Doesn't look like the Austin DT condo market is thriving quite yet. Two more major projects face foreclosure.

[verybadgnome]

When I first came to Austin in '98 I stayed at a hotel on that corner. I thought the location was nothing special then with an interstate, 6-lane road, and restaurants like Jack in the box and chinese food you'd want to avoid. Only good things about location is you can walk to downtown and proximity to the lake.

[jobert]

Originally Posted by austin-steve

I remember reading the initial press release for Star Riverside a year or two ago, and all I could say was "oh brother". It never had a chance, period.

It was a stupid concept, way over priced, and it truly amazed me that anyone could be so dumb as to think that a super high end, luxury project would make it in that specific location. It's not "downtown". The quotes from the developers in the news article were fantasy, wishful thinking, and very naive. The people are not from around here. They could have asked a few Realtors and been told quickly "ain't gonna fly in that location".

How do people this dumb get access to so much money? And who are the bankers that looked at the initial project and thought "looks good"?

Steve

I remember the Australian developer wanted to price the higher-end units at 1 mil+, describing them as the "un-gettable get" (with scenic views of the occasional dead body floating under the 35 bridge). The price told me that the developer was trying to prematurely transfer the risk onto the buyer. The units might be worth that 15 years from now.

You wouldn't buy a stock for 50% more than it was worth because your broker told you to do so, would you?

[Austin97]

Originally Posted by jobert

I remember the Australian developer wanted to price the higher-end units at 1 mil+, describing them as the "un-gettable get" (with scenic views of the occasional dead body floating under the 35 bridge). The price told me that the developer was trying to prematurely transfer the risk onto the buyer. The units might be worth that 15 years from now.

You wouldn't buy a stock for 50% more than it was worth because your broker told you to do so, would you?

the difficulty is knowing what something is worth. The most reliable way to price real estate is by ignoring the appreciation and treating it on a discounted cash flow basis. For example, sum the cash flows over the next 10 years and compare that to other investment vehicles. If you want you can incorporate some appreciation (say 3%-5%).

[inthecut]

I think real estate as an investment vehicle has jumped the shark essentially permanently now. 5% is on the high side, actually, even in Austin, for the next 5-10 years....look more for a long term 2-3% tops, hardly the stock market alternative of 2003-2006. If you want high returns, buy a paycheck loan store franchise for 25% returns..

[jobert]

Originally Posted by inthecut

I think real estate as an investment vehicle has jumped the shark essentially permanently now. 5% is on the high side, actually, even in Austin, for the next 5-10 years....look more for a long term 2-3% tops, hardly the stock market alternative of 2003-2006. If you want high returns, buy a paycheck loan store franchise for 25% returns..

no kidding. You want an investment? You should have bought CIT stock in early November at 25 cents a share. It's now worth over 27 bucks. What do I know, though.. I don't see how a house is a preferred investment unless it's an extra house for which you receive dividends (rent), or it's a superhot market (which we won't see here).

[inthecut]

Originally Posted by jobert

no kidding. You want an investment? You should have bought CIT stock in early November at 25 cents a share. It's now worth over 27 bucks. What do I know, though.. I don't see how a house is a preferred investment unless it's an extra house for which you receive dividends (rent), or it's a superhot market (which we won't see here).

You won't see it ANYWHERE in the nation....heck, we can't even fund our roads and infrastructure anymore(including in Austin)...yet, we are going to build out exuburbs and city high rise condos for eternity?.....hardly.....actually, we will look back on the hyped/overbuilt residential/condo/retail circa 2001-2006 like we do now per the disco late 70s...just really bad cheesy excess...think McMansions and a Starbucks/Kohls/Target on every corner..

Homes and stores are to live and shop in, not a freakin' poker game!

[dv1033]

Originally Posted by inthecut

The fact is, the city plan was to have a huge corridor of high-rise condos down both sides of Riverside, down to Zilker and I-35, and another two canyons down S. Congress and Lamar.....that turned out to be an absolute bust, just like Las Vegas' idea of canyoning the "Strip" with 1M condos......and the reason for Austin's high-rise condo bust was as much that this city can't support that amount of luxury high-rises as the fact that lending sources dried up at the till....

So, no, the article itself was misleading, not MY commentary....

Dallas and ATL made that same mistake in regards to high rise living, I can't see how developers thought there was this huge market for $400K high rise condos. Houston on the other hand built few high rise condos but shot it's self in the foot with overbuilding 2-3 story condos/townhomes.

[Austin97]

Originally Posted by dv1033

Dallas and ATL made that same mistake in regards to high rise living, I can't see how developers thought there was this huge market for $400K high rise condos. Houston on the other hand built few high rise condos but shot it's self in the foot with overbuilding 2-3 story condos/townhomes.

building too many highrise condos is way better than building too few. It may hurt developers, but it will create affordable housing in the area. The demand will always fill the supply - at the right price. This will get more people living downtown which will absolutely driving spending and activity downtown.

In any case there still arent enough downtown condos for a targeted 20K people living downtown.

[inthecut]

Originally Posted by Austin97

building too many highrise condos is way better than building too few. It may hurt developers, but it will create affordable housing in the area. The demand will always fill the supply - at the right price. This will get more people living downtown which will absolutely driving spending and activity downtown.

In any case there still arent enough downtown condos for a targeted 20K people living downtown.

There aren't enough people in the area that can afford a unit DT at the prices the builders would charge. If it was affordable, sure, you could get 20K of people DT, but builders only build out high-end now, or it isn't worth their while.

Now, if you are talking 20K people living in apartments DT, affordable ones, sure, that can happen as well, but, again, it isn't worth the builders while to build affordable rental units either.

Basically, if they build out at all, it will only be for luxury, or close to it.