Gluttony and Glut: Finding the New Normal

An evening cross section of Atlanta's Atlantic Station.

An evening cross section of Atlanta's Atlantic Station.

How serious is the implosion of the once-booming urban condo market? And what does the downturn say about the prospects for housing in urban centers?

A piece in the business section of the Atlanta Journal-Constitution seems to say it all. Desperate to unload some units in “a stagnant market,” says the sub-headline, an Atlantic Station  developer will auction off some 40 units, with bids starting at 56 percent off list price. A similar story about the stalled condo market in Chicago appeared in a Feb. 3 New York Times story.

Well, welcome to the New, New Normal. Just don’t read too much into implications for the future of multi-family housing in these places.

To be sure, fire sales aren’t great news for developers caught in the current pinch, or for investors, including condo owners who bought into a project at the old list price. But it seems to us that the only environment in which this sort of mark down is seen as a disaster is one in which folks deny the realities of the real estate marketplace. It’s not a marketplace unless prices go up and down depending upon what buyers are willing to pay, right?

For what we now recognize as an unsustainable period of speculator insanity, prices of detached single-family homes and condos soared, particularly in desirable cities and desirable climates. The period lasted long enough for a lot of folks – buyers, builders, developers, and real estate brokers, to name just a few – to believe the aberration was the New Normal. For a look at how a misguided sense of entitlement played out in the lives of real people on Florida’s southwest coast, check out George Packer’s story in the Feb. 9/16 New Yorker – it’s called “Ponzi State,” and for good reason – and then take a look at his video. And for a west coast take, watch this video from the Associated Press.

The remnants of that sense of entitlement persist in many of the conversations about “stabilizing” home values by artificially propping up prices in a market still seeking a bottom. New Urbanist developer Vince Graham explained how it’s time for a get-real approach to home values in one of our previous posts.

But it’s just as dangerous to assume an opposite marketplace trend, that advocates for downtown mixed-use development got it all wrong.  The current shakeout is not about whether or not there’s a market for condos and rental apartment options in downtowns; it’s about the nature of that market, particularly about how diverse the housing choices have to be and how well integrated is the planning for truly mixed use opportunities.

One of the best overviews of demographic and marketplace trends is the 2008 report from Harvard’s Joint Center for Housing Studies. And for a glimpse at how Americans rank places they’d like to move to – including places like Atlanta and Tampa that have experienced the greatest housing market downturns – see this recent survey from Pew Research. 

- Ben Brown

Stimulus Showdown

When the Democrats’ $825 billion economic stimulus seemed to choose same-ol’ over sustainable, Smart Growth advocates and New Urbanists began turning up the heat. Favoring super highways over mass transit, rail, pedestrian, and biking alternatives incentivized sprawl for decades. And isn’t sprawl part of what got us in this mess? Smart Growth advocates believe investing new money in the same old strategies will only make it harder to achieve goals of energy efficiency and community affordability. Almost all of this federal stimulus money will find its way into state and local government bank accounts. So debates on how to spend it will take place in forums in Washington and in state houses and city halls all over America.

Time to talk to elected officials in your community, as well as Congress. For Smart Growth and New Urbanist perspectives on the infrastructure stimulus, go to Congress for the New Urbanism, Transportation for America or Center for Neighborhood Technology.

Connecting streets and the stimulus. 
To bolster Smart Growth arguments for how to spend stimulus bucks, the latest edition of New Urban News reports on a study of 24 California cities showing that those with the most highly connected street networks have one third the traffic fatalities of cities with poorly connected street networks.  And in the same issue, CNU president John Norquist provides commentary on the stimulus.

- Ben Brown

Designing for the New Economy

The New Urban Guild, an association of some 60 prominent designers with New Urbanist leanings, met January 10 in Miami to formulate a strategy for creating sustainable architecture for the new American future. The Guild is determined to create a new series of building types that not only hit affordability marks but also satisfy ambitious goals of environmental responsibility, energy efficiency, safety, durability, and neighborhood friendliness. While times seem hard, says New Urban Guild founder Steve Mouzon, the new era can reward innovation and a commitment to high design standards.

- Ben Brown

Report from the Real Estate Front Lines

Vince Graham, the New Urbanist developer of the award-winning I’On TND in the Charleston metro area, has a “get real” message for home owners and realtors. Like other established New Urbanist properties, I’On has weathered the current housing slowdown better than conventional suburban projects nearby. Yet owners determined to sell their homes in I’On have had to face the reality that the era of double-digit annual appreciation is over. In fact, recent sales even in I’On have been at prices closer to those of four years ago, as opposed to the record levels of 2006. “Let’s face it,” says Vince, “2006 was an anomaly. Forget about it. A good pricing rule of thumb this year is to consider what homes were selling for at the end of 2004.”

Other experts have echoed Vince’s analysis. Measured over decades, home values nationally have appreciated at annual averages close to the average inflation rate — roughly three percent per year. Which suggests that average home prices nationally, after teasing investors for years at unsustainable appreciation levels, still have room to fall.

- Ben Brown

What We’re Reading: Retrofitting Suburbia

retrofittingConsiderable attention has been paid to development in urban cores and new neighborhoods on the exurban periphery. But in between, the out-of-date and unsustainable developments in existing suburbs also provide enormous opportunities for regeneration. Retrofitting Suburbia: Urban Design Solutions for Redesigning Suburbs, by Ellen Dunham-Jones and June Williamson, is a comprehensive guidebook that illustrates how existing suburban developments can be redesigned into more urban and more sustainable places. Beyond simply re-skinning buildings or changing use, the best suburban retrofits systemically transform their neighborhoods, increasing connectivity and walkability, while contributing to affordability, transit, and sustainability.

- Hazel Borys