Another conundrum is all the new condos coming back on the market -- either new as in recently constructed or new as in converted from rental units during the boom. Speculators positively inhaled the Miami condo market during the boom, and many of them are now left holding an empty bag. As foreclosures rise and new inventory comes onto the market, one would think prices would drop. But consider the quality of the condo. “The majority are considerably higher priced than existing inventory,” says McCabe.
In order to lure buyers, condo converters upgraded older rental units, adding fancy amenities, appliances, fixtures and services. These are now coming back on the market, but at a higher price point, as sellers want to at least break even on investments. That’s pulling up the median price in the city, even as the sales pace begs to drag it down.
Then there is the story of the housing boom that fed on itself and now has only itself to blame. Prices in San Diego, California literally doubled in the four-year stretch of the boom. A prevailing attitude that land and inventory were limited drove buyers into the market, fearful that they would miss the last boat on well-coveted property.
“It led people to believe there was a structural permanent shortage of homes, but that wasn’t really true,” says Rich Toscano, columnist for the Voice of San Diego. Because at the same time worried San Diegans were gobbling up listings, hungry homebuilders were slapping up houses as fast as they could shoot a nail gun, Lennar in particular. The real estate industry itself grew exponentially: builders, brokers, lenders, and remodelers.
“The housing-related industry became bloated during the boom, and now we’re seeing job losses in the construction, real estate and finance industries,” says Toscano. The local economic factor pressing on home prices is, it seems, the housing industry itself.
If all real estate is local, then all local markets will move at their own pace, and that appears to be the underlying answer to the question of why certain markets are still gaining value. Atlanta, Charlotte, and Seattle were not considered boom markets over the last few years, but now their time has come. Markets that led the boom, like Washington, DC, San Diego and Boston are now bearing the brunt of the bust. It’s all local, and it’s all cyclical. The credit crunch resulting from an aggressive subprime sector certainly threw a wrench in the cycle, but prices during the boom were simply unsustainable, and investors lost sight of lessons learned during the tech boom: What goes up must come down, and what comes down, inevitably goes back up.