Here is the image:
Here is the sumary from the Statesman:
Developers of the Monarch, a 305 unit residential tower under construction on West Fifth Street, have decided to switch the project from apartments to condominiums . . . Officials with ZOM Texas Inc. said their investors this week approved the decision to sell rather than rent the units in the 29-story building, based on what they say is continued strong demand for downtown condominium living. . .Some observers said the change renews questions about whether Austin's downtown residential market might be at risk of being overbuilt. But Charles Heimsath, whose consulting firm does research for many developers about demand for their proposed projects, says healthy sales and reservations at various projects are prompting him to raise his estimates on how many units the market can absorb annually, and he said he expects demand to remain strong for the next two to five years.
And the developer and broker seem very optimistic about the projects sales potential:
Kevin Burns, principal broker of Urbanspace Realtors LLP, the Monarch's exclusive listing agent, said that, without any marketing efforts until now, there already are prospective buyers for at least half the building. From the start, the Monarch's units were built to condominium standards and specifications — larger units with features such as hardwood floors, granite counters and wood cabinetry, for example, with the long-term goal being to sell them, said John Faulk, development manager for ZOM Texas Inc., a subsidiary of Orlando-based ZOM Inc.
The Monarch has a great advantage which is that they will beat many of the other planned projects to the market. With dozens of projects in the early phases of construction or still in the pre-construction planning phases, Monarch will have the advantage of marketing units that are very close to completion, and to target the pent-up demand for new projects.
This is great news for the downtown condo market. One of the big mysteries has been how strong the demand would be for super-luxury projects such as the Four Seasons and the Austonian. While they are only reservations, the high level of interest is very encouraging. This is especially amazing given that the project has not even broken ground!
As for the lower floor units, the sizes range from 806 to 1,815 square feet with prices starting in the $400s. Amenities include a roof-top pool and terrace, concierge service, and room service provided by the hotel. The project is designed by legendary architect Michael Graves. The full profile can be found here.
Condo fees fund the daily operations and maintenance of most condo buildings. They cover security, landscaping, cleaning of common area, common area energy use, maintenance, and other key building functions. On average, our research shows, condo unit owners can expect to pay $0.34 / SF / per month or $340 in monthly condo fees for a 1,000 SF unit. For more information on total condo costs, check out our detailed posting on condo cost of ownership.
Looking at detailed MLS records on more than 30 units on the market today, we recently calculated the rough fees for the major downtown condo buildings that currently have units on the market. Since then, we have received updated numbers from some of the projects and some additional data on two new projects. Almost universally, the fees seem to be calculated on a dollar-per-square foot basis that seems to remain relatively constant on all units throughout each building. So, condo fees are not higher for more expensive units, or units with more bedrooms, or units on higher floors compared to less desirable units of the same size in the same building.
In addition, the prices in the six new buildings that we have looked at our surprisingly constant -- they vary from $0.28 / SF / Month to $0.40 / month -- an amazingly tight range. If anyone has numbers for other buildings, send them to us and we will add them to the list.
Here are the building-by-building statistics:
Fee by Building - - - - - $ / SF / Month
Five Fifty Five Condos.......$0.40
As we get more information on additional building fees, we'll keep updating this posting!
In our first posting on this subject, we concluded that the negative statistics do not really effect the downtown condo market which does not include units below $130K where the most dramatic market changes seem to be taking place. Today, thanks to Ki Gray, we have much more detailed statistics to analyze.
These statistics allow us to look more closely at neighborhood-by-neighborhood sales details for the high end area closest to downtown. Here is what this new data shows:
- Price per square foot increased in June in 20 of 23 central austin neighborhoods analyzed by Ki
- In the 20 most central areas in the first Half of 2007 (v. the period one year earlier):
- Prices increased by 12%
- Sales volumes decreased by 15%
- Days on Market increased from 49 to 52
So what does this data add to the picture? As we stated previously, the culprit is clear when it comes to the change in the broader Austin market: the current sub-prime lending crisis means that many first-time buyers with borderline credit can no longer qualify for mortgages. This is resulting in a decrease in sales of low priced sales -- i.e. houses priced under $130k in Austin.
