21c Museum & Condos Takes a Step Forward

The 21c Museum & Condos moved a step closer to reality this week. The project, a 44-story tower which will combine a museum, hotel, and condos in a very attractive structure on Third and Brazos, received approval from the Austin Design Commission. Next, the Austin Planning Commission will review the project on September 11 before it's final review by the City Council. Given the buildings strong support, it seems to be well positioned for approval.

Here is the summary from the Statesman:

"The 21c museum, hotel and condo development slated for Third and Brazos streets will reach 44 stories into the Austin skyline, making it a dominant presence in the area of downtown east of Congress Avenue. The $200 million project will include 209 condos along with an upscale, 230-room hotel and contemporary art museum. The Design Commission voted unanimously on Monday to support the project, which has already garnered the approval of the city's Downtown Commission and support from the Downtown Austin Alliance."

The building is expected to begin construction in January and to be completed in 2010. The sales center is expected to open later this month.

Austonian (sort of) Breaks Ground

The Austonian, a 56-story tower at 2nd and Congress that would become the tallest building in the city, staged an elaborate "ground-breaking" ceremony today to signify the beginning of construction. While the ground-breaking does hold real symbolic value, it did not involve much in the way of construction equipment. For the ceremony, a pile of dirt was constructed in the middle of the lot and then symbolically dismantled by a large crowd of well-dressed dignitaries in business clothing and matching white hard hats!

While the ground-breaking does not truly commit them to completing the project, it is a step in the right direction. The project team announced that they have lined up full financing for the project from Spanish sources. With the financing complete, they are now commencing construction. When the cranes go up, it will be a good sign that the building will truly be a reality.

The Austonian is an exciting project that is one of the most bold developments in Austin. At 56-stories and with 188 units starting at $500,000, the project is exclusively focused on the high end of the market. This is the segment that remains the most unproven downtown. The commencement of construction is a good sign for the Austin condo market, especially in the middle of the current credit crunch and ongoing subprime lending crisis.

Austonian Austin Condo Ground Breaking Ceremony

AustinTowers.net Featured on Fox News!

Fox News ran a story tonight on the Austonian ground-breaking and the state of the downtown Austin condo market. AustinTowers.net editor Paul D'Arcy was asked to provide analysis on the current downtown condo market.

Update: Downtown Condo Sales

We have lots of updates today on the state of sales at the leading downtown projects:

- The W Austin Hotel & Residences, which is currently building a sales center at Block 21 in downtown Austin, reports that about three-fourths of the 196 condo units have been reserved with a deposit. Construction of the building will begin in October.

- At Spring Condominiums just south of Whole Foods, 40% of the units are under contract. They report that they have sold out of all of the lower priced units. The building broke ground last month.

- At 360, the 44-story tower next to Austin Music Hall, 90% of the 430 units are under contract. The building has been very desirable because it is tall, well-located, and reasonably priced with virtually all of the units priced under $500K. The building has been under construction for a while, it is already approximately 30-stories tall.

- The 305-unit Monarch, also just a block from Whole Foods, is cryptically reporting that "there are prospective buyers for at least half of the units" although it remains clear whether these buyers have signed contracts.

- The Four Seasons Residences reported a month ago that 80% of the on floors 14-32 had already been reserved after just 6 weeks on the market. As a result, they have now opened the lower floors - floors 6 to 13 -- for reservations. They expect to begin construction later this fall

Forecasting Downtown Condo Sales

The Statesman ran a comprehensive analysis of the current condo building boom -- it was the lead story in today's paper. As part of the article, they interviewed many experts on the downtown condo market.

