With today's release of March real estate statistics, the Austin market posted its ninth consecutive monthly decline. While the news is mixed, the Austin market -- and Texas in general -- have fared better than most any other market in the U.S.

Still, it's not like it used to be. While the average sale price last month was up 5% over last March, sales were down 21% from the same period last year. Today, nearly 40% of houses put on the market are removed before they sell. Price per square foot has dropped by 4%, and the average discount from listing price for completed transactions has increased from 1.9% to 3.5%. It's worse everywhere else, but Austin is still feeling the pain.

A big question is whether there is a bubble in Austin. The consensus is no, although some price decreases are likely this year. The common wisdom is that the economy is strong, net migration is high, and Austin never experienced the boom that inflated values across the rest of the country. These three reasons are compelling, and they are often recited as the fundamental reasons why Austin is different.

Interestingly enough, Austin may be more exposed to a downturn than many experts recognize. The local economy is dependent on technology. This was made very clear during the dot com bust when migration patterns reversed, jobs were lost, and the housing market stalled. Months ago, Austin and San Francisco were named the strongest economies in the country based on the strength of the technology sector at the time. Since then, much has changed. Today, technology employers are beginning layoffs as the sector weakens. While nobody expects this downturn to be as bad as the last one, a tech downturn will effect the Austin market.

As for the second factor, this remains positive as Austin will continue to grow. Austin's buzz has never been hotter -- the Austin brand will draw people to town under almost any scenario. This migration will be an important buffer over the next couple of years. If this pattern changes, it is time to get worried.

The final "fact" about the Austin market -- that it skipped the boom -- is simply not true. While the broad Austin market experienced only modest growth over the last five years, prices in central Austin have soared. Between early 2005 and late 2007- just a little over two years -- prices for single family homes increased by 41% in Area 4 (Hyde Park), 43% in Area 2 (Allandale & north central Austin), 55% in Bouldin (near Zilker Park), and an incomprehensible 2-year gain of 83% in Area 3 which covers East Austin close to downtown. During this short period the typical central East Austin house increased in value from a median price of $168K to more than $255K. In Bouldin, price per square foot for the median house peaked at more than $300 / square foot in the second half of 2007 -- prices that make downtown condo projects look affordable.

Like any other market, it is difficult to believe that prices can nearly double during a couple of good years and then not retreat when the economy slides, mortgage rates rise, loan underwriting guidelines strengthen, and the national market implodes. While Austin remains stronger than almost any other market, central Austin prices may be at risk over the next year. While new condo prices are unlikely to go down -- they are too linked to costs -- any negative market change will certainly add pressure on developers as they try to complete the sales process for new projects.

Here is a summary from the Statesman:

Central Texas home sales continued to slide in March, falling 21 percent from a year ago, the Austin Board of Realtors reported today.March, which had 1,832 sales of existing homes, was the ninth consecutive month that home sales numbers dropped. And pending sales — sales expected to close in April — show that the slowdown could continue. Those sales fell 54 percent, the highest percentage on record, the report shows, to 1,349.Even with the slowdown, real estate experts assert that the Central Texas housing market is faring much better than most areas around the country. But the national housing crisis has jaded consumer confidence, and Austin has not been immune to the slowdown.The area’s median price of a single-family home for March increased by 5 percent year-over-year to $186,680. However, homes are taking longer to sell, with an average of 73 days on the market, an increase of 14 percent. With homes taking longer to sell, more homes are on the market, up 24 percent to 9,638.

Tags: market analysis, mls statistics

There is much speculation about the state of the Austin condo market. With lots of new projects, a national housing crisis, and no precedent for high-rise development in downtown Austin, the common wisdom is that all the new projects will fail.

With the revitalization of downtown, the rapid growth of the city, the strong local economy, and the lack of other downtown housing options, the common wisdom so far has been dead wrong. While some ill-conceived projects will likely never break-ground, those that capture the imagination of Austinites--and that are priced appropriately--will thrive.

Take the 360 project, for example. At 44-stories and 430 individual units, it is one of the most ambitious downtown projects. Today, with the skeleton complete, it is the tallest building in the Austin skyline. Set for completion this year, it is at the point where it needs to have sold 70-80% of units to be viable. Not only is the project now sold out with significant deposits, but there is waiting list with enough buyers for an additional 140 units. While some sales may fall through -- the fact of the matter is that demand has been extraordinary for 360. With great views, a great location, and competitive pricing, 360 shows how strong the downtown Austin condo market is for the right project. With this much demand, 360 buyers should expect to see strong appreciation on their units over the next few years.

A report this week from Residential Strategies provides additional details on the state of the downtown Austin condo market. The report, and other sources, provides the following snapshot of several projects' sales/reservations through the end of first quarter 2008:

* 360: 430 units total; 430 committed. 140 unit waiting list.
* The Shore: 192 units; 189 committed.
* W Austin: 196 units; 140 committed.
* Four Seasons Residences: 166 units total; 60 units committed.
* The Austonian: 188 units; 45 committed.
* SoCo Lofts: 69 units; 41 committed.
* Zilker Place: 74 units; 29 committed.