To our surprise, It does look like similar market forces are effecting the prime central areas. While there may not be many units priced under $130k, the same trend is occurring: sales volumes are dropping while prices are rising. The most likely interpretation is a strong broad market with weakness at the low end. The high end seems to be strong while sales of lower priced houses -- and not just units priced under $130K — suffering.
Will this effect the downtown condo market? The data suggests that it will: buyers with borderline financing qualifications will be excluded from the market. However, with strong price appreciation and low inventory, the numbers still look good for developers and buyers alike. But the thing to note is that the June statistics do show a change in the market which should be closely monitored in the upcoming months.
Here are pictures of one of the projects - a roughly 6,500 square foot "house" between 8th and ninth on the East side of Congress Ave. I have toured one of these projects and the amazing thing is the complexity of the engineering. To build these -- and to support the weight of a pool on the roof -- requires the construction of a complex steel structure to support the loads of the house.
Here are a few pictures of the project:
Click the link below to see many more great pictures!
What is going on? Does this mark an end to Austin's defiance of national trends? How will this effect downtown condo sales?
According to the Austin Board of Realtors, the biggest volume change occurred with sales of single family homes priced below $130,000. This explains both the volume drop and the decrease in the median price. The culprit is also clear: the current sub-prime lending crisis means that many first-time buyers with borderline credit can no longer qualify for mortgages. This is resulting in a decrease in sales of low priced sales -- i.e. houses priced under $130k in Austin.
When low priced sales are taken out of the equation, it does seem that sales remain strong. One important thing to note is that MLS statistics do not include the many new condo units that have been sold directly by the developers without ever listing the units on the MLS. Since these numbers are not included in the Austin Board of Realtors' statistics, it is hard to know exactly what is happening in the market at large. The only thing we know is that the volumes and median prices would both be higher if all downtown condo sales were included.
In summary, today's negative statistics do not really effect the downtown condo market which does not include units below $130K where the most dramatic market changes seem to be taking place. But that said, any Austin real estate deceleration is reason for concern, especially after 5 consecutive years of sales increases.
Here are the questions that are answered in the initial version of the FAQ:
- How much does it really cost to own a downtown condo?
- How much do condo fees vary?
- Why are condos more expensive than single family homes near downtown?
- What units make the best investment?
- How big is the high-end condo market?
- How easy is it to sell a downtown condo unit?
- Who actually lives downtown today?
- Do downtown residents actually work downtown?
- How many downtown condo units are bought by investors?
- Do MLS statistics accurately capture the current state of the downtown condo market?
- What is being done downtown to promote affordable housing?
- It looks like there is a ton of vacant sites downtown, will that effect values?
- What is a good source for downtown condo listings?
If you have questions that are not included, please let us know! Just register and leave comments or send us an email here! To visit the FAQ, simply click here!
The big Austin downtown condo question remains: how big is the market for million $ condo units in downtown Austin?Some new market stats from Ki Gray of Escapeso Austin Real Estate provide some context on the high-end downtown market and it's performance so far in 2007.
Here are the number of houses that sold for $1 million or more by year and that were recorded in MLS in the Austin metropolitan area:
2004 - 152 houses
2005 - 213 houses
2006 - 341 houses
2007 - 181 houses (1st Half of 2007 Only)
The amazing thing is that the size of the market has more than doubled in just 3 years. As one of the fastest growing segments of the market, high-end inventory and demand have been rapidly expanding.
It remains to be seen how many high end condo units can be absorbed by the Austin market. In the Austonian alone, there will likely be more than 100 units priced over $1 million -- that is a lot of inventory in one building. The project's construction budget alone is greater than $1 million per unit which should provide an indication of the average unit selling price.