With the ongoing mortgage crisis, the billion dollar question is how the Austin condo market will fare. The answer: while the Austin market is one of the strongest in the country and condo demand remains strong, nobody really knows. The issue is that this is a new market: there is really no good parallel in the history of the city. According to the Statesman:

Forecasting demand for luxury condos is difficult, partly because there is little historical data for the fairly new phenomenon in Austin, said Eldon Rude, director for the Austin market of Metrostudy, which tracks the housing market.The next 12 months will be telling, Rude said. "We won't know how strong this market is until we see some of these projects get completed and begin to close units and move residents in."Their performance will depend on the economy, he said, "and it's impossible to forecast the state of our economy 12 months from now. "

As we have discussed, thousands of units are being planned for downtown Austin -- more than 1,000 are currently under construction. In fact, hundreds of units have been reserved in the last two months alone. For comparison, only 15 downtown condo units have sold on the resale market in this same time period. The difficult thing is that it is dozens of new projects which are being simultaneously introduced to the market. While demand has been strong for the prime projects, it can't be bottomless and nobody knows where the market ends.

One thing which is clear is that the market is stronger on the low end than the high end. The lowest priced units are moving very quickly while it remains to be seen how the high end units will fare. Like many other markets, it will likely be years before we know how many people want to live in a downtown condo and have the resources to afford it!

July Sales: Central Austin Demand & Appreciation Remain Strong

July sales numbers are out and the news is very positive for central Austin. While the number of sales in July decreased for the city as a whole by 2% (even as prices increased 7% citywide) when compared to last year, the story is truly a tale of two cities: inventory is growing in the outskirts of Austin while demand remains very hot for central Austin. In central Austin, sales volumes are increasing, prices are going up, and inventory has been shrinking, It is a very strong market.

The best analysis of the market comes from Ki Gray and his blog:

If we look at the numbers, we saw a total increase in inventory of 1083 homes. If we break this down, we saw an increase of 1050 in outer Austin and an increase in inventory of 33 homes in central Austin. So this is an increase of inventory in the suburbs of 15 percent compared to an increase of 2 percent for central Austin.Another way to look at this is to look at months of inventory on the market:

All.........Outer Austin.......Inner Austin

So in summary, the numbers for the Austin market are better than what we see in an average market (6 months of inventory) but we have slowed down a bit from the fasted pasted market that we saw last year. Also we are seeing central Austin again outperform the suburbs.

When analyzing these numbers, there are a few things to note. First, prices are increasing sharply in downtown neighborhoods: as much as 20-30% in the prime neighborhoods over the last year. Second, these statistics do not include the strong sales of downtown condos which are not listed in MLS. In fact, when these units are considered, it is possible that citywide sales actually grew in July. Finally, it is very important to note that these numbers do not reflect the dramatic changes in mortgage lending which occurred in mid- August. While iy will will take a few months to see the full effect of the current lending environment, it will be strong and negative. The good news is that Austin is better prepared than almost any other metro area: with a strong market and low inventories, Austin should ride the down market quite well.

Spring Condo Update: Construction Begins, Sales are Strong

The Spring condos, an attractive 42-story green-colored building just south of Whole Foods, is under construction and selling quickly. According to the marketing center, construction began on July 24th and completion is expected Spring of 2009. As of today, 40% of units have already been sold.

We have learned of additional details of the planned project:

- 75’ lap pool on the 5th floor with an outdoor kitchen
- Private dining for rent with a full kitchen 
- Gas cooking 
- All 2 and 3 bedroom residences are corner units with 180 degree views
- 2 and 3 bedroom units come with 2 reserved parking spaces
- There is a rentable guest suite available to building residents
- Bosch appliances are standard
- Pets allowed
- Designed as a Green building

The latest renderings or shown below -- and we've updated the full AustinTowers profile on on the project.

Spring Condo Tower in Austin Skyline

Spring Condo Project Bathroom Austin

Spring Condo Project Kitchen Austin

Spring Condo Project Interior Austin

Spring Condo Tower Pool Austin

Austin Housing Prices Increase 5.6%

In the midst of a rough week in the mortgage industry, it is worth taking a break from the doom and gloom to report that the Austin housing market has been relatively strong over the last year even as prices have decreased in other markets. Whatever does happen in the national economy, the strength of the Austin housing market means that we will fare better than most areas of the country where the housing market is much more tenuous.

