Some Like It Hot

So, yes, I should have bothered to learn the name of this ice cream place, but I’m just going to tell you to go there anyway.  Right next to Beyond the Edge over in East Nashville.

They have this ice cream called “Some Like It Hot” which is Mexican chocolate, cinnamon, and hot peppers.  You put it in your mouth and you first taste the chocolate and then you taste the cinnamon, but it takes a second for your brain to register that that’s what it is, and just when you’re all, “Oh, cinnamon!” the heat from the peppers spreads out all over your mouth.

It’s delicious.

I do love to go look at open houses, but I wonder if I’m too picky.  We looked at this place about five blocks (if that) from 5-points on Fatherland and the condos were about a quarter of a million dollars and the doors on the utility closet didn’t close tightly.

And the counter tops were a beautiful blue-gray stone (with flecks of pink), but the place itself was painted a green-gray, which made the counter tops look way too pink, so you’d have to repaint.  I’d have to repaint.

And your view was of the parking lot.

So, then we went out to Rolling Mill Hills… Rolling Hill Mills… Whatever they’re calling the stuff they’re putting up there across from the Hermitage Cafe.

These things are going to run between $300,000 and $500,000.  Very little construction has started and the Professor overheard one of the sales people telling another person that they don’t have all the permits they need yet because there are some environmental issues they have to get cleared up.

And they want to charge you $2,100 for a parking spot!

And they’re talking like they’re 3/4 sold out.  Who can do that?  Who can afford to pay a mortgage on a place that doesn’t even exist yet and won’t until Fall 2008, presuming they get the environmental clearances?

I know I’m a dumbass when it comes to money but Tennessee is a dirt poor state.  Half of us are functionally illiterate.  About a quarter of us have graduated from college.  There are only nine states poorer than us.

Our median income is $38,550 and, adjusted for inflation, from 1999-2005 our income has decreased by 8.7%.

Who the hell are all these people who can afford these places?

I should not think about it.  It’s only going to depress me.

But really, who’s going to live in all these places?  And how do they afford it?

25 thoughts on “Some Like It Hot

  1. The ice cream place is Pied Piper Creamery, and it’s inside V Floral and Gifts. It’s VERY yum! She has lots of other unusual flavors, too. She actually went to Ice Cream University, so she knows her stuff. (Doesn’t Ice Cream University sound like the best place in the world to go to school?)

  2. With a lot of these new development places, the trend seems to be to have a developer build the main property, but then have a sub-developer or two with a different loan(s) buy up blocks of the condos as Investment property.

    When they buy up blocks at a certain price, it keeps the street value high, and creates a perception of demand. People won’t buy into a condo development that has 5% of the units sold because they don’t want to be “the first” or “the only”, but they will buy into a building that has 85% of the units sold, because they think they’re buying into a hot, in demand place.

    Of course 70% of those units may be owned by the XYZ Real Estate Corporation…

  3. the name of the ice cream place is Pied Piper Creamery.

    Your last two questions? I ask myself those same two questions often.

  4. There was an article in the Tennessean yesterday about the Viridian–a large number of the units, maybe as much as a third, were bought as an investment by flippers, who are now having a lot of trouble flipping them. Mostly because no one knows what such places are really worth. So similar places there are selling for anywhere from $136,200 to $480,000, and 70 or 80 of them (more than a quarter of the units) are still on the market.

    I’ve said it before: there’s a real estate bubble in Nashville right now. Take a deep breath, wait for things to calm down (and for all the new condos being built to be absorbed into the system), and prices will go back to being reasonable.

  5. Spooky. I hadn’t read that article. Thanks,nm.

    Yeah, I chuckle to myself when I think about the investors being bitten in the butt by being upside down in the investment they created to drive up property values.

  6. There is no way I’d ever pay anything close to half a million dollars for a glorified apartment in Nashville, even if I were rolling in dough.

  7. Ice Cream University! That sounds awesome. When I was little I also thought Hamburger University (for McDonalds’ franchise owners?) was cool…

    Las Paletas is awesome. At first I thought Irma Paz Bernstein opened another location in East Nashville (Since she lives there now and Bongo Java is right there too) but this place sounds fantastic! Must go there this weekend. I, too, like it hot!

  8. I don’t know if I’d go as far as saying there’s a real estate bubble in general, but the value of the downtown condos that are going up like crazy is definitely inflated, or a real gamble at best. That the Viridian flippers are having trouble makes me wonder what the future holds for the signature tower — though they at least have one very large hotel on board.

    Sadly what I see as a downtown resident is the stratification of the community into these high-price/isolated condos from the riffraff below. Everyone talks about community, while clamoring for ever-isolated ivory towers. The HG Hill’s in the Viridian is representative to me of the demographics that are actually there now, as opposed to what was promised/expected. The place is pricey, and it sells upper-middle-class fare: frozen pizzas and pre-made sushi as far as the eye can see, but god help you if you want garlic, or like more than one onion (I exaggerate, and it’s gotten better, but still).

    So, uh, in all this digression I had a point somewhere.. I think it’s that these exorbitant prices are a gamble, but just a symptom of how people see the downtownish residential real estate market: a gamble and opportunities for a quick flip to make a buck. If there was any real investment in making a real community I think we’d see more reasonable options. The various downtown planning/civic organizations are always talking about lower/middle/upper class integration, but so far I haven’t seen any concerted effort to actually achieve that. I’m still cautiously optimistic, but when I look at monsters like the Signature and Westin hotels going up, I start to see the ideal of an economically integrated downtown starting to slip away..

  9. I am flabberghasted by that article. I am offended. I am terrified to become a homeowner and be laughed at by these assholes who might convince me that something is worth so much more than it is because they work together with other real estate people to give appearances of demand and such.

    Okay, I respect real estate developers and speculators – that’s a legitimate business. However, I think that anyone who believes his condo could double in price in 5 months in ANY market (and especially in this one with so much availability even for new construction where I get to pick my own colors and fixtures) is at least an idiot and possibly as asshole who thinks he deserves to be rich because he thinks he’s smarter than everyone else.

    I also wish the article had made it clear whether the range in selling prices is due, in large part, to location (I would be willing to pay more for a top floor condo with great views than a second floor one that looks at the bricks next door) or more to uninformed buyers who don’t know that there’s so much available and for lower prices.

  10. I should have said that there are localized bubbles. Downtown is one, East Nashville, to my horror, has become another. I don’t think that there’s a population with the income to keep the bubbles going, though, and prices will come down, especially downtown. And then the Hill’s will have onions.

  11. Y’all, I am so happy that all I have to do is describe a place and you can come up with the name of it. Ice Cream University… I so wish I’d gone there instead of regular college.

  12. I think I’ve said this before here, but just in case… and I hear you Chris Wage… Nashville can’t support that level of pricing for all of those downtown condos now, and probably won’t be able to for a good 5 or 10 years, if ever. There’s just no infrastructure for “living” there. Half a million dollars for even 1,500 sq. ft. is ridiculous given the paucity of things to do in downtown Nashville and the relative lack of people making that kind of money here who are demographically liable to be purchasing those units. When I worked here: http://www.backbayresidential.com/rental/displayinfo.asp?id=106&areaid=2&listtype=Rental (one unit in the building I concierged at; I know who lived there then but not now) that unit rented for about $2,700/month, now it’s 4K. Oh, and it happens to be in the heart of the Back Bay on the trendiest street in Boston, with tons of fun, dining, and grocery shopping within two blocks. You really think a Viridian dweller is gonna walk all the way to the closest Kroger on East Main Street at 10 p.m.? I could do it safely and then some in Boston (but to Stop & Shop, not Kroger), but it’d never happen here.

    I hope those flippers have the financial wherewithal to get out of what KC rightly describes as an upside-down obligation. I’m sure they do, but how well and how unscathed is another matter altogether.

  13. Warning – beware asking numbers questions when Jebbo is around (he’s likely to slip into 3rd person).

    Should I do the ironing or use the Internet to find out “who’s going to live in all these places? And how do they afford it”? Do you really need to ask?

    ========================
    According to the Chicago Tribune, at 6% if you want a 20yr $400k mortgage, your income needs to be about $110k/yr.

    According to Social Stratification in the US, in the year 1997 the 90th percentile of household income was $112k. Households with incomes over $100k/yr were generally married couples, usually white, where the husband is either a manager/doctor/lawyer/other professionals in business/education/health care, or to less often a skilled blue collar worker or supervisors. ~50% of households where the husband is a manager/doctor/lawyer/other professional made above $100k/yr. the US Census Bureau, in 2005 17% of households made over $100k. The US percentiles are: 10th=$11k, 20th=$19k, median=$46k, 80th=$91k, 90th=$126k, 95th=$166k. Looked at another way, the top 20% make just a little more (50.4%) than the other 80%. They also work longer (72% work 50+ hrs/wk vs 50% overall). Tennessee median is $40k, with 11% of households and 18% of homeowners making >$100k/yr.

    According to the Census Bureau’s American Community Survey, the top-paying US occupations were: legal ($102k), health care practioner and technical ($72k), computer/mathematical/management/architectural/engineering ($66-68k), business/financial and life/social/physical science ($60k). Lowest were food service/farming/fishing/forestry ($21-22k), cleaning/maintenance/health care support ($25-26k), personal care and service ($29k). Construction/transport/production/clerical averaged $33-35k.

    High school degrees averaged $31k, bachelors $53k, graduate/professional $72k.

    Other Nashville/Davidson County stats from the American Community Survey:
    Of the 18% of homeowners in households earning over $100k/yr, less than 1/2 of 1% of those households are under age 25. The majority are age 45-64. Median income for Nashville home-owning households with 2 earners is about $69k, higher if both work full time.

    53% of the houses worth over $250k in Nashville are owned by that 18% of homeowners in households earning $100k/yr.

    Checking Monster.com in Nashville for jobs over $100k, they are mostly financial/tax controllers/managers, high-tech computer jobs (Oracle DBAs, CRM specialists), and sales directors/managers.

    So: married professional couples in their 40s, she’s a tax analyst at HCA Healthcare and he’s a database admin at BellSouth.

    Wow, too late to iron now. Shucks.

  14. Jebbo, the only problem with your numbers is that they assume common sense in the lender/borrower field. You’re talking about a sensible 20 year FRM with a reasonable interest rate.

    The problem is that in order to sell all these properties, the brokers will push “creative” financing.

    a) 80/20 loans, where the 20% down payment is actually a second mortage at a higher rate.
    b) 120 loans, where the borrower gets more than 100 of the purchase price, assuming an uptick in value.
    c) Interest-only mortgages. These are the ass-kickers for Young Professionals. These kids get out of college or grad school and know they’re “only” earning 35-40K right now, but assume that life will be all nice and neat. So they figure they’ll pop for a mortgage where they’re only required to pay the interest. You can get all kinds of high-value house for no money with one of these babies. The assumption is that you’ll start covering the principle once you get that big raise. No one seems to understand that no one expects the Spanish Inquisition. You get sick. Your company downsizes. You’ve then spent years essentially renting your home and have no equity. But a lot of stress.

    That’s what makes me angry about these mini-bubbles around town that nm mentioned. They’re ALL designed to appeal to the fresh-out-of-college hipsters. Seriously. City living? Funky art-deco East Nashville living? Coffee houses and nightclubs and hotspots. It’s all about grabbing the Interest-Only sector of the market and exploiting people who still have stars in their eyes.

    Not that I’m cynical or anything.

  15. Hey, some of us funky art-deco East Nashville types who frequent coffee houses and nightclubs have been out of college a while, and have gen-you-wine low-interest pay-off-your-principal mortgages. And paid-off student loans, too.

  16. Yes, I know. But the BUBBLE is designed to appeal to the hipster crowd. You know, the overpriced condos plunked down on the edge of the homespace.

    90% of my friends live in East Nashville. Most of those live in houses they bought at a reasonable price and have renovated or are in the process of renovating.

    Most of my friends who are drawn to the new-construction are either a)gay couples with piles of disposable income and no kids or b)younger and looking at the I/O mortgage option for financing.

  17. The bubble in East Nashville isn’t so much in the condos, though. It’s in the house prices. On the bright side, your rehabbing friends will have a tidy return on their investment when they finally sell (so will we, since we bought an already rehabbed house before prices went up), but the prices being asked right on my block now are just insane. I want the bubble to burst before these places sell for what’s being asked, so as to have fewer idiots* in the neighborhood.

    *I want to point out that we have musicians, actors, and writers as part of our current non-idiot, good mortgages mix. It’s just the stockbrokers on the one hand and the fools who will lose their shirts, and their houses, on the other hand that we want to avoid.

  18. From what I’ve seen, the condos (and the teardowns) have fed the bubble-madness out your way. Folks see a teardown house on, say, Gartland, that sells for $375K and start thinking that they can flip a house on Fatherland and make the same kind of money.

    I don’t see your East Nash bubble bursting until the feeders get their hands on Downtown. The transparency of the Viridian’s problems is bad for you guys, because it’s keeping the flippers in East Nashville longer than they normally would stay.

  19. Well, I don’t see it, either, but I want it. I want it, dammit! Doesn’t that count for anything? If B were queen she’d put a price cap on my street.

  20. Man I wish I’d read this post yesterday morning! I was all set to take the kiddos to Las Paletas (JBelle had the day off from school) only to find out they are closed on Mondays. But I see from Pied Piper’s MySpace that they are open on Mondays and in basically the same area. We ended up at Cold Stone Creamery, not exactly a bad ending. And now we have TWO frozen treat places to check out and hang out at this summer!

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