Austin Hike & Bike Trail to be Extended
The Hike and Bike trail is a key downtown asset and one of the biggest selling points of downtown living. Extending the trail has been challenging as much of the land is owned and occupied by various commercial and residential projects -- some built as close as 20 feet from the lake.
With today's action, the City council has hired a firm to design a 1.1 mile boardwalk over the water to extend the trail without requiring redevelopment of existing properties. The full project is expected to cost $10 - $15 million to complete.
Development around Lady Bird Lake has stirred significant controversy over the last few decades, staring with the development of the Hyatt many years ago and continuing with a number of recent condo projects proposed for the South side of the lake. In today's meeting the city also took action to review current waterfront development guidelines.
According to the Statesman:
A 15-member task force will soon begin evaluating the city's development regulations for properties along Lady Bird Lake in an effort to eliminate inconsistent and vague rules that have frustrated developers and citizens opposing their projects.Members soon to be appointed will include a representative from the Parks and Recreation Board, the Planning Commission, the Design Commission, the Downtown Commission, the Environmental Board, Save Town Lake, the Town Lake Trails Foundation and the Real Estate Council of Austin.The City Council also will select representatives from registered neighborhood organizations with boundaries abutting Lady Bird Lake and owners of property within the affected areas.The group is scheduled to submit a public report with recommended changes by early fall, and the City Council probably will hold public hearings and vote on the recommended changes in January.
Great News: Austin Home Prices up 0.33%!
While this may not seem like good news at first, it makes Austin one of the strongest real estate markets in the country. During a period when national home prices fell 10.7% and housing in markets such as Miami, Phoenix, and Las Vegas fell by 19.3%, 18.2%, and 19.3% respectively, Austin is practically in a class of its own. Of the top twenty markets, of which Austin is not included, only Charlotte, North Carolina showed a positive return.
While the data is not apple to apples -- the Austin market looks at the average sale over the period and the national statistics look at repeat sales of the same houses -- Austin's positive growth is a sign of strength in difficult times. While most of the country is struggling with unprecedented market declines, record foreclosures, and skittish buyers waiting on the sidelines for the market to bottom out, the Austin market has held steady. In parts of the city -- especially central Austin and Westlake -- values continue to grow at enviable rates.
While Austin isn't immune to the effects of the national market, the city's strong job growth, economy, and migration patterns have provided a buffer against weak credit markets and rising jumbo mortgage rates.
While Austin has remained flat, CNN reports that the national data released today is the worst on record:
"Residential real estate has posted another record decline.The S&P Case/Shiller Home Price index of 20 key markets, released Tuesday, shows that home prices plunged 10.7% in the 12 months ending January. That marks their lowest level since the index launched in 2000.Of those 20 metro areas, 16 reported record annual declines. Ten of those cities posted double digit declines through the 12 months that ended in January.The survey's 10-city index fell 11.4% year-over-year, its steepest decline since its inception in 1987. "
National Condo Market Continues to Implode
The condo markets in Florida, Las Vegas, and other markets are very different from the market in Austin, Texas. After huge run-ups in prices, the trend has reversed, According to the Wall Street Journal, "the median condo sales price in the Cape Coral-Fort Myers area of Florida fell 26% to $202,300 in the fourth quarter of 2007 from $273,400 a year earlier. . . Prices dropped nearly 20% in Tucson, Ariz., and 12% in the Atlanta area during that time, according to National Association of Realtors data. Inside the newly minted Quantum on the Bay in Miami, prices for two-bedroom units have fallen from the high $700,000s to around $500,000."
When prices drop this quickly at the same time as new projects are nearing completion, it creates a very painful market dynamic. When a buyer puts a 10% down payment on a future unit and then sees the value of the unit fall by 20% during construction, they walk away at closing to avoid future losses. The projects, in this situation, wind-up in a very precarious situation with as many as 40% of pre-sold units failing to close. If the developers are unable to pay back the construction loans, they subsequently lose all of their capital, default on the loans, and the projects often go bankrupt.