According to the Austin Business Journal:

The cost of Austin-area homes has increased 5.6 percent in the last 12 months as prices on the national stage dropped 1.5 percent, a report released Wednesday shows.The median price for a home in the Austin-Round Rock metropolitan market stood at $186,600 at the end of the second quarter, up from $176,700 in the second quarter of 2006, according to the National Association of Realtors' quarterly housing report.

While this growth does not reflect what has happened over the last couple of weeks, and provides no guidance as to what will happen in the next couple of months, it is better to enter a difficult period from a position of strength.

Seaholm Construction Begins

Construction has officially commenced on a five-year project to transform the Seaholm power plant and surrounding site near Cesar Chavez Street and Lamar into a large mixed-use project. The initial phase of construction, as expected, include mostly infrastructure enhancements and site preparation.

Seaholm is a 7.8 acre site, the main feature of which is the 136,000 historic art deco decommissioned power plant. The redevelopment project will add a 22-story hotel and condo project featuring 80 condo units atop a 160 room hotel. While the initial phase of the project will open in 2008, the Seaholm Plaza Hotel is not expected to open until 2010.

The project will also include offices, extensive retail, and more than 3 acres of open space. However, the most exciting part of the project is the redevelopment of the Seaholm facility itself. When complete, the art deco structure will include nearly 100,000 square feet of retail and restaurants.

More than anything else, Seaholm will further shift the heart of downtown to the west. While downtown life used to center around 6th street between Congress and red river, the warehouse district, 2nd street district, and Whole Foods have shifted the balance. With Seaholm, the downtown action will increasingly be centered between Congress, Lamar, 5th, and Town Lake.

Jumbo Mortgage Rates Spike

The mortgage crisis is now front page news all across the United States. While conforming loans remain okay -- primary loans with values below $417K and full income documentation for buyers with solid credit - the investor market for everything else is in trouble. The result is a rapid rise in rates. As for the condo market, there will be very little effect for buyers of units that are less than $500K. For the high-end market, however, the market change is dramatic.

First, many buyers who qualified for loans a couple of weeks ago will not be able to get financing at all today. For those who can still get financing, rates have risen dramatically and are currently hovering between 7.5% and 8.0% for jumbo 30-year mortgages.

Bankrate.com reported today that:

Buyers of pricey houses are finding that money has suddenly become more expensive to borrow. Ditto for loan applicants who don't want to prove that they told the truth about their incomes.Rates on jumbo and Alt-A mortgages have zoomed upward since the last week of July, even as rates on conforming, fixed-rate mortgages slipped downward.The development is bad news for people who want to borrow more than $417,000 to buy a house or refinance a loan, or who can't or don't want to document their income. Rising jumbo rates make it more difficult to sell a house costing half a million dollars or more.

Over the last few months, hundreds of Austin buyers have put units under contract in new condo projects such as 360, the Four Seasons Residences, and the W Hotel & Residences. many of the buyers may no longer qualify for mortgages, or, may not be comfortable with the higher monthly payments now required. While every building is different, some projects do allow buyers to get 100% of their deposit back if rates climb over a certain threshold, one of the major buildings set this rate at 8%, or if buyers are unable to secure financing. With rates spiking, some buyers will be able to take advantage of these provisions.

For the majority of downtown units priced under $500K, including most of the units I buildings like 360, the current mortgage crisis is not catastrophic. While lending standards have tightened this week, most buyers with solid credit and documented income will still be able to qualify for the same traditional mortgage, just at a slightly higher rate.

For buyers who can afford the higher rates or our planning to pay cash, now might be a great time to negotiate with developers. If this crisis continues, it will be very difficult to sell many of the high-end units currently planned for downtown Austin.

Mortgage Crisis Hits Austin

Over the last two days, the Austin lending market has changed dramatically for the worse.