While different projects have different standards for reservations, the data clearly illustrates a few key market forces. First, near-term projects such as 360 and The Shore are doing great. Second, the most affordable projects are selling well, even if they are outside the downtown core. Finally, the ultra-luxury projects--many of which are still a couple of years out--remain the most at risk. While the Austonian, Four Seasons, and W have broken ground--many of the most expensive units may be the hardest to sell.

All-in-all, the news is good. With clear market data, there is no doubt that thousands of people are willing to live downtown. While some of the projects that have broken ground still have work to do, the projects that do break ground in this environment are likely to be successfully completed. While the local real estate market is far from perfect (though much better than the rest of the country), the state of the downtown Austin condo market remains strong.

Tags: market analysis, mls statistics

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
3.57......3.91..................2.48

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.

Tags: market analysis, mls statistics, news

On July 20, June MLS numbers were released, showing the first drop in June sales in five years, even as prices rose by more than 7%. As the strength of the Austin market has defied national trends over the last year, it's natural to worry whether this might signal the beginning of the end.

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:

In June:
- 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.

Tags: market analysis, mls statistics

June sales were announced today by the Austin Board of Realtors and the news is interesting: volumes were down 6% from June of 2006 while prices were up by 7%. This was the first June drop in volume in the Austin market in 5 years.

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.

Tags: mls statistics, news

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,

Tags: mls statistics, market analysis

Interest rates keep going up. Sub-prime lending has been cut back. The rest of the country is watching housing values drop. In Austin, however, it's a very different story.

May real estate statistics were released today and the numbers show a surprisingly strong market. According to the Office of Federal Housing Enterprise Oversight, housing prices in Austin are up 10% so far this year. According to MLS statistics released by the Austin Board of Realtors, the average number of days on market in May was just 55 days and the median sales price was $183K.

As we've mentioned before, these numbers provide a context for looking at the Austin condo market without providing the complete picture: many condo projects are privately marketed so that the units never hit the MLS and aren't included in the monthly statistics.

Tags: market analysis, mls statistics, news

How big is the market for million dollar condos in downtown Austin? Developers are betting that hundreds of buyers are willing to invest $1 million or more on high end units in projects like the Austonian, 21c, the Four Seasons Residences, and in the condos at the W hotel.

To get a sense for the competition for million dollar homes and condos in the Austin market, I scoured current MLS listings for homes and condos currently on the market with asking prices above $1 million.

Surprisingly, there is an amazing amount of single family home inventory priced over $1 million:

Current MLS Inventory by Listing Price
$1M + -- 572 Homes
$2M+ -- 171 Homes
$3M + -- 70 Homes
$4M+ -- 29 Homes
$5M+ -- 12 Homes
$10M + -- 1 Home

And how about the Austin condo market? Currently, there are just 9 condos priced over $1 million in all of Austin. While the MLS numbers include projects that are being marketed directly without an MLS listing, the number is still amazingly low. While the number of houses in Austin with a Tax appraisal over $1 million has grown from 1,602 to 2,981 between 2005 and 2007, the million dollar market is the fastest growing segment of the Austin real estate market. While it remains to be seen if downtown Austin demand grows proportionally, it seems quite likely.

Tags: market analysis, mls statistics

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.

Tags: nokonah, market analysis, mls statistics, costs, investment

Now that it is open and available for occupancy, the 240 unit Milago is completely sold out. Despite the fact that all units have been purchased, it is curious to see 30 units -- 1 / 8th of the building -- currently listed on MLS. While some could be from people whose plans have changed between when they signed the contract and now, the most likely option is condo flippers.

It will be interesting to see what happens. While the Austin market increased by 5% last year, this is hardly the sort of growth that gets flippers excited. Now, with 30 units competing for buyers, it will be interesting to see how fast they turn and whether prices increase as the market strengthens.

Tags: investment, mls statistics, market analysis, listings

An incredible 75% of the 430 units in Novare Groups' 44-story 360 project are now under contract after just 3 weeks on the market. The units, which are mostly priced between $190K and $550K, rank among the most affordable units in the current downtown condo boom. This demonstrates, once again, that there is tremendous pent-up demand for reasonably priced units in central Austin.

Today, there are only 9 listings in the Austin MLS (360 is being marketed privately and is not reflected in the MLS numbers) in all of central Austin — areas 1b. 1a, 2, 4, 6, 7. To find similarly priced homes, buyers need to look far outside the city center. In contrast to other options, central high-rise developments seem to be very attractive to buyers. As this sales rate shows, units priced under $400K will move very quickly -- there will likely be ongoing demand to fill quite a few projects like this one. Novare, in fact, is planning additional 35-story and 40-story tower on the central post office site and an adjacent lot for completion by 2010. These units will priced in a similar range to the 360 project.

AustinTowers ongoing reader survey (please take our survey if you haven't already!) has shown so far that more than 90-percent of potential downtown Austin condo buyers are looking for units priced under $400K with the median target price for buyers currently around $300K.

