>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.)

>Get In Line, Developers!

>This is getting a little ridiculous, don’t you think?

Developers Ask U.S. for Bailout as Massive Debt Looms

With a record amount of commercial real-estate debt coming due, some of the country’s biggest property developers have become the latest to go hat-in-hand to the government for assistance.

They’re warning policymakers that thousands of office complexes, hotels, shopping centers and other commercial buildings are headed into defaults, foreclosures and bankruptcies. The reason: according to research firm Foresight Analytics LCC, $530 billion of commercial mortgages will be coming due for refinancing in the next three years — with about $160 billion maturing in the next year. Credit, meanwhile, is practically nonexistent and cash flows from commercial property are siphoning off.

Oh noes. You are the folks who blew it up with your constant clap louder refrain and irresponsible speculation and now you want a government handout?

Dream on.

>TN Unemployment Up

>May unemployment figures are out and it’s not good news for Tennessee:

NASHVILLE, Tenn. — The number of unemployed people in Tennessee jumped by 30,800 in May, a 19 percent increase over the previous month, the state Department of Labor and Workforce Development said Thursday.

The state’s unemployment rate jumped from 5.5 percent in April to 6.4 percent in May, nearly a full percentage point above the national rate.

Someone alert the real estate and homebuilders associations. They keep insisting the Tennessee economy is rainbows and lollipops, and they can’t understand why the real estate market is tanking.

As Atrios says, facts are stupid things.

>Buyer’s Market

>I’ve heard of incentives but this is ridiculous :

To get prospective buyers through the door — you can’t appreciate the hardwood floors, or the two fireplaces, or the waterfall or the pool if you don’t at least get through the door — the Garcias are ready to sweeten the deal.



“We will give two round-trip tickets to anywhere Southwest flies and a box seat for 4 at the Hollywood Bowl in Hollywood, CA, to anyone whose recommendations lead to a direct sale of this house,” Priscilla Partridge, Garcia’s wife, wrote in an e-mail to friends and acquaintances on Monday. She did not respond to The Tennessean’s request for an interview.

Her Realtor, Mara Thompson of Zeitlin & Co., said more and more sellers are turning to incentives. She’s seen people offer cars, a year of free gasoline, cruise vacation package and even — in the case of one $2.2 million home currently for sale in Green Hills — college tuition for the buyer’s children.

“A lot of people are doing it,” Thompson said. “With the market as it is today, I think people are just trying to be a bit creative.”

I’ve said all along that the Nashville real estate market is imploding. There’s literally a forest of “for sale” signs sprouting in Green Hills–and no, it doesn’t replace the actual forest that developers destroyed to build these homes.

But what do I know? In Sunday’s Tennessean, we heard from Michael Arnold, president of the Home Builders Association of Middle Tennessee, who offered this “clap louder” perspective:

What we are seeing here is a strong and resilient local economy that is bucking the national trend in several key areas, the first being in job growth. Unlike a significant portion of the rest of the country, Middle Tennessee is showing great strength in its job market. In fact, Middle Tennessee has accounted for more than 40 percent of all new jobs across the state in the period between April of 2007 and April of this year.

Huzzah! All is well! But why, oh why, are there so many “for sale” signs everywhere?

Unfortunately, first-time buyers, move–ups and retirees alike are being deterred from taking this crucial step by the national headlines that run in our local media. This waiting-to-buy syndrome is what is affecting our local market, unlike the aforementioned markets that have significant economic problems to blame for their current situations.

Damn you, liberal media! It’s always your fault!!!

Of course, I’ve written before about our local media’s valiant efforts to paint a happy face on the local real estate market.

Look, the economy is sucking everywhere. Nashville doesn’t have magic fairy dust sprinkled over it making it immune from the same forces that affect everyone else. Pretending otherwise just makes real estate folks look lame and frankly a little bit desperate.

Here’s a hint: I don’t think an “incentive” to pay for someone’s college education is the sign of a strong real estate market. Good for people thinking creatively and all, but if you need help paying for your kid’s college education, maybe you shouldn’t be buying a $2.2 million home. Just a thought.

>It’s Always Good News (When You’re The Trade Association’s President!)

>Is Nashville’s real estate bubble bursting? I would say yes, it is:

There were 2,227 home closings reported for the month of March, according to figures provided by the Greater Nashville Association of Realtors®. This represents a decrease of 28.7 percent from the 3,126 closings reported for the same period last year.

Numbers for the first quarter were 5,763 closings, down 27.8 percent from the 7,990 closings during the first quarter of 2007.

