WOW! Austin Home Prices Rising!

Across the country, most major metropolitan areas are seeing home prices continue to drop. In fact, housing values are down 20% from their peak nationwide. Housing prices in Austin, however, never experienced the same loss of value. While inventory remains high and sales volumes have dropped -- April 2009 sales were down 33% from the peak April 2007 volume -- prices have remained amazingly stable.

Today, one major index of home values reported that Austin home prices actually increased by 2.2% in March, 2009 over the year ago period -- a very positive development for the Austin market. In the same index, nationwide prices were down by 11.5% during the same period.

Why has Austin stayed strong? There are three reasons:

(1) Austin never experienced bubble-like run up in values during 2006-2007 that many other markets experienced

(2) Austin continues to see strong net inbound migration which helps stabilize values

(3) Austin employment has remained strong. Amazingly, the most recent data shows a decrease in the local unemployment rate.

As a result, Austin continues to be one of the strongest real estate markets in the country.

Here is a summary from the Austin Business Journal:

According to First American CoreLogic’s Home Price Index, 33 states saw home prices decline at a faster rate in March. However in the major Texas cities, including the Austin-Round Rock metro area, prices increased. In the local area prices rose 2.2 percent in March compared with March 2008. That’s down slightly from the region’s February home price increase of 3.2 percent compared to the previous February.

Housing price declines are slowing in states that have seen the highest declines in the past three years, but prices are dropping faster in states that have seen only moderate decreases in that time period, the research found.

Nationally, housing prices fell 11.5 percent in March compared with the same month last year, down from an 11.7 percent annual decline in February.

The number of states with double-digit annual declines has doubled in the last year, according to the index, from seven states in March 2008 to 14 states this March.

Nevada remained the top-ranked state for annual price depreciation in March, with an average home price decline of 26 percent. California followed close behind with a housing price decline of 25 percent compared with the same month last year. Rhode Island, Florida and Arizona round out the top five.

W Hotel & Residences Developer Faces Delisting

Stratus Properties, the developer of the W Hotel & Residences in the 2nd street district, is facing delisting from the NASDAQ for failure to promptly file financial reports.

While this sounds bad, the event alone should not jeopardize the project. However, the developer's accounting irregularities and delinquent financial reports will limit financial flexibility until the issue is resolved. This is an especially important issue for the W as one of it major lenders is in precarious financial shape. It could also violate covenants of the project's bank financing.

The best indicator of the situation is the fact that the stock continues to trade at a healthy value, signaling the market's belief that the issues will be resolved. While stock in Stratus is down 50% from it's 2009 high set on January 2nd, it's more than 50% above its March 9 low.

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New Downtown Restrictions to Limit Lakeside Skyscrapers

The most contentious Austin zoning battles relate to development close to Ladybird Lake. The prime downtown lake is considered one of the city's most important natural assets. As a result, the City has been closely examining proposals to protect the lake from future development. Essentially, the City Council would like to limit the height of development on sites directly adjacent to the lake.

Essentially, the City has two goals: first, to control development around the lake. Second, to ensure access to the lake. The appropriate policy action becomes complicated with an important hypothetical: where there are gaps in the hike and bike trail, should the city provide height variances in exchange for trail extension or improved public access to the lake? It's this very real example that been the focus of City Council debate.

Last night, after much discussion, the Council gave the second of three required approvals that limit building heights around the lake to either 60 or 96 feet depending on location. To address the above example the council decided that developers could be allowed to exceed 96 feet "if they can prove doing so would be substantially better for the community." This is a fair compromise that will provide the City with the appropriate zoning tools to protect the lake in the future.

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Brazos Place Auction Results: All Units Sell, 29% Discount

Today was a big day for Brazos Place as all 19 remaining units were sold in less than 90 minutes to a packed room of bidders.

On average, the units sold at a 29% discount to the original listing price. This is, however, a useless barometer as the units were not selling well at the original prices. More useful is the average price / square foot which at $281/SF is a 9% discount to the 2008 downtown condo average of $308. Unfortunately for current Brazos Place residents, the units sold for 24% less on a $/SF basis than the $370/SF average of the 12 Brazos Place units sold via MLS in 2008.

