There was a report just released that shows the effect of over investment in condo developments in the Miami area had disastrous results for some investors but every cloud can have a silver lining!
In the boom time for real estate, much like the rest of the USA and the world, the supply of 'qualified' buyers was seemingly endless. With this unprecedented demand for property, developers and investors realized that if they build it, they will buy. Things were going well and developments were being approved and built all over the country. Nashville TN was different in this regard. The traditionally under appreciated downtown area in Nashville, in terms of residential occupancy, was seen as huge potential for the emerging condo market.
In Nashville, the Gulch area which had been in decline for some time, was seen as the ideal location for a 'planned' urban community made up of residential condos and retail outlets designed for restaurants and stores. The early adopters and investors had seen how quickly other downtown Nashville projects had sold out and quickly the sales of the upscale condos at the Icon and the Terrazzo were creating news in the local Nashville media. Buyers were seeing the potential of buying a condo for themselves and then one to flip in a couple of years when the project was finished. Prices kept on going up as the demand was out stripping the supply.
The Velocity condos in the Gulch were designed with a slightly different buyer in mind compared to the Icon and the Terrazzzo. The potential buyer was probably looking more for a lower price point, not so concerned with a downtown vista but still appreciating the lifestyle of downtown living with access to all the local nightlife and urban culture of the Gulch.
The Real Estate Bubble Bursts
As the real estate market bubble burst in 2008 the condo pricing had to be seriously revised. As the units at the Icon were closing it soon became apparent that buyers who had qualified easily for mortgage 3 years earlier were now being denied financing and as a result were losing their minimal deposits and walking away from the purchases. This resulted in a flood of condos back on the market. The lack of buyers, the low consumer confidence and general reluctance of the public to enter into the real estate market in a time of national doubt over economic conditions all conspired to create a situation were the developers and financial backers of the projects were forced to reconsider their involvement with the projects.
Condo Buyers Market
As a result of the downturn in the economy the Icon and Terrazo units were starting to be offered at prices well below the asking prices in the hey day of the downtown condo boom. Many of the units were auctioned off in an attempted to recover some of the investment but the end result was that the market value of the property in the Gulch was significantly reduced.
The Velocity was the last development to be affected by the change in the condo market across the country and unfortunately went in to bankruptcy in early July 2010
The Silver Lining
So...where is the silver lining? The good news for qualified buyers is that they can now buy a condo in the Gulch at a substantial saving over the original list prices. The other good news is that for all the investors that did manage to finance their purchase they have increased the availability of units to rent!
In Miami, the downtown area is spring back in to life, with an injection of people taking advantage of the properties that were once only for sale, and the scenario is likely to be mirrored in Nashville.
The good news is that all the renters will have disposable income to spend in the coffee shops, the urban grocery store, the restaurants and nightclubs. This will add life to the area which in turn will add to the appeal of the area as a desirable vibrant place to live. As the demand grows then so will the property values and eventually the units that were for rent will be sold and the investors that managed to stay for the long haul will start to see a return on their investment!
The Ashton Real Estate Group of RE/MAX Advantage
The #1 Real Estate Team in Tennessee and #2 RE/MAX team in the World!