Tags: 360, market analysis, mls statistics, news, investment

One problem with analyzing the downtown austin condo market is the lack of good sales data on many of the projects currently on the market. When realtors sell traditional single family homes or resell condo units, they are listed on MLS and the actual sales price is recorded in MLS and available to any participating real estate agent. Unfortunately for buyers and sellers, many of the new downtown high-rise projects are being marketed by in-house sales teams without the assistance of realtors. As a result, these units never hit MLS, aren't included in market statistics, and the comparable sales data isn't available to realtors. The result: downtown condo buyers have very little information on sales prices and discounts in the major downtown projects.

The only upside is that the lack of transparancy may help buyers get better deals. When a large project is marketed on MLS, developers are very resistent to give discounts as every future buyer will ask for the same deal. They are much more likely to stick to list price or standard discounts to protect their margins. When the sale is non-public, the developer doesn't have to worry about providing a break on an uncontested unit as nobody else will know.

This trend towards in-house marketing is one of the reasons that the current MLS statistics show a 14% year-over-year drop in February of condos and townhomes in Austin. While sales volumes of single family homes are flat amid tightening supply and quicker sales, the condo and townhome data is useless because it does not include any of the in-house sales.

Tags: market analysis, mls statistics, investment

The market for high-end homes has been one of the fastest growing segements in the Austin market. According Sam Chapman, "there are [currently] over 400 homes priced for over one million dollars on the market in the Austin area. The average price of these Austin luxury homes is $1.8 million and the average size is over 5,000 square feet. The most expensive listing is an over 17,000 square foot home that is listed for $7.5 million. There are more than 40 homes on the market in Austin priced over $3 million."

When you look at actual sales over the last few years, exceptional high-end homes near the water, in Westlake, or downtown now sell for as much as $500 / SF or more. No matter how nice a smaller house is in a prime neighborhood, it's rare to see houses under 4,000SF sell for more than $300SF. The average for the Austin area is well under $150SF. So, the key is that the luxury market is a distinct market of large houses in select locations, on prime lots, with very high-end finishes. In December 2006, 28 houses and condos in Austin sold for more than $1 million. In the scheme of things, this is not a very large market.

Read more to see detailed statistics on high-end sales by MLS area . . . . Read More...

Tags: market analysis, mls statistics, news

The Nokonah, A luxury high-rise project completed in 2002, was one of the first successful projects that helped to ignite the current condo boom in downtown Austin. The 11-story project is located at 9th and Lamar just north of Whole Foods and on the western border of downtown. When the Nokonah was built, the real estate market in Austin was stalling as the regional economy slowed. It was not clear how well the new project would do. Five years later we know the answer: the project sold out and the buyers have seen significant appreciation in the value of their units.



In order to better understand condo values in the downtown market, we've begun a comprensive analysis of public tax records (tax records are available online through the Travis Central Appraisal District) to better understand downtown condo market values and how they have changed over the last five years. This analysis, which tracks every unit in the Nokonah, shows appraisal value and $ / SF by floor, apartment size, # of bedrooms, and year. The data is fascinating and will be a useful tool for anyone looking to purchase a downtown condo (Register for the full report).

For example, the analysis shows that the average appraisal value of Nokonah units rose 61% from $233 in 2003 to $376 in 2006 - a growth rate of 17% per year. This is more than trible the 5% annual growth rate in sales prices for the Austin market during the same time period. Even as other projects have hit the market, Nokonah values have continued to increase in value.

While the average appraised value is $376 / SF today, there is incredible variance. If you're trying to figure out what the right price is to pay for a new unit, the Nokonah data is very interesting: current appraised values actually range from $230 / SF to $498 / SF depending on size, floor, bedrooms, etc. In future postings, I'll dive deeper into the factors that make a unit more or less valuable.

Over the next few weeks, I plan to post more information from the Nokonah analysis in this blog. In addition, I am going to provide all registered members with direct access to the spreadsheet with all of the data. This will be a great tool for anyone who is trying to ensure they don't overpay for an Austin condo or anyone who is interested in better understanding Austin condo market dynamics. Registration is absolutely free -- just click the link on the top of the page and complete our very brief survey. The summarized data will be published in a future post, and it will help AustinTowers better understand our readers. Please register -- you'll receive a link to the full Nokonah analysis later this month!

Tags: investment, mls statistics, market analysis, listings

It's not easy to get a clear picture of downtown condo sales volumes. Real estate sales statistics are reported by MLS area, and the downtown area cuts across a few zones: Area 4 runs from Guadalupe to I-35. Area 1B runs from Scenic on the west to Guadalupe / Lamar. Both are bounded on the south by Town Lake and the north by 2222. There are also some projects south of town lake in Area 6. While most of the downtown units are captured in these statistics, there are also some units near the university, in Tarrytown, and in the other corners of central austin contained in area 1B and 4.

So what do the numbers show? Downtown condo sales grew from 2004-2006 by 33% while sales volumes in the larger Austin market grew by 27%. In fact, downtown condo sales as a % of all Austin condo sales actually shrunk from 31% to 25% during the same period. In 2006, a total of 619 condo units were sold in areas 1B and 4.

I draw three conclusions from the numbers: Read More...

Tags: market analysis, investment, mls statistics, news