The good news for the high-end projects are that they are adding much needed downtown inventory in the fastest growing segment of the market. The bad news is that nobody knows how deep this market is -- or how many units can reasonably be sold in any given year,
The Monarch — billed as the city's first luxury rental high rise tower — is now very far along in the construction process. Developer ZOM Austin is constructing what was supposed to be a 27 story rental project on 5th just East of Lamar with 297 rental apartments and 8,500 square feet of ground floor retail.
The confusing part of the project is it's website which now bills the project as the Monarch Condominiums and refers to the upcoming opening of the project's "sales center". It's hard to find any interpretation other than that the project will be largely, if not entirely, converted from a rental to a condo project. There is not currently any websites promoting rentals at the Monarch.
Current sales of downtown Austin condo units are reported to be quite strong. While rental rates are rising, the market for very expensive downtown rental units is very very small. Given hat the Monarch will beat many of the other planned projects to the market, the switch is probably a smart decision. What remains to be seen, is what percentage of the building will be rental and which units will be condos. If anyone has additional information, send us a note!
The market for downtown condos is very active but quite different from the single family home market in two key facets.
First, downtown condo owners who want to sell are currently competing with new units entering the market. If too many units come on at once, downward pricing pressure may ensue. That said, developers are very good at controlling prices and surprisingly patient. However, it's important to note that condo projects are more commodity-like than single family houses in established downtown neighborhoods.
Second, units for sale within a building compete directly, and brutally, with other units within the same building. As we have written before, If you buy a house in central Austin, the odds are that it is different -- in one way or another -- from every other house in central Austin. When it comes time to sell your unique house, you may get lucky and sell for more than it's worth, or you may be unlucky and have it sit on the market for a long time. Setting a price is a key variable, but pricing a unique house is as much art as science.
The issue is that the value of unique single family homes is subjective and highly personal. Every house, every street, and every aesthetic is valued differently. The single family home market, as one would expect, is very different from the downtown austin condo market.
Every high-rise condo project has a large number -- sometimes hundreds -- of interchangeable commodity-like units. Unit 16B is essentially identical to unit 17B. The result is a much more efficient resale market. When it comes time to sell a downtown condo, there will likely be similar units on the market. If they are cheaper, they will sell faster. If they are more expensive, the may never sell at all.
While the floor (the higher the better, stay away from the ground floor) matters and in some buildings the view can vary greatly from side to side, the effect on value is not as dramatic as one might think. Our ongoing analysis of Nokonah values and appreciation confirms this: units on floor 11, the top floor, are valued at just 11% more than units on the second floor. Buyers seem to pick a building first, and then look for the right unit weighing size and price. This approach leaves very little room for creative pricing.
Yet, it's amazing how differently sellers price similar units. The AustinTowers listings pages provide a few great examples of this. For example, there are two units currently for sale in the Nokonah: a 670 SF 1/1 for $450K and a 1,225 SF 2/2 for $550K -- the smaller unit is almost certainly overpriced.
Because it so easy to compare prices, downtown condo values will be efficiently set by the market. The building will make a huge difference, but actual prices will be set by your neighbors. This has some benefits and drawbacks. On the positive side, accurate comparables make it easy to set the right price and correctly priced units should sell quickly. On the downside, pricing may fluctuate more widely with supply and demand: when there are lots of people selling at the same time, it's likely that prices will drop. And there is very little chance to get lucky and sell your unit for above market value --- if a unit doesn't sell, the most likely reason is that it is overpriced.
The New York Times published an interesting analysis of the development pressures on the hill country surrounding Austin. The hill country is one of Austin's greatest assets and has historically been protected from development by the difficulty of providing a reliable water supply across the rural region. Recently, however, new water infrastructure has changed the equation, adding to development pressures in the hill country.
