Today's Austin American-Statesman included a very short article, an inset really, that was interesting:
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:
Click on that chart for easier reading, but I'll just highlight a few
-- 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
-- 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":
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.
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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