While the booming condo market in cities like New York, San Francisco, Los Angeles, Miami, Boston, Philadelphia, Washington and San Diego helped establish the idea of an American "urban renaissance," the latest data show that these cities, particularly their downtown cores, will be impacted the most by the slowing housing market.
"Inventories for houses are up 39 percent from a year ago, while those for condominiums have shot up by 63 percent. Home price increases are slowing and could begin to decline. But the condo market is much worse. Prices could fall as much as 9 percent this year, according to one recent investment bank analysis. Four-fifths of developers say they find more price resistance from buyers.
High priced, overhyped urban areas are particularly vulnerable. Many of these markets are heavily influenced by speculators, who own as much as one-third of the condos for sale in downtown San Diego and more than four-fifths in Miami. These 'flippers' are most likely to unload properties once they see the prospect of declining prices."
Thanks to Joel Kotkin
Comments
AAANNNNDDDD.... here's Kotkin!
You know, I got halfway through that article before I realized it smelled familiar and, sure enough, it's by Joel Kotkin. Only Kotkin could shrug off declining mainstream home values with a simple 'some suburban values will also decline.' Is this guy living under a rock? Does he think that all of the news pieces on the housing bubble are geared toward city cores?
What's obvious to everyone but Joel and the Reason/Heritage/ApplePie/Chevrolet Foundation is that there is a group of people now interested in city living who formerly would not be. The issue is that they may be interested at 200k for a 1 bedroom rather than 400k. Hyper-inflated values borne of exotic mortgages are not unique to city cores.
And he loses MAJOR POINTS for referring to Philadelphia as a wannabe city. Get lost, Joel.
But I agree with him completely on the concluding point:
The decline of the high-end market should also lead developers and city officials to move away from their elite obsessions and toward focusing private capital on a potentially huge pent-up demand for middle class and family oriented urban housing.
Kotkin and Demographics
Excellent comment. Everything we read says that housing values generally may decline. Kotkin distorts this news by saying that there are no problems in the suburbs but the increase in urban housing prices is purely a speculative bubble.
There are more people now interested in urban living, as you say, and one reason is demographics. Because of the aging of the population, a larger percentage of Americans are empty nesters who no longer need their suburban houses and schools. Many have vision problems that make it difficult to drive, so they have to live in urban neighborhoods with public transportation and with services they can walk to.
Of course, Kotkin ignores this demographic fact, because it conflicts with his prejudiced view that the only people moving to cities are thrill-seeking yuppies.
Charles Siegel
Philly as Ultra-inflated?
Philadelphia's condo/downtown housing market can hardly be characterized as ultra-inflated. In fact, the housing "boom" currently underway in Center City would not even qualify as a "boom" in peer cities such as New York, Chicago and San Francisco. Philadelphia is merely experiencing normal housing growth. It's not normal for Philadelphia because the city had been in decline for so long. So the media is loathe to suggest that this growth can be sustained. Interestingly, many high-profile Philadelphia-based developers and brokers are partially blaming the media for fanning the boom is over fire.