Here is the complete auction data:

Unit

Plan

SF
Listing
Opening Bid
Sold (incl. 4% Fee)
$/SF
Discount

709

1 Bedroom / 1 Bath

1272

$414,900
$170,000
$288,080
$226
31%

1007

2 Bedrooms / 2 Baths

1399

$479,900
$190,000
$339,040
$242
29%

708

2 Bedrooms / 2 Baths

1358

$519,900
$210,000
$329,680
$243
37%

1008

2 Bedrooms / 2 Baths

1324

$494,900
$190,000
$326,560
$247
34%

1108

2 Bedrooms / 2 Baths

1324

$504,900
$200,000
$329,680
$249
35%

705

1 Bedroom / 1 Bath

891

$304,900
$120,000
$229,840
$258
25%

1208

2 Bedrooms / 2 Baths

1324

$514,900
$210,000
$346,320
$262
33%

710

1 Bedroom / 1 Bath

623

$199,900
$80,000
$168,480
$270
16%

1103

1 Bedroom / 1 Bath

832

$324,900
$130,000
$229,840
$276
29%

808

2 Bedrooms / 2 Baths

1324

$519,900
$210,000
$374,400
$283
28%

1107

2 Bedrooms / 2 Baths

1399

$489,900
$200,000
$399,360
$285
18%

1109

1 Bedroom / 1 Bath

884

$359,900
$140,000
$255,840
$289
29%

908

2 Bedrooms / 2 Baths

1324

$484,900
$190,000
$385,840
$291
20%

1203

1 Bedroom / 1 Bath

832

$332,400
$130,000
$244,400
$294
26%

1207

2 Bedrooms / 2 Baths

1399

$499,900
$200,000
$418,080
$299
16%

707

2 Bedrooms / 2 Baths

1399

$519,900
$210,000
$422,240
$302
19%

706

1 Bedroom / 1 Bath

812

$339,900
$140,000
$250,640
$309
26%

1210

1 Bedroom / 1 Bath

623

$259,900
$100,000
$200,720
$322
23%

PH

Custom Plan

2745

$1,575,000
$600,000
$967,200
$352
39%

According to the auctioneers, more than 1,000 people pre-viewed units in advance of the auction. A large number bid in person. This is testament to the string demand for downtown housing at the right price. In this light, the auction was a major success. For existing residents of Brazos Place, however, the news is much less positive. Every existing owner most certainly paid substantially more money for their unit than today's auction prices. For them, the real test will be when units sell again on the resale market: prices will likely be somewhere between the original price and the auction discounts.

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BartonPlace Event Invitation

BartonPlace would like to invite Austin Towers readers to a live radio discussion on "Dissecting Downtown
Facts vs. Fiction" to be followed by a construction tour of BartonPlace and an afternoon reception.

The details are:

What:
Live Talk Radio Show (1:00pm)
BartonPlace Site Tour(3:30pm)
Afternoon Reception (4-5pm)

When: Sunday, May 24th @1:00pm

Where: BartonPlace PresentationCenter
(1800 Barton Springs Rd)

RSVP by May 20th to ashley@bartonplaceaustin.com Read More...

Star Riverside Proceeding with Construction

Star Riverside has announced plans to proceed with construction of the first two planned buildings with completion expected in the first quarter of 2010. The project may be the last major condo development to break ground during the current building boom. With tight credit markets and slack demand, most drawing board projects have been indefinitely delayed or cancelled.

Star Riverside Austin Condo

Star Riverside is an Australian-driven development on the south shore of Ladybird Lake near I-35. The $150M project will feature to 64 units in the first phase. According to the developers, the first two buildings will feature large units (2,000SF+) which will be priced from $600K to $1M+. A second phase would offer smaller units starting at as little as 4375K. These offerings do not match, however, with current MLS listings which include 6 units with prices ranging from $345K for a 670 square foot 1/1 to, $517K for a 935SF 2/2, $792K for a 1,280SF 3/2 and $1.34M for a 2,315SF 3/2.

The developers, Constellation Property Group, report that they have lined-up financing for the first two buildings but not for future phases. They hope to raise additional money to complete the remaining buildings by late 2011.

Here is a summary from the Statesman:

The first phase, Star Riverside, will have 64 units in two six-story buildings overlooking Lady Bird Lake. It is expected to be finished in the first quarter of next year.

