About Des Moines' Downtown Des Moines

Downtown Des Moines condo sales have fallen hard with the nationwide real estate slow down a fact which was highlighted in a recent Des Moines Register article entitled "Stagnant condo sales plaugue downtown Des Moines" dated November 19th 2010. The article stated, among other things, that downtown sales were off 75% from their peak in 2006, that only 30 units had closed in 2009, and that 2010 was poised to be only marginally better. In doing a quick check I see that 2010 finished with 29 closed sales out of an inventory of approximately 111. For all you absorption rate folks that's a 3.82 year supply. Pretty dismal on the surface.

Pundits, builders, real estate agents and industry insiders querried variously blamed onerous FHA rules, consumer preference, unemployment, sluggish sales of homes by potential move up buyers, etc. What they really should be blaming is the existing products and stratospheric prices. There are far too many one bedroom and two bedroom units, with the 1 bedrooms priced from $200,000 to $500,000 coming hobbled with association fees in the $250-$775 range. With 3 bedroom, 3 bath, 2 car homes in surrounding areas selling for around $170-$175,000 that's a tough sell on lifestyle alone, even with a full ten year tax break for buying downtown.

But...enter the Riverwalk Brownstones, Hubbell Realty's second phase of the Brownstones on Grand project. The Brownstones on Grand have struggled with the rest of the market. The units pictured above started out at around $450,00- $500,000 in 2006. Five years later the two 9 unit buildings are still not sold out and prices have dropped to as low as $284,900. Hubbell got this only half right, there were too many two bedrooms, even though the units had decent sq. ft., around 2000, they were still too high priced and most lack rooftop access, but for their credit all came with two car garages. Still five remain unsold.

With Riverwalk Brownstones however Hubbell knocked it out of the park and sales are on fire. The three bedroom units (there is a 2 bed option) come with 2.5 baths, a two car garage, granite counter tops, roof top access and importantly, association dues at $150 a month. Add the ten year abatement to that, and it's too good to resist. The Riverwalk phase is being built behind the Brownstone phase and consists of four 4 unit buildings. The first four units are finished and are shown to the right. According to MLS data two units have closed, six are pending and one is active. According to Darla Willett-Rohrssen the listing agent on the project, half of the new units have pre-sold, or have offers prior to the buildings being built. In fact the units are selling so well Hubbell raised prices for the remaining phases which will all likely be BTO or Built To Order. From what I can see the un-built units are not listed but can be sold and will then be placed on the MLS when pending. See a snippet of the MLS data below:

On a recent blustery 16 degree day crews could be seen hard at work on completing the second and third buildings for which foundations have already been laid.

My opinion is that they key to future successes in downtown condo sales such as those Hubbell is experiencing with Riverwalk Brownstones is to keep the prices affordable, around or at under $200,000, offer three bedroom options with two car garages, allow them to be sold FHA and keep the association fees low. Riverwalk may be unique however because these are street level homes where you can walk right out onto the sidewalk, which are not in large supply. Another smart move by Hubbell for this development was to create a website for the association where the bylaws, budgets, minutes, covenants and more can be reviewed at any time: http://www.hubbellcommunities.com/community/documents.asp?id=5&name=Brownstones%20on%20Grand If you're an agent or buyer who has ever tried to wheedle these basic documents out of a seller to no avail you can really appreciate the convenience this provides.

Hopefully other builders and developers and their agents will take note of Hubbell's success with Riverwalk, stop bemoaning the state of the economy, and start building and offering products people want to buy at prices they can afford.

Data courtesy of Des Moines Area Association of REALTORS covering the period 01/01/10~ 02/03/11.

Papajohn Sculpture Park in Downtown Des Moines

"Shattering Silence" by Iowa artist James Ellwanger at the State Capitol Complex

Downtown Des Moines from Buchanan St looking southwest

Pedestrian Bridge over I-235 connecting Walker St. and River Hills apartments from the Des Moines botanical center parking lot with Iowa State capitol in the background

Last night provided a good opportunity to head to downtown Des Moines with my new Panasonic Lumix LX5 to test out its night scene capability. The LX5 is billed as one of the most advanced point and shoot cameras available. Since its debut in August of this year it has been getting rave reviews. The LX5 is unique among many point and shoot models in that with the aid of a lens adapter you can use filters and additional lenses. The camera also has a hot shoe for attaching an external flash. Additionally it has aperture settings and a sensor that rival DSLRs but without the extreme cost and bulk. The built in lens will also go down to 24mm, alot wider than most cameras in its class. With the add on wide angle lens you can go down to 18mm. I can't wait to get out and shoot some new listings when my wide angle lens arrives.

The aperature and sensor allow for good clarity at low light levels without the use of additional lighting. Curious about its capability I read through the manual and grabbed the camera and a tripod and headed downtown and started shooting. I was pretty amazed at the results. It was alot of fun taking the photos. I met several people who were curious about what I was doing and who were palpably excited when they saw the results. I think I may have sold a few more LX5s for Panasonic! Fortunately the camera comes with a good developer software program called Silkypixs so the images can be worked to produce many interesting effects. The images are best enjoyed in my opinion by listening to the accompanying video, Downtown by Petula Clark....

Pedestrian Bridge over the Des Moines river south of Court Avenue

Looking down East Locust Ave towards the state capitol

Court Avenue entertainment district

12th St between Locust and Walnut Streets

Parking garage and fire station at SW 9th St. and Mulberry.

Petula Clark sings Downtown!!

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.