On Nov 24, 2004, at 10:33 AM, Victoria Heller wrote:
The trouble with markets is they go up and down, and no one knows quite when or how. That doesn't mean disaster is ahead. As Vicky noted, almost all downtown development is unsubsidized, so this is truly private investors making market-based risk decisions. Overall, the activity is a strong sign of faith in Mpls. And even if the market is "correcting" - which would be reasonable given the newness of the downtown residential area - real estate is a long-term investment for most buyers and nearly all investors, so this is Chicken Little acorn stuff at this point.Prices falling..watch out below!
I hope there's no public money in these deals (other than $95 million in The
Village at St. Anthony).
I've talked to a lot of market analysts about whether there's a housing - and more specifically a condo - bubble. The ones who are more independent of developers make no predicitions about the near term (1-3 years) but all are pretty bullish beyond that.
There are two major reasons for this:
1. Demographics. Ten of the ten fastest-growing subgroups are people without children (sort of a dumbbell shape - lots of 20-30-somethings and 55-60-70-somthings). These groups are more likely to go to condos and townhomes - and in the city, Downtown has the best combo of undeveloped land near significant amenities. True, you can get overpriced spikes going forward, but longterm, the demand for this type of house should remain strong.
After all, G.R. ended up Downtown, not Southwest or Northeast.
2. Population movement. Everyone has seen the demographic predictions from folks such as the Met Council: 1 million more people will move into the Twin Cities in the coming couple of decades. Only a sliver may move into the cities, but it only takes a relative sliver to float the boat in places like Downtown and near-Downtown neighborhoods such as Whittier.
I appreciate G.R. using Skyway News as a cultural signifier - though I should point out, the reason that the "no new condos" headline in the pipeline was because it is, so far, a one-month trend. (The month before, developers announced a 45-story, 200-some-unit condo tower where Let It Be Records is on Nicollet Mall.) You also don't get many projects announced in the winter - classic real estate stuff. If it persists for six months, it's an interesting datapoint, but even then may be nothing more than a harbinger of demand and supply evening out in the short-term.
Another thing to note: developers are already reacting to the marketplace. The soft spot in the market (as it is for single-family homes) is about $400,000 on up (exception: places with truly spectacular views). What's happening is developers who announced projects six-12 months ago are reducing the size of their units (and the price) and increasing the number of units. I think G.R. will have more options in a year. I also think this is a good thing for Downtown because it means more people down here, and we can have more folks than the Gold Coast crowd.
One thing that will be interesting to see is how an office-market rebound will affect the housing market. Right now, the only real action is in housing, so if there's a bubble (or something less; call it a blister) it might be because there's no competitive investments challenging housing returns right now.
Here's a link to a recent marketplace story we did. It touches on some of the things G.R. so ably described, albeit from a less personal perspective:
For some condo owners, it's 'musical lofts' http://www.skywaynews.net/articles/2004/11/08/news/news03.txt
David Brauer Kingfield Editor, Skyway News and Southwest Journal
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