Downtown Real Estate Roundup: August Edition
We try to create our own content here on the site, but sometimes another blog does such a solid job that we feel compelled to link to it. Joe Peffer at Columbus Homes Blog definitely produces some of that “linkable” content in the form of his downtown real estate roundups…
- 11 different downtown Columbus condo locations had sales in August
- 6 of them sold for under $220,000 in case you’re thinking you’d never be able to afford one.
- They averaged almost 1400 sq feet in case you thought Columbus condos are always too small.
- 13 of the 15 Downtown Columbus condos that sold offered at least one parking space in case you thought there’s never any parking and 4 of them had 2 spots included in the price.
Read the rest HERE
Now who’s clamoring for “affordable” housing again?
Really folks…let the market work before we demand that the mayor step in and subsidize housing to deliver those unicorns $100k 2-bedroom condos in premium locations.
-Eric
Huh! I saw that on Peffer’s blog and my first thought was - who says $220k is affordable? Besides, of course, DINKs.
A $220k loan w/20% down at 6% interest is a monthly payment of $1055. That should be affordable to LOTS of people…not just DINKs. Add in that property taxes, in many cases, are waived for the first 10 years and you’re including an even larger slice of the population.
To put that into perspective, someone making $50k/yr has a monthly take-home of almost $3,000. If you can’t live off of the leftover $2,000, then you have some budgeting issues to look at.
Mr. Peffer does do good job of presenting his facts, but you have to admit, he’s hardly an objective observer. He’s a realtor whose job it is to sell downtown. The 6 condos that sold for under 220,000: How many of them were 219,900? And what was the square footage? I’m guess the majority of the 6 were under the average of 1400 sq. ft. And the 1 bedroom loft at Yukon that sold for $109,900… Just how does one draw up a deed for a broom closet? And how do you plumb it?
Anyway, the problem is NOT that someone needs to step in and subsidize housing. I am all for “letting the market work” and avoiding outside influence from the government (especially). The problem is the market is BOGUS; it’s over-inflated! The housing market today in this country, particularly the urban housing market, is the new “Dot-Com Bubble”. And like the tech stock trading tirade of the late 90s and early 2000s, its skin is beginning to thin and it’s on the verge of bursting. The market will “work” because people will continue to bite off more than they can chew, will continue to rely on crazy ARMs, Negative Amortization loans, interest-only loans because salespeople (like Mr. Peffer) and lenders are so good at what they do. As long as borrowers keep getting talked into these loans, and ignoring their true financial situation, the housing market will continue to look pretty even though it’s all silicone and collagen.
The 2100 sq. ft. condo in Buggyworks that Mr. Peffer mentioned sold last month for $850K. That is a little over $400 per square foot! At that rate, a 1 acre plot of land would cost $17.4 MILLION. The broom closet at the Yukon, sold for between $250 and $300 per square foot ($13 Million per acre). These figures are insane, and it’s nobody’s fault but the buyers and borrowers. The sellers and lenders are just benefitting from the other great pillar of the American economic system, Capitalism! Until the buyers make a conscious decision that $400 per square foot is as inflated as the collective ego of Congress, the bubble will continue to thin.
Foreclosures are up 93% from last year, and recent data shows that over 5% of all mortgages in the US are in default. Ohio is one of the worst states, along with Michigan and Indiana.
How do these statistics play into my argument? As lenders begin to tighten up on borrowers, and these crazy loans start to go away, or the penalties for default become more and more serious, the market will shift, creating a glut of overpriced and over-valued housing. Appraisals will then shift to reflect TRUE market value, and the affordable housing market will emerge without the help of Mayor Coleman. Of course maybe by the time buyers wise up, I’ll have to change that last sentence to say without the help of Mayor Eric.
In the meantime, I’m sitting back and waiting for the all the condos downtown purchased with ARMs to reach the date when the adjustable rates become fixed and foreclosures mount. Then maybe I can upgrade from my humble $150 per square foot condo in the short north to something on the streetcar line!
