Condominium Appreciation

[TheHarvester]

Originally Posted by achtungpv

One of my co-workers did the math and it would take 38 20-story towers to house 25K people. They'd have to tear down the office buildings to make that much room. I guess all the downtowners could work as doormen at other towers. I don't think the Mayor has really thought this through

The thing I disagree with in your comments is the idea that downtown doesn't have enough jobs for 25,000 people. If that's true, then why does it seem that about 50,000 cars head into central Austin every morning? EH?

Most downtown workers don't live there. Housing 25,000 people in the central area might be a financial risk for condo investors, but it's very smart in terms of urban planning. There are no residences in the Frost Bank tower or most of the other tall buildings downtown. Wouldn't it be nice if you could commute by walking across the street instead of sitting on Mopac or I-35 for 40 minutes, barely moving?

[achtungpv]

Originally Posted by TheHarvester

The thing I disagree with in your comments is the idea that downtown doesn't have enough jobs for 25,000 people. If that's true, then why does it seem that about 50,000 cars head into central Austin every morning? EH?

Most downtown workers don't live there. Housing 25,000 people in the central area might be a financial risk for condo investors, but it's very smart in terms of urban planning. There are no residences in the Frost Bank tower or most of the other tall buildings downtown. Wouldn't it be nice if you could commute by walking across the street instead of sitting on Mopac or I-35 for 40 minutes, barely moving?

That's right, most downtown workers don't live there and 98% would have no desire to ever do so and I don't think they'd give up their job for someone that moves in downtown.

[TheHarvester]

OK, good point auchtung. Assuming that the people who want to live downtown are the same people who will work downtown is where I went wrong in my argument.

However, in planning for a future in which traffic congestion will only worsen and gas prices are likely to rise, the incentive to live closer to work will increase. This will probably create multiple mini-downtowns, instead of a core city surrounded by bedroom communities. And of course this is already the case as we see many major employers in places like Round Rock, Plano, etc.

Unfortunately, there still exists the problem of people living in one suburb and commuting to another. I know people who commute to Round Rock from Leander, for example. But the cost imposed on people through lost time and the financial burden of driving a lot combine to push people towards making better choices about locations.

One demographic you might not be considering is people like me. I will be starting a new business soon and I'll be working from home. I'd most like to live near downtown. There are many others who might fit that profile. I agree with your original comments, however, that the condos are going up much faster than the market will keep up with and therefore they are very risky as investments.

[austin-steve]

The short answer I've heard from delevopers and economists is that the first wave of Austin condos will have enough demand, but that if everything in the pipeline were to in fact be built out, there will be an over supply. The expectation is that some of the projects will be put on hold or not built.

Now, what I don't know is what the definition of "first wave" is. I don't know if that means everything that's already broken ground, or everything completed, or what.

As far as the general market, I haven't run stats on July yet, but I'm sensing not a slowdown, but a reduction in intensity and in some areas. Inventories seem to be climbing also.

This may just be the summer winding down, but for example, I just noticed today that the Active homes in Villages at Western Oaks in the 1600-2100 sqft size are priced less than the Pending and recent Solds. I don't think that area is going down by any means, but it's been really hot the past couple of years and might be taking a small breather.

Steve

[achtungpv]

Completely agree, TheHarvester.

Unfortunately, cities in the Southwest & Texas really grew up after A/C & the automobile and are not built for pedestrian travel. IMHO, in 50 years, unless there's a new power source for cars (corn ethanol ain't it) you may see flight away from all the "hot" cities since they are designed for long commutes and that's just not going to be financially feasible for most folks.

[TheHarvester]

Originally Posted by austin-steve

...if everything in the pipeline were to in fact be built out, there will be an over supply. The expectation is that some of the projects will be put on hold or not built.

Thanks for the reality check, Steve. If you look at the plans for most cities, you can get the impression that they're about to explode with new highrises of all sorts, but that's because those plans tend to hype the growth and fail to take into account the fact that many of the "plans" are just someone's idea that is contingent on dozens of critical factors aligning.

In other words, I think you nailed it. We won't see a full build-out of those condo projects because people who create 35-story central-city residential towers aren't idiots. They're smart investors and they won't even break ground on such a project if market demand isn't reasonable expected to keep up with their plans. I just hope we don't end up with half-built highrises that make the old Intel skeleton look like a tiny bone fragment by contrast. Imagine if the largest places got built up to their full height and then abandoned! That can't happen, right?

[FromCalitoSteinerRanch]

Good Statesman article...

Austin condo market: How much is too much? (broken link)

[TheHarvester]

Originally Posted by FromCalitoSteinerRanch

Good Statesman article...

Yes indeed. That's quite a splash of cold water in the face.

It's so important to get these reality checks whenever there's a hot trend. Trends are, almost by definition, temporary and ephemeral. The Austin condo frenzy is already slowing down, and with all the new highrises on the books I'd place my bets on "the peak is over." If you can find a bargain condo, great. But for those who want to invest in speculative high-end condos in buildings that haven't even broken ground, ya might want to just put the cash in a savings account.