As the subprime lending crisis has evolved into a global problem—the bankruptcy of two large lenders seems to have tipped the scales — the market spotlight has turned a negative eye on every participant in the residential mortgage market. As the bad news has spread, lenders are dramatically cutting back on loans -- and rapidly raising rates at the same time.

The market changes in Austin over the last 48 hours are dramatic:

- A number of lenders, especially brand name lenders such as Wells Fargo and Bank of America have hiked jumbo (>$417K) mortgage rates from 6.8% to over 8.0%. Many other lenders seem to be following.

- Specialty loans -- especially loans that do not require income verification or documentation -- have quickly disappeared. These loans, which were commonplace a week ago, are now very difficult to come by. The same is true for loans that do not require a full 20% down payment.

- It has been reported that large loans (>$1.5M) are now very difficult to obtain, even for people in a very strong financial position.

These changes are bad news for buyers -- especially buyers who have placed deposits, are stretching their budget, and haven't locked in their final loan. We'll see how the marker evolves over the next few weeks. While anything could happen, most experts believe that the mortgage lending environment will get worse before it gets better.

New Austin Four Seasons Residences Renderings

The Four Seasons Residences, the new condo project adjacent to the hotel, has released new renderings which provide a great feel for what the building will look like when it is completed. The renderings also show a slightly modified exterior design: more upper floors have been added with full glass walls. These replace the lower floors with smaller windows. The change is the result of the elimination of rental apartments which were initially planned but since have been replaced by additional condo units. The building is designed by Michael Graves, a world-famous architect.

The pictures show sample units as well as the rooftop amenities: a pool, yoga deck, and sun deck more than 30 floors above town lake. The pictures complement a very impressive "walk-through" video rendering of the project which can be viewed in the Four Seasons Residences appointment-only sales office.

As previously reported, the project recently opened the lower floors to prospective buyers after more than 80% of the units on the upper floors were reserved in the initial sales phase. The project seems to be on track to sell out by ground-breaking sometime this fall.


Economic Analysis: 2008 Job Growth to Drive Austin Housing Price Appreciation

If there is one rule in predicting what will happen in the housing market, it's that strong job growth drives strong real estate demand. This is why the Austin market was red hot during the tech boom and why the market was stagnant during the tech bust -- even as real estate prices soared in the rest of the country. And it is one of the main reasons that the Austin market has stayed so strong in 2007, even as national prices decline, interest rates continue to spike, and the sub-prime crisis unfolds.

The good news is that job growth in Austin is expected to remain strong. According to Mark Dotzour, chief economist and director of research at the prestigious Texas A&M Real Estate Center, 2008 should be a great year for the Austin housing market.

The Statesman reported that:

Dotzour said national job growth will be only about 1 percent but that Texas' rate probably will be double that. And he predicted that Central Texas will outperform both the nation and the state with 3.5 percent job growth. "Austin is blowing the doors off the state of Texas," Dotzour told a crowd of more than 1,000 people. On the housing front, Dotzour said, the Austin metro area should see healthy sales and price appreciation. . . Home sales were at near-record levels at mid-2007 with a low, four-month supply, Dotzour said. . . It's no surprise, he said, that Central Texas home prices appreciated 11 percent in early 2007 compared with a year earlier, according to federal housing data. That outpaced rates of 6.87 percent in Texas, 4.34 percent in Florida and 1.19 percent in California. "I would expect at the current low levels of inventory, home prices are likely to continue to appreciate substantially in the next 12 months, possibly rising in the 8 to 10 percent range," Dotzour said in an interview.

For condo shoppers, market appreciation and rapid increases in construction and land prices are clearly putting upward pressure on condo prices. As long as demand remains strong, condo prices will likely continue to slowly rise.

Austin Crane Shortage

Austin's KXAN is reporting tonight that an acute shortage of cranes and crane operators is complicating high-rise construction in Austin. We've heard numerous reports from developers that a scarcity of construction labor -- and skilled general contractors and sub-contractors — is leading to escalating constructions costs, and higher condo prices in the end.

