Alabama Economy: Downtown Housing
Owner Jeff Baker knows the downtown drill.
“I’m on my fourth loft now.”
Baker’s rented and owned through the years and he and his trail-blazing brethren saw the potential in this urban landscape before most people did.
“Everybody had a common bond of trying to make anew. It was new territory down here. It was like the Oklahoma land rush.”
But the rush has turned from ‘Eureka!’ to Anemic. Condos aren’t in demand as they once were and some property owners are trying to find other ways to recoup their investments.
“What we are seeing is a shift to rental by many people. Developers are building rental properties and people looking for housing are seeking an apartment or even a loft to rent.”
While Operation New Birmingham president Michael Calvert says downtown demand is strong, people are starting to look at other avenues.
ONB says there are more than 21-hundred condo units or loft apartments in the downtown area – the city center as they call it. Most of those – 89 percent — are occupied. But the ones that aren’t – are moving slowly. Some have been on the market for months.
And the excess inventory has left some developments without a lease on life.
“There’s a lot of people who want to move down there. But hey they don’t want to commit to a mortgage, something they got to hold onto, when Birmingham is kind of on the start of this thing. They’re not Seattle, yet, They’re not Nashville, yet. They’re not even close really.”
David Leer is developer of the 20-story Leer Tower project – the old Cabana Hotel – which was slated to add more than 60 high end condos to the market. The project is on hold. Part of it – the second mortgage – in foreclosure.
Leer says conservative bankers don’t want to lend money on what they perceive to be a risky investment. And so financing the project has been tough… in a market not friendly to sellers.
“You buy appreciating assets and you rent depreciating assets.”
Drew Klacik is an urban policy analyst at Indiana University/Purdue University Indianapolis.
“Even in talking about Birmingham housing market – we have to really recognize that there are multiple housing markets within Birmingham or Indianapolis, right? But in many of those markets, housing prices are at best stagnating, if not going backwards. And so, if you ask me and the choice whether to buy or rent a depreciating asset, I would prefer to rent a depreciating asset and thus it’s easy to understand why there is a trend towards rental markets in many urban areas.”
No matter what kind of units are on the market, the downtowner Jeff Baker believes the urban landscape is healthy and will continue to grow.
“You know everybody’s suffering through the same thing across the board. But downtown is a little more stable, because it’s unique property; every unit’s different.”
It is a niche he hopes can weather any harsh housing storm.