Quote:
Originally Posted by crewer
I'm curious here now. With so many units going up in downtown and existing units remaining on the market for so long that price reductions are necessary, how much do investors think they'll gain from buying into downtown Austin? And I do mean investors! I've already heard of several people who have contracts on multiple units in the 360 with the intent to flip them.
As you know, investors are instrumental in distorting true housing demands.
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“Distorting?” I don’t know if I would go out on a limb and say that investors “distort ‘true’ housing demands.” If you really think about it, all home owners are investors in their property; even if it is their homestead. Nobody buys a home out of necessity.
What's more, you'd be a pretty foolish if you “invested” in a home, with the intent to flip, and did not complete your due-diligence on the property (whether it be a condo or SFR). Additionally, you must be confident in your ability to achieve a specific cap rate set forth before you buy. The profit in any deal is made on the front end!
Plus, investing is a part of any business. The condo developers don’t necessarily care if a buyer is a flipper or a home owner. They made a sale! That unit is gone! In my mind, a smart “flipper” wouldn’t spend much more than $150,000-$250,000 on a condo unit in the Austin market. If one spends more, you will be really cutting your cap rate down and your unit(s) will have to endure a longer period on the market.
I have not seen any recent numbers on the Austin condo market, but the average single family residence in Austin (1Q2007) sits on the market for about 70 days. And the market, as a whole, has about a 2 month supply – which is considered very healthy.
Nonetheless, developers are becoming wary in both types of residential markets. But the overall, short-term, economic outlook is still positive through 2007 and into 2008.
Also, there’s something that people seem to be forgetting here when discussing the number of proposed and under construction units in this market…the delivery times. Timing is everything, and most of the units in said projects will be delivered over a several year period, i.e., between mid-2007 and the end of 2010 (for the projects already on the table). That being the case, demand should still outweigh supply. On the other hand, I would agree that if every project was planned to deliver their units within the same 6-9 month period, I’d agree that there may be an over-supply situation.
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