Remember all those condominiums being built in various downtowns, and how they were supposed to herald the return of people to the cities? Not so much.
“We’re in for a fairly ugly correction,” says the president of Trammel Crow Residential. It turns out there are 5.5 million vacant homes out there, mostly purchased by speculators who expected condo and other home prices to go ever upwards.
Since new home demand is only 1.8 million houses per year, we have a few years of vacancies to absorb before the market can recover. The condo market, in particular, looks dead through 2008.
What seems to happen is that some developer will realize there is an untapped market for a new housing type such as condos or mixed use. The first one built will be highly successful, causing other developers to jump in. The market might be able to support, say, five condo towers, but before you know it, ten are going up and it is a race to be among the first ones done. Everyone else is in for pain and hard times.
I suspect the same thing is happening with mixed-use developments in Houston, one of the few cities that so far isn’t subsidizing such developments. The article cited above is headlined “rental apartments a bright spot in a dim housing market,” but the article notes that 10 percent of single-family rentals and 11 percent of condos are vacant, so that’s not much of a bright spot.