Most of you know that I keep a keen eye on the Nashville condo market and prices, but many of you don’t realize how much in-depth research I do. It is also interesting to learn that many buyers assume that the Velocity in the Gulch is the least expensive condo development in Nashville, but that is only true if you are looking at total price. A more interesting view is which condo developments offer the best price per square foot as our real estate market is heavily weighted in that direction when it comes to generating comps or ascertaining value. It’s just another way to compare condo buildings from an ‘apples to apples’ perspective.
Nashville Condo Prices Have Shifted
It should not come as shock that one of the most expensive condo buildings to build, is one of the best priced to sell. The Terrazzo is backed by an investment fund who understands the market forces and understands how to recover their development loan. Yes, the Canyon Johnson Urban Fund is exercising their rights under a forbearance agreement, but so are Fifth Third Bank, Compass Bank, Bank of America, Pinnacle Bank and Wachovia Bank. So why is the Terrazzo priced so much better than the rest?
There are several reasons, but the more interesting question is why aren’t the other banks pricing their condos as aggressively? Do they believe that they have a better condo product or that their location is more desirable? Perhaps, they have more patience; unlikely, but it is a thought. It is also important to realize that this pricing won’t last too much longer. As the development nears 60% sold out, the Terrazzo should be slowly raising pricing, or at least, that is what the economics of the forbearance agreement seem to suggest.
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April 13, 2010, 12:26 pm
You are crazy if you think pricing will improve. Maybe a little in the summer but next year, they will be even cheaper and that is why no one buys. Pricing will continue lower as long as you have the large number of units on the market, and lack of qualified buyers. There hasn't been enough pain felt by the other developments yet and the fundamentals of income and the job market won't allow for it. They are going to have to cut more aggressively to move and get the volume of sales up. If they haven't moved many by now at good prices when the government is handing you $8k to do it, I would say future prospects are not great. However, the job market may be getting better in the next six months which could get things going, but the prices are still too high. Banks are just extending and pretending as their collateral continues to erode in value.
April 13, 2010, 3:29 pm
Hi Justin,
I agree that the market prices as a whole are on the decline; however, prices in the Terrazzo are rising ever so slightly and may actually present the safest purchase if you are in the market to buy a condo in downtown. I would certainly also agree that none of these condo are a good investment. In my research, condo prices on a macro-level will continue to decrease until Summer 2011 when there will begin a slight uptick over 2 years until a rather large price increase occurs around the Summer of 2013 assuming the US dollar stabilizes and we see inflationary practices in the economy.
I also agree that banks are extending and pretending, but would also add that many are still unsure as to what their best exit strategy is in this market. So call is extend, pretend, amend, then act.
April 13, 2010, 5:31 pm
April 13, 2010, 7:52 pm
Grant, what is your take on the green hills market? It just seems to have so many good fundamentals going for it and not a lot of land which keeps the building in check somewhat. I know you predicted a few months ago that there could be a shortage in that market at some point. Given what you are seeing, is Green Hills relatively insulated from the declines?
April 13, 2010, 7:59 pm
Are you referring to the condo/townhome market in Green Hills or to the housing market in general because my answers are quite different.
April 14, 2010, 12:36 pm
I am referring to the Condo/Townhome market specifically. What do you think?
April 14, 2010, 2:15 pm
Surprisingly, the condo and townhome market in Green Hills is in its infancy with the exception of several older developments built along Hillsboro Pike in the 80’s. The condo market is completely underdeveloped and would be well served to take advance of the new walkability created by Bradford Commons and the H.G. Hills Center. As such, it is easy to get burned with such a relatively low inventory from which to draw stability. Case and point, The Alexander.
My advice is this in the Green Hills market – don’t be afraid of the condo/townhome market, but be aware that buying an older property will never return the same dividends as a newer property in a less developed area of town like 12th Ave. South. If I were to draw a comparison to traditional investing, I would tell you that the Green Hills market is a little like buying a municipal bond instead of a tech stock. The property will always be valuable, but never jump to the next echelon without the necessary ingredient of time.
Do you have a question about a specific development or two?
April 14, 2010, 5:36 pm
I am referring to the Condo/Townhome market specifically. What do you think?
April 14, 2010, 7:15 pm
Surprisingly, the condo and townhome market in Green Hills is in its infancy with the exception of several older developments built along Hillsboro Pike in the 80’s. The condo market is completely underdeveloped and would be well served to take advance of the new walkability created by Bradford Commons and the H.G. Hills Center. As such, it is easy to get burned with such a relatively low inventory from which to draw stability. Case and point, The Alexander.
My advice is this in the Green Hills market – don’t be afraid of the condo/townhome market, but be aware that buying an older property will never return the same dividends as a newer property in a less developed area of town like 12th Ave. South. If I were to draw a comparison to traditional investing, I would tell you that the Green Hills market is a little like buying a municipal bond instead of a tech stock. The property will always be valuable, but never jump to the next echelon without the necessary ingredient of time.
Do you have a question about a specific development or two?