Gluttony and Glut: Finding the New Normal

An evening cross section of Atlanta's Atlantic Station.

An evening cross section of Atlanta's Atlantic Station.

How serious is the implosion of the once-booming urban condo market? And what does the downturn say about the prospects for housing in urban centers?

A piece in the business section of the Atlanta Journal-Constitution seems to say it all. Desperate to unload some units in “a stagnant market,” says the sub-headline, an Atlantic Station  developer will auction off some 40 units, with bids starting at 56 percent off list price. A similar story about the stalled condo market in Chicago appeared in a Feb. 3 New York Times story.

Well, welcome to the New, New Normal. Just don’t read too much into implications for the future of multi-family housing in these places.

To be sure, fire sales aren’t great news for developers caught in the current pinch, or for investors, including condo owners who bought into a project at the old list price. But it seems to us that the only environment in which this sort of mark down is seen as a disaster is one in which folks deny the realities of the real estate marketplace. It’s not a marketplace unless prices go up and down depending upon what buyers are willing to pay, right?

For what we now recognize as an unsustainable period of speculator insanity, prices of detached single-family homes and condos soared, particularly in desirable cities and desirable climates. The period lasted long enough for a lot of folks – buyers, builders, developers, and real estate brokers, to name just a few – to believe the aberration was the New Normal. For a look at how a misguided sense of entitlement played out in the lives of real people on Florida’s southwest coast, check out George Packer’s story in the Feb. 9/16 New Yorker – it’s called “Ponzi State,” and for good reason – and then take a look at his video. And for a west coast take, watch this video from the Associated Press.

The remnants of that sense of entitlement persist in many of the conversations about “stabilizing” home values by artificially propping up prices in a market still seeking a bottom. New Urbanist developer Vince Graham explained how it’s time for a get-real approach to home values in one of our previous posts.

But it’s just as dangerous to assume an opposite marketplace trend, that advocates for downtown mixed-use development got it all wrong.  The current shakeout is not about whether or not there’s a market for condos and rental apartment options in downtowns; it’s about the nature of that market, particularly about how diverse the housing choices have to be and how well integrated is the planning for truly mixed use opportunities.

One of the best overviews of demographic and marketplace trends is the 2008 report from Harvard’s Joint Center for Housing Studies. And for a glimpse at how Americans rank places they’d like to move to – including places like Atlanta and Tampa that have experienced the greatest housing market downturns – see this recent survey from Pew Research. 

– Ben Brown

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