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Market News and Trends

Downtown Austin Condos — market environment


Today’s Austin American-Statesman included a very short article, an inset really, that was interesting:

Downtown Austin condo sales update

The focus was on five newer condo projects that were caught in the housing downturn with a glut of competitive highrises.  The short version is that something more than 400 units out of about 1,000 in these five projects are still available at prices ranging from the mid-$200,000’s to more than $4,000,000.

How do 400 units of unsold inventory affect the downtown Austin market?  Significantly.  The projects discussed in today’s article are not sold through our MLS, so direct comparisons are difficult.  Reviewing MLS sales that must compete with those new condos, though, is straight-forward.  Here’s a quick summary:

Austin Downtown Condo Stats - All

Click on that chart for easier reading, but I’ll just highlight a few items:

     — Over the past six months, sales have averaged about 14 units per month.
     — At that pace, current MLS listing inventory represents 8 months’ supply — higher than a “normal” market with 6.5 months of inventory, but just barely into “buyers’ market” territory.
     — The average list price of condos now on the market is 63% higher than the average sale price of those that have sold, even though the average available property is just 17% larger than the average of the units now on the market.
     — Median values are more similar, indicating distortion of the averages by a few very high prices.

This is a highly varied market, with different segments behaving very differently.  One way to slice the data is by “# of bedrooms”:

Austin Downtown Condo Stats - 1 BR
Austin Downtown Condo Stats - 2 BR
Austin Downtown Condo Stats - 3 BR

Again, you may enlarge those charts, but they are snapshots of the 1-bedroom, 2-bedroom, and 3-bedroom market segments.  Highlights:

From a seller’s standpoint the “best functioning” segment is 1 bedroom condos, with 48 active listings and 36 sales in the past six months.  At that pace current inventory would last 4 months — conditions that noticeably favor sellers.  The average sale price in this segment was much nearer the average list price of available listings, indicating that sellers were in a strong position in negotiations.  There are now more than 4 times average monthly sales under contract, indicating a sharp rise in demand in this market segment.

More 2 bedroom units have sold in recent months, but there are many more for sale — about 7 1/2 months’ supply.  Such slightly over-inventoried conditions generally favor buyers, but this market is close enough to balance that some more desireable buildings allow sellers to negotiate from strength.  Other buildings and projects sell at a larger discount if sellers genuinely want or need to sell.  With pending contracts numbering just twice average monthly sales, there has been a slight uptick in demand recently, but not as broadly as in the 1 bedroom segment.

With almost 14 months of inventory the 3 bedroom condo market strongly favors buyers.  Small numbers of listings and sales allow price extremes to dramatically influence averages:  The average active list price is 85% higher than the average recent sale price; the median list price is 144% higher than the recent sale price.  Just 1 pending contract may indicate a dip in demand, or just a small sample, but by any analysis this market segment is weak, and not improving.

Condominium sales are perhaps the most location-specific of all residential real estate, and each building or project downtown has its own character and ambience.  That brings us back to the five newer projects in today’s newspaper article.  These are all attractive buildings in very good locations.  For the most part, these projects were designed for the upper end of the downtown market, which has suffered in recent years.  The important topic for this discussion, though, is inventory.  In a downtown condo market that is  oversupplied with just 119 active listings, the projects discussed in the Statesman today add another 400 units for sale — increasing the total supply by a factor of almost 4!!!!

[Note:  There are about 900 more condominium units for sale today in the city of Austin, and another 150 elsewhere in the metro area.  Some of those may attract a few buyers who also shop downtown, but the downtown market area is a unique environment and competition elsewhere in town is not a strong influence.]

There is almost always a special attraction for new construction but there is obvious pricing tension in downtown condos as well, especially for larger and more expensive units.  It is great to see this downtown market on the move again, and both new and resale  condos will continue to sell.  At the high end sellers will need to be patient or aggressive, or both, whereas many mid-range 1 and 2 bedroom properties will find a pool of interested buyers.  That said, there is every reason to believe that downtown Austin generally — new and resale condos combined — will remain over-inventoried and very competitive for a long time to come.

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About Bill Morris, Realtor

More than thirty years of business experience (high tech, client service, business organization and start-up, including many years in real estate) tell me that service is the key to success and I look forward to serving you. I represent both buyers and sellers throughout the Austin metropolitan area, which means first-hand market knowledge is brought to bear on serving your needs: -- Seller Representation is a comprehensive process that begins with thorough market analysis and consultation, continues with properly staging the home to achieve the highest price possible in a reasonable time on market, a complete program of marketing and promotion, ongoing updates and communication, closing coordination, and follow-up throughout (and after) the sale. -- Buyer Representation is also full service: shopping, previewing, price and market consultation, contracting, negotiating, coordination of inspections, appraisals, repairs, and closing details, and follow-up beyond the closing of your purchase to ensure your lasting satisfaction. Because the real estate industry is becoming more sophisticated and challenging every day, you need a professional that understands the industry and is positioned to stay ahead of the game. I go the extra mile to help you achieve your goals. That's why I constantly research the market and property values so your home is priced effectively from day one. I also make sure the public knows your home is for sale by using innovative advertising and marketing techniques to attract potential buyers.

Discussion

3 thoughts on “Downtown Austin Condos — market environment

  1. Hey friend can i publish some paragraph of your article on my little blog of university.I have to publish a good articles out there and i really think your post Fits best into it.I will be grateful to give you an source link as well.I have two blogs one my own and the other which is my college blog.I will publish some part in the university blog.Hope you do not mind.

    Posted by Eva | May 21, 2011, 10:15 PM

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  1. Pingback: Downtown Austin Condos — market environment « Bill Morris' Austin … | Market My Home Local - May 21, 2011

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