All that being said, I’d like to point out that this blog is a huge proponent of conservation and I love that about it. Eric always provides interesting insight into conservation, public transportation, walkability, all things that are so vital to the future of cities and the overall future of society. Getting the word out about that is critical and I praise Cap City Savvy for doing its part. However, this forum’s stance on urban development begs for more discussion about financial conservation and being smarter consumers financially when it comes to housing, credit, and trends in society that can be as damaging to an urban community as CO2, pollution, and too many skywalks.
-Matt (not to be confused with the newly added contributor to CSS whose enthusiastic bio made it sound as though he just got a job at The New York Times. I mean don’t get me wrong, Eric does a fantastic job and this is a great forum, but seriously dude, it’s a Blog.)
Eric I think you should have asked the other Matt to contribute! Look that killer comment! Just kidding Matt.
Anyways my bio - was just to give people an idea of where I am coming from and why I plan to present things in a visual way. I didnt think it was that enthusiastic, you should have seen me write me - then you’d know why I am a visual person.
All in good fun. Unfortunately that was my last post to the CSS Cavalcade of Hits, as I have been blacklisted by the Blog Owner. It’s ok though, I occasionally watch his dog and teach it bad habits. Now I must go and work on my list of potential aliases. So long….for now MMMMWAAAHHAHAHAHAHAHAHA
Eric, (Regarding your comment on “Let the market work, before bringing subsized housing downtown”, I am sure you didn’t mean it the way it came out; but I thought downtown was EVERYBODY’S neighborhood. Mayor Michael B. Coleman wants downtown housing for ALL segments of the market; not just those who can afford the present market.
Danni - I actually did mean it the way it came out. Downtown is obviously a desirable place to live…hence the real estate prices. This is how housing markets work in all major cities in the US. Many people want to live close to work in walkable, mixed-use neighborhoods and are willing to pay a premium to do so. There’s nothing wrong with that model. It’s capitalism.
Everyone seems to have this expectation that they are somehow entitled to live in desirable neighborhoods at the price one would expect to pay for less desirable neighborhoods. As Joe actually pointed out in his blog, there are already a number of more affordable options available.
Downtown is definitely EVERYONE’s neighborhood. It’s the cultural and economic center of Central Ohio. It’s available for everyone’s enjoyment, but that doesn’t mean that everyone can afford to live smack-dab in the middle of it. The most successful cities have an elegant solution to this problem.
They link Downtown proper with other, more affordable neighborhoods with clean, efficient transit. This is one of the reasons why I wholeheartedly support the Mayor’s streetcar initiative. By first linking the north and south, we can be assured of a successful start. Then we can build off that and hook in areas like Franklinton and Old Towne East. Following that, light rail stations outward.
The result is that we’ll have physical links to “everyone’s” neighborhood. Now if you want to pay more to be able to walk to many destinations…that’s an option too!
Let the market work, but give people an option on how to get there.
Eric, not all major cities work like you say. Lots of them have subsidized/affordable housing in and around downtown. Also, you say: “There’s nothing wrong with that model. It’s capitalism.” Do you really think that there is NOTHING wrong with Capitalism? Really? That’s quite a bold statement and one that I definitely don’t agree with. I wouldn’t get rid of Capitalism, but I think left unchecked and un-regulated, there would be lots of problems.
Matt,
You are correct - other cities have afforable housing around downtown, not in the heart of it all - which is what Eric said.
-Matt (CCS)
We’ve got to get you Matts a last initial or something!
To address “September 10th Matt’s” rebuttal…I actually think housing markets are some of the best examples of capitalism we have. There are millions of options for consumers, and they have the freedom to choose where they want to live, how much they want to spend, how much space they prefer, how many toilets they want, and so on. Sometimes people’s wants don’t always align with their budgets so they have to prioritize. That’s the free market at work.
As far as subsidized housing in premium locations go, I’m not sure how that fits into the framework of capitalism. Our society is built around rewarding hard work with money. Take away that motivation and what do we have?
The example of this for me is my grandfather. He didn’t even speak English when he came to this country, but he died a millionaire. It wasn’t because he was lucky, or even brilliant. It certainly wasn’t because he received subsidized housing or food stamps. It was because he worked his ass off.