Will this happen in Austin? The answer seems to be "no." The markets where condo prices have imploded have featured a combination of three critical factors. The first is that all home prices -- condos and single family residences -- have dropped dramatically in value. This has not happened in Austin. In fact, in 2007, prime central areas increased in value. In area 8e which covers much of Westlake, for example, prices increased by nearly 15%. The second factor is that condo projects were massively overbuilt. While many projects are planned in Austin, not all will be constructed. The ones that do make it to the market -- while adding lots of downtown units by historical standards -- represent a miniscule percentage of Austin housing units. In fact, the 700+ downtown units that will be completed in 2008 are essentially sold out at this point.
The third major factor in the national meltdown is the current credit crunch. Today, there are few good options for people with poor credit, first-time home buyers who want to make small down payments, and anybody who needs a jumbo or interest-only loan. These trends effect us here in Austin in the same way they effect the national market. This is the primary reason that the Austin market has slowed down and price appreciation has paused in spite of a strong local economy and string regional job growth.
According to the Wall Street Journal, one of the big problems has been that developers in other cities started too many projects before the bust and failed to cancel or convert projects under construction to another use -- as rental units, for example. In Austin, virtually every project that started constrcution before the summer credit crisis is now sold out. Every project started after the crisis has been required to meet a very stringent bar for pre-sales. While no market is 100% safe -- Austin seems to be in excellent shape in comparison to many other major condo markets.
Hear is a summary from the Wall Street Journal (see the article here - subscription required):
It may seem surprising that anyone would want to add supply to a market whose troubles have been well-publicized for many months. But the economics of condo building encourage developers to bring half-finished projects to completion, even when prices and demand are plunging.Developers usually put up their own money for a project first, then spend borrowed funds. Once developers have spent their money and have commitments from lenders, they have a strong incentive to keep building to finish the project."These developers had millions of dollars tied up and they had them financed so they just moved forward," says J. Ronald Terwilliger, chief executive of Trammell Crow Residential, which builds many rental apartment buildings and also a few condos. "What they hope is that by the time the project is finished the market comes back."However, developers and lenders can more easily shelve projects that are still in the early stages. Many developments nationwide are being canceled, suggesting that by next year or 2010, the number of new condos coming onto the market may slow to a trickle.
Arthouse Announces Striking Downtown Expansion Plan
Arthouse (formerly the Texas Fine Arts Association) was founded in 1911, and for more than ninety years it has advocated for the support of contemporary art in Texas, organizing exhibitions and presenting them in Austin and statewide. From its home, the Jones Center in downtown Austin, Arthouse pursues its mission: to promote the growth and appreciation of contemporary art and artists in Texas. The museum is well respected for its innovative exhibits and programs.
With the $6.6 million renovation and expansion, the project will “recycle” the current building which in the 1920’s was the Queen Theater, a key part of the Queen/Paramount/State theater “block,” and in the 1950’s became a Lerner Shops department store. Three new galleries, two artists’ studios, a 90-seat community/screening room, and a 5,500 sq. ft. rooftop space with a 33 foot x 17 foot movie screen will be added.
The highlight of the Arthouse project is the innovative architecture of the renovated structure. The striking building features randomly placed green translucent bricks, a modern awning reminiscent of the building's department store past, large glass windows including live projections on the upper floor, and a dramatic rooftop deck with an open air movie theater. The main space on the second floor also doubles as a large screening room.
The Arthouse project follows Austin Museum of Arts recent announcement of a new free-standing 40,000 square foot museum and a separate 425,000 square foot 30-story office tower on the current lot at West Fourth & Guadalupe. Together, these projects mark an exciting expansion of downtown arts options. With regular events, gallery openings, and now rooftop movies, these venues will continue to thrive as cornerstones of the emerging downtown cultural scene.
The Central Austin Condo Conversion Boom
Many of these new projects offer upscale central living for much less than the price of the major high-rise projects. As downtown condo prices have rapidly increased while rents have grown at a slower pace, downtown condo conversion provide a quick return for developers. While the price is lower -- often $200 - $250 / SF -- the product is also very different. Unlike the new glass, concrete, and steel downtown towers with panoramic views and high-quality build-outs, most of the current crop of conversions are low-rise renovations of older wood-framed buildings without views and with limited amenities. The main attraction is the price of entry, with units starting under $100K -- they are the most reasonable yet chic living options within miles of downtown.
Representative projects are being completed in Clarksville, East Austin, and South Austin.
