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March 19, 2009

Is the Austin Condo Market Overbuilt?

Northview To get a sense of the current market conditions, Austin Chronicle writer Katherine Gregor recently spoke with local representatives of the major Downtown Austin condo projects.

Gregor’s article distinguishes between rental units and condominium units, which is an important distinction when evaluating the housing supply. In 2008, 776 new condominiums were completed and available in Austin. Of those, 670 have sold. Currently an additional 790 condominiums are under construction; approximately 350 of those are under contract. That leaves only 546 units to sell over three to four years and no new projects are slated to hit the market through 2012 or 2013.

As a frame of reference, Gregor contrasted Austin's 500+ unsold condos with the current oversupply of condominiums in Miami.  In the Miami area, between 5,000 and 7,000 units (existing and under construction) are unsold.  Such projects, she stated, tend to be deeply discounted, turn into rental apartments, or just go under altogether. Kevin Burns, CEO of UrbanSpace, calculated that Miami is building one condo for every 40 residents; Austin is building one new condo downtown for every 1,022 residents. Contrary to the extreme situation in Miami, the Austin condo towers currently under construction are expected to sell out despite the national economic crisis.

Read Gregor's article, "Pondering Downtown Condos," here.

Another recent article supporting downtown growth was written in Community Impact.

The article cited a 2009 economic forecast from AngelouEconomics. In the forecast, principal Angelos Angelou hailed positive natural growth in the population as the most significant indicator of future housing growth.

Angelou expects that there will be a shortage in housing as builders focus on the national state of the market in lieu of the positive growth that Austin is experiencing.

In 2008, only 8,100 housing units were built compared to the 18,000 in 2007. This year’s unit count is expected to be even lower, at only 6,000. Angelou asserts that the ideal number of home starts for Austin this year is 11,000.

Read the full article here.

 

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