Came across this interesting article in the Wall Street Journal on why the country built so many condos during the boom a few years ago. E.g., one stunning stat was that Las Vegas may have a 20+ year supply of unsold units.
Ultimately, my takeaway is that like any product, there isn't limitless demand for condos and it's easy for investors and developers (not to mention realtors and bloggers like me back in the heyday) to get ahead of themselves — especially if supporting trends seem to corroborate the enthusiasm. The key here is that legitimate demand drivers like empty nesters, density, pent up demand, millennials, immigration, etc. are all valid but the supply can't dwarf the demand.
Urban centers will continue to represent an important, if comparatively small, part of the rapidly evolving American landscape. With as many as 100 million more Americans by 2050, they could enjoy a growth of somewhere between 10 million and 20 million more people. And in the short run, the collapse of the high-end condo market could provide opportunity for young and unmarried people to move into luxurious urban housing at bargain rates.
But lower prices, or a shift to rentals, could prove financially devastating for urban developers and their investors, who now may be slow to re-enter the market. And for many cities, the bust could represent a punishing fiscal blow, given the subsidies lavished on many projects during the era of urbanist frenzy.
Great article. I think we all were riding some crazy high during that time. Very informative piece.
Interesting points for sure, but I would not look at the Wall Street Journal for sound journalism when it comes to anything close to impact or outcomes of global warming. Our love affair with the car will begin to subside. Cities with progressive leaders are realizing that building roads to get through and around fast are not a priority for their city. Gasoline will be $6 or $7 soon enough. More people will want / demand better transit, more livable, walkable, bike friendly cities. Hope Seattle becomes one of them.
Las Vegas was never intended to be an “urban city”, so there could well be 20 years supply there. Developers all decided to “test” a market at the same time and found it was not there. Maybe it was due to timing, but we will have to wait a while to find that out.
More people will want / demand better transit, more livable, walkable, bike friendly cities. Hope Seattle becomes one of them. This sounds great but I’ve lived in downtown Seattle since 1997 and this is unrealistic. I walk, bike and ride the transit much as I can but city is overwhelmed with homeless, crazies, drug addicts and drunks. I drive my car even if it’s 5 blocks if there’s free parking. Buses smell so bad from all the homeless people riding in the free zone. Some streets are covered with homeless and drug addicts sleeping on sidewalks, especially in Belltown area. There are crazies walking around screaming profanities and City does nothing. This is such a Liberal city that they don’t have the political will to clean up the city.
What I never understood about the Seattle downtown boom was how much focus there seemed to be on the high-end market. Was there ever really that much *good* market research showing all that pent up demand for high end condos?
I make a pretty decent income, and rent downtown. When I looked into possibly buying downtown (I need a two bdrm place), payments on a 30 yr loan + taxes + dues didn’t look as good as continuing to rent and investing the savings.
The high end places were going to have to find a lot of folks a lot better off than me to fill them. I wonder where they expected to find them.
ig a bit, we’ll find that the 80s bubble may actually be SMALLER in relative terms than the bubble we’re in right now. The 8% annual appreciation in the 80s has to be put into context. Back then wages and inflaton were both high compared to today. Let’s understand what 8% annual appreciation really means. Eight percent means prices DOUBLE every 9 nine years. In order for that to be sustainable, wages would have to double every 9 years too otherwise eventually nobody would be able to afford a home. Inflation in the 80s was running at roughly 5 or 6%, double to triple inflation today.