We’ve been seeing these reports month after month in the local paper for the past year and a half. But you wouldn’t know it from reading local real estate cheerleader columnist Richard Courtney, who in addition to writing for The Tennessean, Nashville Post and the Nashville City Paper, was also 2007 president of the Greater Nashville Association of Realtors .

Consistently Courtney has put a happy face on these dour numbers in columns and interviews, as one would expect from the GNAR president. But why didn’t our newspapers counter this industry source with a less, you know, biased perspective? (And why did the Tennessean and the City Paper think it was OK to give an industry rep a column, anyway?)

In the face of all evidence to the contrary, Courtney’s columns and statements to the media have been unfailingly sunny, and reporters interviewing Courtney have never questioned his reasoning. Every piece of bad news is always accompanied by the “but it’s actually good news because ….” codicil. It would be funny if it weren’t so irresponsible.

Want a trip into the memory hole? Let’s start with January 2007:

January home sales dip compared to 06 figures

With home sales either stagnant or tumbling in many markets nationwide, the Nashville area saw a similar lack of vigor last month, as there was a 3.4 percent dip in transactions compared to numbers from January 2006. According to figures provided by the Greater Nashville Association of Realtors released Monday, the multi-county area registered 2,289 home closings in January, compared to 2,371 closings reported for the same period last year. On a similar theme, the median price for a condominium unit remained flat when comparing same-month numbers.

Despite the sluggishness, the January 2007 numbers represent the second-best January since GNAR began totaling figures in 1977.

“The real figure is that other markets are down 15 to 18 percent, so we are bucking the national trend,” said Richard Courtney, GNAR president. “The reality of the market is that we could not sustain the extremely healthy pace we enjoyed the past 15 years.” Courtney, who writes a real estate column for The City Paper, said the healthy growth of the past few years has cushioned the market so as to experience a contraction with minimal pain.

“These figures are actually very encouraging,” he said. “They confirm that the market remains active and the level of home sales is being sustained as the year begins.”

Actually, a decrease shows the level of home sales is, you know, down. And if January 2007 was the second best January since 1977, and those sales were down from the previous year, that must mean January 2006 was the best year ever. That means we peaked in 2006 and started a down cycle two years ago.

You’d think a real estate columnist/source would tell us that, but I understand that Courtney was in a tight spot: torn between telling the truth to newspaper readers, and being the industry cheerleader his GNAR job required.

Sales continued to slide in April 2007. Still, Courtney looked on the bright side:

Nashville-area April home sales dip 7.6%

“What were acknowledging is that 2006 was an anomaly,” said Richard Courtney, GNAR president. “We might not see those [2006] numbers again next year or the next.” Still, Courtney said the numbers to date this year are encouraging. “The fact is that our cumulative numbers show this is the second best year-to-date so far,” he said.

By July of 2007, Big Shitpile was exploding all over the country’s real estate market. Foreclosures were on the increase:

Foreclosures pickup nationwide, statewide

Call it one more sign that Nashville’s red-hot housing market could be slowing down.

Or filling a demand, depending on how one sees it.

[…]

Because many, if not most, foreclosures are on lower-priced houses, Courtney said they could ease the crunch in the “affordable housing,” $160,000-and-lower price point.

“We probably have the demand to handle that,” said Courtney. “Some of that inventory might be welcome.”

Dude, give me some of what you’re smoking! But this is all ancient history. An entire year has past since Courtney donned his rose-colored glasses and told us all to relax! It’s good news that home sales are down!

Here’s Courtney’s Friday “Tennessean” column:

Sales in the Greater Nashville area are down a whopping 28.8 percent for March compared to March of 2007.

This information was provided by the Greater Nashville Association of Realtors.

Oddly, the prices are rising. Sales are down and prices are rising. James Taylor once wrote “well, the sun is surely sinking down, but the moon is slowly rising. So this ole world must still be spinning ’round.” And so it is in Nashville.

For the year, sales are on an upward trend with 1,644 units in January; 1,892 in February; 2,225 in March; and 2,316 pending for April. And the sales numbers always surpass the pending number.

So, sales in units are down as compared to year to year, but more homes are selling each month than the previous month, a minimum of four months of increasing sales.

Oh Richard, always looking on the bright side of life. Surely it isn’t news that sales in April are higher than sales in January, February or March? It’s always that way! And right after he blamed February’s drop in sales on cold weather! It’s still down from last year, and that’s not good.

I don’t mean to pick on Richard Courtney, whom I’m sure is a nice person. I do mean to pick on this habit of the news media–local and national–of putting industry cheerleaders in the position of industry expert. They are not the same thing. I realize being an industry cheerleader is all part of the job for an association president–what’s wrong with the City Paper and the Tennessean? Courtney’s cheery analyses of the Nashville real estate market were never countered, challenged or even questioned.

