[Mpls] Terrific Condomania article in CityPages.....

[David Brauer]

On Nov 24, 2004, at 10:33 AM, Victoria Heller wrote:

> Prices falling..watch out below!
>
> I hope there's no public money in these deals (other than $95 million 
> in The
> Village at St. Anthony).
>
The trouble with markets is they go up and down, and no one knows quite 
when or how. That doesn't mean disaster is ahead. As Vicky noted, 
almost all downtown development is unsubsidized, so this is truly 
private investors making market-based risk decisions. Overall, the 
activity is a strong sign of faith in Mpls. And even if the market is 
"correcting" - which would be reasonable given the newness of the 
downtown residential area - real estate is a long-term investment for 
most buyers and nearly all investors, so this is Chicken Little acorn 
stuff at this point.

I've talked to a lot of market analysts about whether there's a housing 
- and more specifically a condo - bubble. The ones who are more 
independent of developers make no predicitions about the near term (1-3 
years) but all are pretty bullish beyond that.

There are two major reasons for this:

1. Demographics. Ten of the ten fastest-growing subgroups are people 
without children (sort of a dumbbell shape - lots of 20-30-somethings 
and 55-60-70-somthings). These groups are more likely to go to condos 
and townhomes - and in the city, Downtown has the best combo of 
undeveloped land near significant amenities. True, you can get 
overpriced spikes going forward, but longterm, the demand for this type 
of house should remain strong.

After all, G.R. ended up Downtown, not Southwest or Northeast.

2. Population movement. Everyone has seen the demographic predictions 
from folks such as the Met Council: 1 million more people will move 
into the Twin Cities in the coming couple of decades. Only a sliver may 
move into the cities, but it only takes a relative sliver to float the 
boat in places like Downtown and near-Downtown neighborhoods such as 
Whittier.

I appreciate G.R. using Skyway News as a cultural signifier  - though I 
should point out, the reason that the "no new condos" headline in the 
pipeline was because it is, so far, a one-month trend. (The month 
before, developers announced a 45-story, 200-some-unit condo tower 
where Let It Be Records is on Nicollet Mall.) You also don't get many 
projects announced in the winter - classic real estate stuff. If it 
persists for six months, it's an interesting datapoint, but even then 
may be nothing more than a harbinger of demand and supply evening out 
in the short-term.

Another thing to note: developers are already reacting to the 
marketplace. The soft spot in the market (as it is for single-family 
homes) is about $400,000 on up (exception: places with truly 
spectacular views). What's happening is developers who announced 
projects six-12 months ago are reducing the size of their units (and 
the price) and increasing the number of units. I think G.R. will have 
more options in a year. I also think this is a good thing for Downtown 
because it means more people down here, and we can have more folks than 
the Gold Coast crowd.

One thing that will be interesting to see is how an office-market 
rebound will affect the housing market. Right now, the only real action 
is in housing, so if there's a bubble (or something less; call it a 
blister) it might be because there's no competitive investments 
challenging housing returns right now.

Here's a link to a recent marketplace story we did. It touches on some 
of the things G.R. so ably described, albeit from a less personal 
perspective:

For some condo owners, it's 'musical lofts'
http://www.skywaynews.net/articles/2004/11/08/news/news03.txt

David Brauer
Kingfield
Editor, Skyway News and Southwest Journal