Here is a summary from the Statesman:
Ryan Robinson, demographer for the City of Austin, said that with demand for downtown area housing skyrocketing, "market pressure pushes prices up, and property owners can realize a larger margin from selling units as condos."Most of the converted units have emerged from apartments built in the 1960s and 1970s in "prime locations" in Central and Southeast Austin that command higher-than-average prices, Davis said.Often they appeal to buyers because they offer "upscale living in a mixed-use development" with boutique-style retail, restaurants, coffee bars and the like, "all in one new urbanism-type community in the heart of the city," Davis said.Barbara Ditlow, a real estate agent with Capital City Sotheby's International Realty, knows of four condo conversions in South Austin, all with updated wiring, plumbing and walkways, plus granite counters, stainless steel appliances and wood floors. . . But Ditlow said buyers need to do their homework before purchasing converted condos."Some (developers) buy these apartments at high price points and have to skimp on the finish-out to meet the bottom line," she said, adding that it's important to research the developers and their track records. "Don't get stuck with sow's ear when you thought you were buying a silk purse."
The $13.5M 2020 Congress Project in South Austin includes units priced from $97K for 425SF to $200K for 943 SF
The 30-unit 41 Waller conversion project in East Austin has units starting at $215K for a 936SF 2-bedroom condo
Economist: Downtown Condo Market To Remain Strong
Perryman's analysis includes two key points. First, downtown is becoming an increasingly attractive place to live as the urban core redevelops. As traffic and sprawl worsen throughout the rest of the city, the more demand will increase for downtown units. The second point is that net migration into Austin is incredibly high with more than 40,000 new residents pouring into the city each year. If just 2% of new Austinites decide to live downtown, all planned downtown units will likely sell out.
Here is a summary from the Austin Business Journal:
The steel and glass residential towers set to reshape the downtown Austin skyline aren't a pipedream. They're coming--and they're going to be filled, a new study shows.The analysis from Texas economist Ray Perryman suggests that while the nation battles a housing correction, Austin's residential market remains relatively healthy. Moreover, says Perryman, there is clear demand among Austinites to live in the city's vibrant downtown.There are currently about 6,000 people living downtown. And with about 4,000 residential units under construction or planned around downtown, that population is expected to double over the next two years. Perryman says with the Austin area adding more than 40,000 new residents annually, the local housing market will continue to fair well, and rising energy costs and traffic woes will drive a growing interest in urban living."This housing market will fundamentally support the type of housing being developed downtown," Perryman said at a morning press conference at City Hall organized to discuss the report. "There is an amble population to absorb these units."Asked whether those who desire to live downtown could actually afford to purchase units, most of which are over $500,000, Perryman says the market is there, particularly among young professionals coming to the area making good money in expanding fields like technology. He pointed out that if less than 1 percent of the entire area population chose to live downtown, they would fill up all of the existing units as well as those being planned downtown.
New Downtown Affordable Housing Initiative
As part of the initiative, the City is building a comprehensive affordable housing program around the large-scale development of the Green Water Treatment Plant between Seaholm and the second street district. The program has two primary components. First, to ensure that at least 10% of units are affordable to households earning less than $42,000 for a 1-2 person family (80% of the area median income), the City is reducing land prices and requiring developers that developers who want to participate in the project include affordable housing units. Second, the city will dedicate 40% of property taxes generated by the project to a housing fund which will provide subsidies to make additional units affordable.
The City plans to choose a developer in June.
Here is a summary from the Statesman:
City leaders have urged developers to build more affordable housing downtown with little success. Now, Austin plans to put its money where its mouth is with the upcoming sale and redevelopment of the Green Water Treatment Plant and nearby Austin Energy property.Blunting the developers' argument that land and building costs downtown are just too high, city officials plan to give them no choice but to include low- to moderate-priced housing in the redevelopment of the nearly four city blocks and as a result almost certainly will make less on the land sale."We're not in the business of making money," Council Member Brewster McCracken said. "We're in business to achieve public values and goals."The city also plans to directly subsidize additional units for even lower-income families and dedicate 40 percent of the property taxes generated by the redevelopment project to its affordable housing fund."I just think it's an opportunity to have much of both worlds: a lot of tax base delivered, hopefully a significant measurable one-time capital gains in the land sale and then a series of other community goals," Mayor Will Wynn said.