According to the story:

"There's no available operators in Austin right now," said construction worker Sam Buchanan. "They're all working." With a nationwide shortage, construction managers are paying more to keep cranes moving in Texas.

Over the last two decades, only a handful of tall buildings have been built downtown. As a result, local construction companies are only staffed to build a couple of major projects at one time. With more than 20 projects currently under construction or being planned, it is getting very difficult to find labor and equipment to build new projects. The result is simple: construction prices are going up and condo prices will likely follow.

AustinTowers.net Featured on NBC!

AustinTowers was featured on the 10PM news tonight on NBC station KXAN! The story looked at the changes to the Austin skyline and the potential impact of construction equipment shortages on existing projects and condo costs.

Watch the story here!

Reserving a Condo: Up-front Payment Requirements

In July, more than 100 Austin condo buyers reserved units in projects such as the Austonian, the Four Seasons, and the W Hotel & Residences. All three of these projects have one thing in common: they are currently empty lots. Actually, in the case of the Four Seasons Residences, the building site is currently a very busy hotel parking lot.

In the current hot condo market, top projects will sell out before the first ceremonial shovel of dirt is removed from the lot. In these circumstances, buyers will be required to pay deposits years before they will be able to occupy their newly selected home. The deposit requirements vary widely among projects. Typically, buyers will be required to pay between 3% and 10% of the purchase price of the unit in order to execute a sales contract. The projects that are super-upscale or in high demand are the ones most likely to have high condo fees.

A typical payment scheme would be an initial payment of $5,000 or $10,000 to be paid at contract signing. This payment reserves the unit. The balance of the deposit would be paid over 90 or 120-days (or with some projects all money is due by ground-breaking). In addition, most buyers are required to pay 50-100% of upgrades such as wood floors, premium appliances, and sound system packages.

One comment we have heard from buyers is that it is currently a seller's market: prices are non-negotiable, deposit requirements are steep, reservations require a sales contract, and there are very few good deals or incentives to be had. While the 360 supposedly provided a 3% down incentive for a limited time to move some remaining units, these sorts of incentives are hard to come by and almost never available on the prime units that tend to sell first.

While the current market for condos may be a sellers market, this won't be true for every project that comes along over the next couple of years. The name brand projects such as the Four Seasons, the W Hotel & Residences will see high demand from people who value the brand. Other projects, like the tall and reasonably-priced 360, will also sell well. For the other downtown projects, competition for buyers will be fierce. It is inevitable that some buyers will be able to negotiate better deals, free upgrades, or reduced deposit requirements by shopping around and playing projects against each other.

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SoCo Lofts Near Completion on South Congress

While dozens of high rise condo projects rise from the ground in downtown Austin, interesting condo developments are also nearing completion in other parts of the city. One notable project is the SoCo Lofts which is nearing completion in the red hot South Congress district. This 69-unit condo development with ground-floor retail is located near Saint Edwards University. By building outside the core of downtown, the project has been able to hit a price point that is much lower than any current downtown project. With 616 SF units starting at $169,900 and 2-bedroom units starting at $289,900, the project is at least 25% less expensive than the new downtown projects.

SoCo Lofts

The SoCo Lofts are not alone: a number of interesting projects are currently under development on South Congress, South Lamar, and on the East side across I-35 from downtown.

Here is a full profile of the project:

W Austin Condo Update

The W Hotel & Residences continues to make progress. They are now actively selling units ad have completed nearly 200 meetings for the 206 planned units in the 36 story tower. Supposedly, they have taken firm reservations for somewhere between 20-35% of the units.

The W is offering 19 different floor plans ranging in size from 644 to 3,779 square feet. They have launched a new website which includes all of the floor plans: http://www.block21residences.com/plans.asp. The project is located in the heart of the second street district directly behind city hall. The modern W brand is popular and should fare well with a young, affluent audience.

Here is a new image of a model of the planned building: