Thursday, June 29, 2006

The good and the bad in Memphis...

Paul posted a blog about a few things going on in Memphis. Here's my opinion on them...

The Good:
First, one of the big perks to living in Tennessee: Tax Free Week. The idea is that occasionally the State of TN will throw in a sales tax holiday to promote local business. They rarely give much advance notice to Tax Free Week, as I don't think they want consumers to be waiting for it to arrive. But, when it happens, it's great! Most stores will mark down their items by 10% or so to match the tax savings. The next savings week is coming up on August 4th to August 6th. Customers can get clothing, school supplies, or computers without paying tax. The exception to this are items that are considered to be more of a luxury. This means, any one piece of clothing must be worth less than $100. Each school supply must be worth less than $100, and each computer must be worth less than $1,500. Clearly, a big part of this particular tax free week is to help parents get their kids ready for back to school. How nice!

The Bad:
I've really had it with the price of real estate in Downtown Memphis. Since moving to LA 2 years ago, I have watched the market value of places downtown grow at an exponential rate. When I left Memphis, I had a wonderful 2-bedroom, 2-bathroom apartment in one of the nicest apartments in downtown. It included air conditioning (a given), a free washer and dryer just for me, storage space, 2 swimming pools, a gym, and a gated entry with unlimited parking spaces. For all of this, I paid a premium-- then, over $850. Now that 2 years have passed, a similar place in downtown seems to be going for close to $1,500. And, here's another that is priced just over $1,000.

In fact, I have spoken with local friends lately who didn't feel they could cough up the extra $ it costs to live in downtown and have opted for places as far as 20 miles east. For a place outside of downtown, a 2 bedroom, 2 bathroom apartment is still going for less than $700. And with that, you get many more amenities.

And, you can forget about buying a place for the price that things were going for 2 years ago, or even one. A one bedroom condo in Memphis used to go for less than $100,000. Heck, a TWO bedroom condo used to go for less than $90,000. Now, a one bedroom condo in downtown Memphis can get up to over $1 M! Here's a sample that's more representative of the average. It's a one bedroom, 1.5 bath condo in downtown Memphis that's going for $362,000.

Now, keep in mind that the condo that I just showed you used to be an apartment building. The residents were kicked out (or asked to buy their places) in order to turn the apartments into condos. Granted, the space is 2,000 square feet, but I just don't care. That same place would have been $100,000 not too long ago.

And, what has changed? I hope to have a better answer for this after visiting Memphis in a few weeks, but in the meantime, I'm really not sure. Crime is up and downtown does not have the following:
  • A normal grocery store (When I lived there, I used to drive to Mississippi or Arkansas to go grocery shopping)
  • A doctor
  • A dentist
  • A gas station
  • A shopping mall or other major shopping center (There is one nice mall, but the only place that I ever found to buy clothes there was the Gap and Anne Taylor Loft. As much as I like these stores, this isn't much variety.)
  • Choices in schools (I think there is one small school downtown)
  • Jobs - Although there are some places to work downtown and things are growing, don't count on it. When I lived there, I worked 25 miles east in Collierville, TN.
So, I hate to bash downtown, but seriously, where do the developers get off charging so much? I learned yesterday from the Downtown Condo Report that the total number of condos downtown has risen to 3,633 (including those in progress).

Who is buying these places?

According to the Downtown Demographic Report, the average salary in the "Downtown Core" is only $51,000. How in the world is someone making $50 K supposed to give up $300 K for a one bedroom place?

When developers are choosing the prices for their condos, they should also consider property tax. Many areas that surround downtown don't have property taxes. But because TN has no state income tax, if you do pay property taxes, they're high. This encourages residents to move further and further out of the city. So in addition to being able to build a giant house for less, they also forgo the high property taxes.

Isn't the point of building up downtown to attract residents?

The reason that I'm ranting is that I'm already paying over $1,000 / month for an apartment-- in Los Angeles... in a nice neighborhood. Within walking distance of the beach. Near celebrities. Near all sorts of restaurants, jobs, and grocery stores. Near a huge shopping center. With lots of dentists and doctors to choose from. With gas stations.

And, despite this great place where I live, I have always really loved Memphis. The low cost of living there has always been a huge argument for me to move back. But, how can I continue to argue that if I'll be paying the same price or more for rent? Heck, when I lived there, I used to have to drive to Mississippi or Arkansas to go grocery shopping!

So anyway, after my visit in a few weeks, I hope to have more understanding around how property taxes and rents in downtown have soared in a proportion that doesn't match salaries there.

I should take a moment to mention a few of the reasons I LIKE downtown, since clearly you may be wondering.
  • The People - Memphis has a small town feeling. It's a given that while you're out, you WILL see someone you know. Heck, you'll probably see 10 people you know.
  • Market Segment - The demographic of people downtown is progressive. According to an online marketing resource (a link I can't find at this moment), the people of downtown Memphis are a similar market segment to that of people in Santa Monica, CA
  • Live music - You can find this anywhere and everywhere and always - even during brunch
  • Original art - The art community is thriving downtown and the local businesses support it by displaying pieces that are for sale
  • Diversity - Where else can you see a country concert, a symphony, an off Broadway show, a boxing match, an art opening, a political debate, a rodeo, museums, a baseball game, spas, horseback riding, canoeing, a black tie event, a volunteer event, a small business incubator, public transportation, rollarblading on a boardwalk, river boats, rooftop parties, and people who actually like a big cross section of these types of different events - all in a 10 radius?
  • Cost of Living - Aside from real estate, the cost of living in downtown Memphis is extremely reasonable. In addition to things being reasonably priced, many events are free. Gotta love that!
Alright, enough with that topic. I'll be sure to post an update in a few weeks if I find anything that would explain the high real estate prices. The bigger question is: Is the market at its top or is it going to head back down sometime soon?

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