In today’s Austin Business Journal there is news about the first sign of something we knew would eventually happen. The question has been asked “are there enough condo buyers to buy all of these Austin condos scheduled to be built?” The answer I’ve heard from various sources (economists, builders, Realtors who specialize in condos) is “no, there won’t be enough demand, but the developers know that and many of these projects simply won’t be built, or will be postponed”.
That makes sense, but I haven’t actually seen a project get pulled until now.
From the Business Journal article:
Some developers reevaluating area’s booming condo market
In what may be the first sign that all is not well in the booming local condo market, one of the developments slated for South Austin is unlikely to happen as planned.
Sound familiar? I wonder if more may follow.
Avera Residential has pulled The Magnolia, a 139-unit project planned for 3 acres at 1201 S. Lamar Blvd., from its Web site and sources say the project is in limbo. The development firm that’s focused its attention on South Austin residential projects first announced its plans for The Magnolia two years ago and was actively preselling units earlier this year. The company planned to spend more than $35 million on the project.
It’s interesting to me that this is a South Austin project, not a downtown highrise. Demand for housing in South Austin, especially the closer in South Central areas of the 78704 zip code, has been strong and steady for the past couple of years. And the South Lamar area has gained notable popularity during that time, with a lot of retail and residential activity.
The Avera Development website shows 4 other projects in South Austin, two of which are listed as “sold out”. The other two are listed as “pre-selling”. In today’s world of untrustworthy semantics, I don’t know if “Sold Out” means really sold, or perhaps “fully reserved with a waiting list”.
The other question would be, “Sold Out” to whom? Austin developers have been pretty good about limiting investors, but if a lot of these units were put under contract by investors, or buyers with weak loan credentials, the current challenges in the lending market could cause a lot of those buyers to fall off before closing.
For a map and list of the other current South Austin projects being developed by Avera, click here.
Here’s the problem. Developers operate in pendulum-like swings. Like animals eating more than than they need(that
includes us humans), the developers keep the pipelines humming as fast as possible with loans, upcoming-projects,
land aquisition, and pre-selling units. The more buyers, projects, and loans they line up, the more they are butressed
against prices going up and business going down. As always, they reach a point where the pendulum cannot maintain
its momentum, and completely overhangs its mark. Loans dry up, along with buyers, and they are stuck with product.
They proceed to shut down the pipeline, re-organize, and prepare to overshoot another market in the future. And so on,
and so on, and so on……..
I am pretty sure that the Magnolia lot is the one with a cellphone tower that appears to be located right on it, and it is also right next to the freight line running next to Lamar. When driving past I often wondered who would want to have a cell tower immediately outside their window and live next to a freight line?, and also about possible health concerns from radiation etc. So, I am thinking that the problems are just as likely connected with some design and marketing issues specific to a sub-standard site. After all, what does the author of the article really know as fact rather than just assume in a day dreamy kind of way?
Good points. I was in fact curious about why a South Austin project would be having trouble. It would make sense that it could be reasons unrelated to the demand.
Steve
Next project to be cancelled, delayed or completely redesigned:
http://1155bartonsprings.com/
I don’t see how they plan to sell condos starting at $1 mill in South Austin, in the current credit market. Hell, they’re still trying to sell those condos on the top of the Hilton and how long has that been finished? Note that like the Magnolia, this is also right next to the train tracks.
In my opinion, there would be a larger market for condo buyers if reasonably sized (1600 sq ft or so) three bedroom condos were being built. I think the Circle C in the sky approach is played out.
Solman,
I agree. I can’t even believe people are willing to spend $1M on a place to eat, sleep, shower and hang out. One can argue the “convenience” of condo living, but in most cases the monthly condo fees exceed what it would cost to have full service lawn care as well as weekly maid service in a residential home.
Steve
Hey Steve,
It’s not just the lawn care and weekly location. It’s having ammenities on site. It’s the location where you don’t need to drive your car everyday (if you work and play downtown). Even if you don’t work downtown, your commute is easier as you are going against traffic most of the time.
It’s being close to where most of the activities and cultural and social events in Austin are without have to worry about where to park your car. It’s having a great view from one of the upper floors. Go take a look at the views from the Hilton. They are amazing. There’s also more security if you leave for an extended vacation or trip as the place is monitored 24/7 by human beings (not just a wired alarm system). It’s being close to Town Lake.
It’s not for everyone, but I certainly enjoy it. The big disadvantage is having to live in a much smaller space. So it’s probably not good for families or people that own a lot of things, need space, and a yard. But I don’t have many things anyway. I own a place at the Milago condos and a house in Avery Ranch as well. I’ve lived in both. Although the house is much more comfortable as more than 2 times the size for a little less money. But I save a lot of time living downtown.
Leon
I’m coming to Austin, have always been interested in the town and the people. I’ve stayed at the Hilton and wondered what the inside news is on the condos. Any idea of price, are they being resold etc. Also any other areas you’d think would be great living downtown would be appreciated. Alternative to conventional condos and houses are more my style.
Tom – Here’s a web page that combines all the listings for downtown condos, including above the Hilton:
http://www.austintowers.net/at/downtown_condo_listings.html
You might also want to check listings in the following zip codes: 78704, 78705, 78703, 78722, 78702. Those are your classic Central Austin neighborhoods. ’02 is rough in patches, so walk around the neighborhood before buying.