possibly need is within a hundred yards, but that more things for living are within walking distance or accessible with mass transit. And in fact, lots of stuff is or should be (in a properly functioning urban environment) within a few hundred yards of your residence.

And the point isn't really to live next to the Symphony or the ballpark, which is all well and good, but those things are once in awhile attractions which boost the quality of life for residents from across the city.

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The plan is when I get this house paid off, I move into the city. I want to be in a concrete and steel high rise (5 stories or more) that is walkable to everything...like Encore, Viridian, Terazzo, Icon, Rhythm, or even Vandy area like 1101 18th, The Glen etc... I would consider Germantown, or East Nashville if I can get into something like the 37206 Building, MM2 etc.. I am going to pay cash.

Issues for me:

1) I am done with suburban houses with crawl space where I am dependent on the automobile for everything. After my flood experience last year, the last thing you want is crawl space or a house on a slab. Why this part of the country does not do concrete basement houses is beyond me!

2) I did not mind Velocity having the first floor on grade because grade is a 1-2 foot thick slab of concrete on top of rock. Slab houses in the suburbs are on soil, and in my area the soil is soft; therefore some of the slab houses have sunk below grade! After last years flood with so much top soil being washed away, some of the slab houses have had water damage around the exterior walls, and people were getting damp carpets and damp mold around baseboard trim. With this knowledge, they are still building suburban houses post flood the same way.

3) I would like a building where I have underground parking, or above ground parking below the units. A garage like Velocity is fine too. Some houses I looked at in the city were on crawlspace or slab on soil. There is no reason Nashville should not be on basement foundations due to our rainfall, and the fact our winters are getting colder thus creating pipes bursting because crawl space houses are too low to the ground. Crawl space also traps moisture which can lead to allergies and mold in some cases. Crawl space is also a haven for insects, and in the city...rats. Sorry, but that's the truth. We have plenty of mice here in the suburbs. I know most people could care less if they live on crawl space. I am sure most never think about it, but if they got the amount of water in mine like I did from living up against a hill during last years flood, you would be concerned. My sump pump did not work very well. Had I been on a concrete basement house, water would not be an issue. The water would have been funneled into a drain, and routed to the storm drain.

Last years flood really got me thinking about construction methods and how in this area it is so much safer, and green, to live in concrete and steel construction. Its better for the environment, and using lumber is simply a waste of a natural resource. We are cutting back on paper goods why not lumber? Using lumber also has variances in construction that prevent a house form being square on measurement. Ever try to lay carpet or flooring in a lumber construction building? Its impossible to get a square or true wall! I am surprised after the flood we don't have the regulations in the southeast like you have in most of the midwest, west, and northeast. Houses must have concrete basements for tornado shelter, prevention of freezing pipes in the winter, and to keep flood waters from getting into living space.

Okay, did not mean to get off into a construction materials debate, but with our ever changing environment, living in the city center as opposed to the suburbs will make more sense in the future. Yes, it is true our founders settled Nashville by the river, however by the turn of last century it was evident they chose the best place with solid and higher ground. The amount of times downtown has flooded was five times in the past 150 years. Flooding in the suburbs near the Harpeth River (which winds all through southwestern and southeastern Davidson County) is more frequent.

Actually a great site for this type of discussion is www.cyburbia.org.

BR

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Maybe I'm missing your point, but actually, isn't that more the point of city living? Not that everything you could possibly need is within a hundred yards, but that more things for living are within walking distance or accessible with mass transit. And in fact, lots of stuff is or should be (in a properly functioning urban environment) within a few hundred yards of your residence.

And the point isn't really to live next to the Symphony or the ballpark, which is all well and good, but those things are once in awhile attractions which boost the quality of life for residents from across the city.

Yes, my point was base upon the statement about living at 5th and Main which is several blocks from most of the downtown ammenities but walkable. It has more to do with the cost of living in such buildings that the actual availabilty of goods and services. You can't ask to live in the least expensive units that are situated in the most desirable areas. 5th and Main would provide for a 1$50,000 option but you are going to be slightly farther away from things. Mass transit (which is coming) also helps alleviate these issues. We can already take a free bus from almost all points in the core to the farmers market,etc. I LOVE downtown living so please don't confuse my statement for disappointment.

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