Des Moines has a vibrant condo market in its historic central downtown. We have lofts, we have high rises, we have re-purposed space, we have row houses, we have penthouses, we have brownstones, we have everything but enough buyers for all of the inventory.
Developers, spurred by tax credits awarded by the State, went on a building frenzy downtown staring in the late 1990's. Available units went from under a thousand to nearly six thousand in about seven years. Then 2007 came. At the height of the building frenzy there was over a five year supply of units available. Developers finally got the message and "re-purposed" many projects into affordable rentals or just shut down the projects altogether. The estimated 75,000 people who flock downtown to work everyday just weren't sold on the idea of not leaving at the end of the day. Despite large employers such as Allied Insurance, ING, Wellmark Blue Cross/Blue Shield, Principal Financial, RUAN Transportation and many others being located downtown, the area cannot seem to convert those itinerant commuters into residents.
In 2009, just 35 units were sold downtown despite many price reductions and other incentives offered. The average sale price was $195,086 from an average list price of $212,068, for an average discount of almost 9%. Days on market were an abysmal 172, or about 64% higher than the market as a whole.
This year however looks a little better, 22 units have closed in the first part of the year and 6 are pending. The average sale priced has jumped to $210,201(the good) but from a list price of $282,654 (the bad) making for a discount of 25% (the ugly). Active units stand at 139, meaning at the sales pace of the first half of the year we have 2.5 year supply. Days on market are down to a modest 129, but that is still 40% higher than the broader market.
Desite the fact that early buyers of downtown housing units have seen their equity vanish, despite the fact that those have had to sell have been clobbered, and despite the fact that there is a huge oversupply meaning anyone who buys now basically can't sell for years and will take a huge hit to resell, downtown housing advocates still insist the city needs to do more to get people to buy into downtown.
Don't get me wrong, I'm all for the development of the downtown area and want to see it succeed. It's great to see all the new restaurants and entertainment venues as well as the expansion of services. The problem is that planners with the city and state allowed builders and developers to go hog wild thereby allowing supply and demand to get totally out of whack, ultimately harming homeowners who supported the initiative enough to invest their capital in downtown housing. A two and a half year supply of condos is just way too many, and that's the tally after many projects were re-purposed or halted. It took an absolute crisis to develop before anyone would even hint that the emperor had no clothes. Clearly, lots of somebodies did not do their homework. Maybe I missed it, but I have not heard any apologies from the state, the city, or the developers for their part in this debacle.
Recently, within the past month, a fellow blogger contacted me to do a valuation for a unit this person owned downtown. This agent had bought in early and had paid $446,000 for a unit in a project where similar units now sell new for $299,900 to $325,000. This person has moved south and has been trying in vain to sell this unit for years. Meanwhile the tax valuation is stubbornly stuck at $433,000. If I had to, I know I could easily find dozens of similar cases.
Again, I'm for growth of the downtown area, but being a real estate agent and having a fiduciary obligation to my clients, I'd have to advise them of the cold, hard facts concerning downtown housing. If after weighing the pros and cons the client still wanted to buy, then at least I would feel that I'd done what I should as their agent. For some, housing is not about dollars and cents, but about lifestyle and enjoyment, and downtown Des Moines certainly has a no shortage of those commodities either.