I have friends who read these sunny reports and thought Nashville was immune to the real estate crisis who are now in some serious financial trouble. And GNAR has a new president now and she’s peddling the same shit:

“The number of closings is down significantly compared to last year, but the fact that home prices are rising is a good sign that the Greater Nashville market remains stable even in this time of market transition,” says GNAR President Mandy Wachtler in a news release.

Please, Tennessean and City Paper, do not give Mandy Wachtler a real estate column. People need real, unbiased information about the real estate market, not fairy tales.

Silver Linings

I wonder if this trend has appeared in Nashville yet:

CLEVELAND – The nation’s foreclosure crisis has led to a painful irony for homeless people: On any given night they are outnumbered in some cities by vacant houses, and some street people are taking advantage of the opportunity by becoming squatters.

Foreclosed homes often have an advantage over boarded-up and dilapidated houses abandoned because of rundown conditions: Sometimes the heat, lights and water are still working.

On a related note, the Nashville homeless census (.pdf here) showed a slight increase in the local homeless population:

(NASHVILLE, Tenn., Feb. 8, 2008) – An updated count of the city’s homeless population, coordinated by the Metropolitan Development and Housing Agency, found 2,237 persons living either in shelters or outdoors. The number represents only a nominal increase from last year’s 2,176. The information will be used as part of the continuing effort to combat chronic homelessness in Nashville.

The count, which took place in the early morning hours of January 29, found 1,771 people living in homeless shelters and 466 in non-sheltered locations. Of the total number of homeless individuals counted, a majority are considered to be “chronically homeless.” The federal government defines a chronically homeless person as “an unaccompanied homeless individual with a disabling condition who has either been continuously homeless for a year or more or has had at least four episodes of homelessness in the past three years.”

I can’t imagine that too many of Nashville’s homeless are finding shelter in empty homes; it just seems like all of the new developments are in suburbs and places like Green Hills, while the homeless seem to be clustered around the shelters and other social services offered downtown.

But I could easily be wrong. I know full well that many homeless are adept at staying hidden. I know the park adjacent to the Green Hills Public Library has been home to several homeless individuals. These aren’t the folks dressed in rags and pushing a shopping cart (although Green Hills has its share of those, too), but rather folks who work hard to “blend in.” No doubt, they are not included in the recent census numbers, nor would be squatters taking shelter in an empty home.

I am reminded that these are people, not numbers: people with names, families, and stories to tell. They have problems we can’t even imagine. A lot of them are women with children: this year the Campus for Human Development said they had so many more women clients than usual, by December they had run out of feminine hygiene products. Our church actually took up a collection of sanitary products to help out.

I do know that we’re seeing increased numbers of people seeking assistance, people who don’t fall under the “chronically homeless” label but instead have jobs (sometimes two or three jobs) who have been affected by the credit mess. These are people who are just one illness or job layoff away from becoming homeless. They aren’t the folks showing up in shelters or sleeping under bridges–yet. And I wonder if this city is at all prepared to deal with this potential time bomb.

>No One Could Have Anticipated This!

>[UPDATE]:

A sidebar to today’s NPR story on mortgage fraud illustrates how one developer was able to “dodge the mortgage fraud bullet” that plagues Las Vegas by not allowing speculators to buy his new homes in bulk. As a result, his development has fewer foreclosures and fewer drops in property values.

Imagine that!
——————

Like we didn’t see this one coming a mile off:

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.

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.

Why did they let this happen? This kind of inventory glut will ripple across the local economy, and could drag down property values everywhere. We’ve already displaced low income residents by gentrifying neighborhoods like 12South and Waverly-Belmont, and we still haven’t replaced the inventory these folks were priced out of.

And now the money quote. Was this supposed to be tongue-in-cheek?

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.

Oh, please. You can blame President Bush for a lot of things, but this isn’t one of them. It’s the fault of greedy out-of-state developers who are not invested in our local community, just here to make a quick buck and move on. It’s the fault of a flaccid Planning Commission that never saw a construction permit it didn’t like. It’s the fault of cheerleaders like the Downtown Partnership who are blinded by their own self-interest.

And it’s the fault of local reporters like Richard Lawson whose fawning coverage of the local real estate scene never raised an eyebrow of concern over all of this overbuilding. Instead, all we got was “clap louder!”

>Sign Of The Times

>Available: 2,250-square-feet of commercial space on Glen Echo Road in Green Hills. Prime Location. Available immediately.

(Click on image to enlarge)