Thousands of new people will come to Austin this year. One of the nice benefits of downtown development is that it takes pressure off development west of the city. A single large downtown building can provide enough housing to displace a 400 acre suburban development. Plus, as downtown residents either work downtown or drive in a reverse commute, they reduce the traffic pressure on highly congested roads.
Here is a quote from the article:
The Hill Country, an area that extends about 150 miles west of Austin, is quickly becoming suburban. With its rolling hills, lakes and rivers, it is attracting Texans eager to escape city life, and out-of-state buyers who can buy more acreage for less, real estate agents say, than they might pay in other states.“People want to live out in the country,” said Charles Gilliland, a research economist at the Real Estate Center at Texas A&M University in College Station.Water, once so difficult to find, is, at least for now, not a problem because of new water lines. Thousands of new homes are planned, and last year the Real Estate Center reported that land prices had reached as high as $25,000 an acre. In certain areas, the prices have ballooned even further.Ranchers and farmers, enticed by multimillion-dollar payouts, retirement or the lack of heirs, are selling thousands of acres of their large properties to developers eager to put up homes and strip malls. Other landowners, threatened with rising property taxes, see no option but to sell some of the land they have held in their families for many decades.The beauty of the Hill Country may also be its undoing. The crush of new people is likely to put more cars on county roads, pollute creeks and streams and eventually drain underground water supplies, according to the Save Our Springs Alliance in Austin.In an environmentally sensitive area like the Hill Country, which sends water downstream to Austin, the stakes are particularly high. And the concerns have led to efforts — like those of the Lowenthals’ group — to curb development.
According to a source who recently visited the 360 sales center, the 44-story 430 unit is selling well and should sell out soon -- many months ahead of its scheduled completion date. With 430 units, 360 is the largest of the current crop of developments, so a sell out would be a strong sign for the market.
The news is that 360 has sold approximately 378 of the planned 430 units. With 52 units remaining, 88% of units have been sold. Supposedly, most of the remaining units face East with the cheapest remaining 1 bedroom selling for $283K and the cheapest remaining 2 bedroom listed at $406,000. There are still 14 floor plans to choose from.
While sales are strong, the other side of the coin is that the first 75% of units supposedly sold in the first three weeks in he market in March. In the following 3.5 month, they have sold just another 13%. But, there is lots of time left to sell the remaining 52 units.
360 is unique in that it is well positioned, very tall, early to market, and attractively priced. It still remains to be seen how well the more expensive downtown projects will fare.
When 21c Musuem & Condos, the latest downtown luxury condo project, was announced on June 11, many interesting questions were once again raised about the downtown luxury condo market. While the market remains strong for units priced below $400K -- such as many of those in 360 and Milago -- the market for high end units is not yet proven. With a bunch of high-end developments in the works including the Austonian and the new Four Seasons Residences, we should find out soon whether a real market exists for hundreds of units priced over $500K, and dozens priced over $1M as these projects come to fruition. As none of these projects have broken ground, it's hard to know where they really stand.
When the 21c project was announced, some interesting speculation on the Austin luxury market made it into the news coverage. Here is an excerpt from the Statesman:
Some observers question whether downtown might end up with a glut of high-end condos, as has happened in some other major cities. But Poe and some local real estate developers and consultants insist demand remains strong locally as baby boomers, young professionals, empty-nesters and others seek an urban lifestyle."I think your market is pretty deep," Poe said. He noted that developers would have three years to sell units before the building opens, adding that selling 65 units a year is "not an unreasonable goal."Charles Heimsath, president of an Austin-based real estate consulting firm that advised developers on the project, said strong pre-sales and reservations at both the Austonian and the Four Seasons suggest a solid demand.
The information from Charles Heimsath, an independent consultant, is very encouraging if true. It makes sense that the 21c developers did their research before deciding to proceed. We'll keep our eyes open to see if we can uncover any additional information on the state of presales at the current set of high end projects.