Prices for the units, all of which will have about 2,200 square feet, will range from the high $600,000s to about $975,000, said Eugene Marchese, president of Constellation Property Group.

The second phase, Revolution Riverside, will have about 140 units in two buildings of nine and 11 stories. Construction is expected to start in mid-2010 and be completed in late 2011, Marchese said.

Those units will be priced from $375,000 to about $650,000 and will have about 1,200 square feet.

Marchese said he has scrapped plans for Star Luxe, an ultra-luxury part of the project that was to have had units of 4,000 square feet or more, priced at $1 million and up.

Nationally and in Austin, "I think we will see the luxury end of the market struggling for at least the next three to five years," Marchese said, adding that the high-end sector is troubled across all industries, from condos to retailing in general.

"I think there's just been a paradigm shift across the world," he said.

Economic outlook: Marchese said he has financing in place for the first phase of his project but not for the second phase. He said he thinks the capital markets, which have largely been locked up, will loosen next year.

Although some real estate experts say the economy hasn't hit bottom, Marchese said: "I think we're seeing the bottom, and we're going to bounce along here for the next six months. And then within 12 months, we'll start to see a definite turn in the overall economy, and the capital markets will follow suit."


Brazos Place: Auction Fine Print

In eleven days, Brazos Place will auction as many as 20 units to the lowest bidder. The May 17 auction has received lots of press and attention -- in particular because the units are being promoted with incredibly low opening bids. The opening bids start at a too-good-to-be-true $80,000 -- as much as 58% lower than the original unit price.

Brazos Place Austin Downtown Condo Auction

Are the opening bids too good to be true? Like any auction, it's important to read the fine print. Here are some of the rules of the Brazos Place condo auction:

- The opening bids are not the reserve bid: the reserve bids have not been made public. The units absolutely will not be sold for the starting bid price.

- All buyers must pay a 4% buyers fee on top of their bid.

- Like any resident, buyers will need to pay a monthly condo fee. The average is $400 per month.

- To participate, you must register by 5/14.

- Before you bid, you must provide a $2,500 deposit via cashier's check for each unit you are approved to bid on. You need to show them the check to bid, but you don't hand it over unless you win.

- Successful bidders need to put a 3% deposit if they are purchasing one unit or a 5% deposit if they are purchasing multiple units. This needs to be paid upon successful bid but can be paid with a personal check.

- To be eligible to bid, you must be pre-qualified by Bank of America -- even if you have other arrangements for a loan.

- You can register your broker / agent and they will receive a 2% commission.

- You must close within 30-days (or 45-days for an additional $1,500).

- If you don't close, you will lose as little as $2,500 or as much as 3% of the purchase price.

These rules are not unusual for a condo auction -- in fact, they are quite fair. But it is very important for bidders to understand how the auction will work. In particular, it is essential for buyers to know that they will need to meet a reserve price and pay a 4% buyers premium, important considerations for bidders looking for a great deal.

New Condo Mortgage Restrictions

Earlier this year, Fannie Mae stopped guaranteeing mortgages in new or newly converted condo developments in which fewer than 70 percent of units have been sold or are under contract. Fannie's previous rules set the cutoff at 51 percent. Freddie Mac recently sent a bulletin to sellers and servicers announcing plans to adopt similar restrictions beginning July 1.

The restrictions essentially raise mortgage rates for otherwise conforming mortgages (i.e. under $417,000 in Texas) where the condo development is effected by any of the following issues:

- A new project in which 30% of units have not been sold (or under contract) at the time of completion or closing.

- Existing condo communities where 15 percent or more of owners are delinquent on their association fees by at least 30 days.

- New or existing condo communities where more than 10 percent of units are owned by a single entity.

- New or existing condo communities where more than 20 percent of the total space in a project is used for nonresidential purposes.

Fannie has some flexibility in its presale rules. Developers who don't meet the 70 percent threshold can ask Fannie to waive the restrictions in certain circumstances. So far, more than 90 exemptions have been provided nationwide.

These changes should not have a dramatic effect on the largest and highest profile projects as new units in the big projects are typically priced well over the conforming threshold. For the lower cost high-rise projects where loans are likely to conform, sales rates have been high. Most of the major projects look on track to hit 70% by the time of completion. Most likely to be effected are smaller low-rise projects near downtown and condo conversions in downtown.