Home News Austin Builders Couldn’t Finish Homes Fast Enough. Now Their Product Is Piling Up.

Austin Builders Couldn’t Finish Homes Fast Enough. Now Their Product Is Piling Up.

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For Austin, Texas, homebuilder Leonard Bullard felt like a California gold rush in late 2020 and early 2021.

As out-of-state buyers flocked to the Texas capital, Bullard’s company, Urban ATX, operated at maximum capacity, scooping up dirt and building luxury homes as quickly as possible. At one point, Bullard had 55 of his homes in his over $2 million pipeline. Now he’s down to 25 people at various stages of development and wants to cut that number in half amid a market slowdown.

Bullard, like other luxury builders in Austin, faces the harsh reality that available real estate is too expensive and there are too few buyers.

consideration One of the hottest real estate markets Just months ago, Austin saw luxury home sales plummet 37.6% year-over-year in the three months ended Aug. 31, according to real estate brokerage data.

redfin.

By comparison, U.S. Luxury Home Sales Fall 28.1% During the period.

Inventories are rising as sales slow —A predicament for developers who raced to build bigger, more expensive homes Due to the influx of wealthy buyers due to the pandemic. In September, the number of new home listings over $1 million jumped 266% compared to September 2021, according to Independence Title Co. data. Ultra-luxury properties, including the one on Lake Austin, are insulated from the slowdown, but homes that flew off the shelves last year from $3 million to $5 million took him 30 days to sell and more than 60 days. I’m here.

“The projects are piling up,” said Chester Wilson of Greater Austin Builders, who stopped buying land last year. Wilson estimates that he and others are planning about 50 new homes in Austin’s affluent neighborhoods of Zilker and Boldin He Creek. Unlike last year, when the buyer bought the new home months before it was completed, Mr. Wilson now has three “sitters.”

Because homes take time to sell, Wilson and his partners pooled funds to cover maintenance costs for each home in the pipeline. Recently, they sold the disassembly to another builder for a $17,000 loss.

In Barton Hills, a new five-bedroom home is privately sold for $5.28 million.


Photo:

Rudy Lara

During the pandemic, buyers lured by Austin’s funky cultural scene, a lack of state income taxes, and a burgeoning tech sector flooded in, causing inventory shortages and pushing up prices, according to local realtors. In 2021, sales in Austin above $1 million jumped 89% compared to sales at the same price point in 2020, while deals above $3 million Independence title data shows a 77% increase over the period.

Commenting on the influx of buyers from places like California and New York, Kumara Wilcoxon of Cooper-Sotheby’s International Realty said, “There’s tremendous demand from the feeder market, and you can specify a price and get it. he said.

In areas such as Zilker and Barton Hills, land sold for $300,000 in 2014 will drop in 2019 and 2020, according to Joshua Brunsman of Third Angle Realty, which specializes in land deals. increased from $750,000 to $800,000. By 2021, the Covid-boosted builder was paying more than his $1 million for demolition properties.

Many have built homes to spec, including the developer of an 8,000-square-foot home on Lake Austin in the city’s Westlake neighborhood. According to Zillow, in June he hit the market for $18.5 million. Several other properties worth over $10 million are up for sale in Austin’s Private His Market, and some remain unsold.

Eric Moreland of Moreland Properties, which sells $18.5 million homes, said buyer demand for truly unique properties and floating homes remains strong. He cited several deals over $7 million in recent months, including those sold on the market.because Texas is a non-disclosure statereal estate market data can be opaque, as there is no need to publish real estate sales prices.

The agent described another scenario where in the sub-$5 million market, buyers are more severely impacted by borrowing costs. Andy Allen of Keller Williams Realty said he saw the writing on the wall when the Federal Reserve hinted at a rate hike this year. U.S. mortgage rates hit 20-year high 6.92% in the first half of October. Allen, meanwhile, said the market was overheating. He cited his $2 million home, which he regularly sells for 15% above market value. “It’s not sustainable,” he said.

Austin on spec

BergaGonzalez/Sam Burch Architect (rendering)
BergaGonzalez/Sam Burch Architect (rendering)
BergaGonzalez/Sam Burch Architect (rendering)
BergaGonzalez/Sam Burch Architect (rendering)

Home under construction on Lake Austin has 5 bedrooms and 2 slip boat docks. It went public in June for $18.5 million. BergaGonzalez/Sam Burch Architects (4, rendered)

stock market volatility, inflation Economic uncertainty has since pulled buyers out, preventing sellers from specifying prices, and buyers are now sticking to more realistic selling prices in search of deals, according to the agent. , Austin has recorded 11 sales over $10 million in 2021, a 450% increase year over year. It has been held five times so far this year. Darin Walker of Cooper Sotheby’s International His Realty said:

Tech executive Jeremy Maraskey said he and his wife, Vanessa Benavidez, who worked with Walker to buy a home, experienced sticker shock when they first started looking for a home in April. However, within a few weeks, the market changed rapidly. In August, the couple paid $6.33 million for a five-year-old house in Rollingwood, after the seller purchased his $999,000 listed property in 2016, demolished the existing home, and closed in 2017. built a new house on the site. It went public in May for just under $8 million, according to multiple listing services.

Despite the 21% discount, Malaskey believes he overpaid for the home because property prices are likely to fall another 10% before the market bottoms out. It’s okay to overpay because we were fed up, we wanted to reconcile,” he said. “The value is in owning a house.”

But not all buyers feel the same pressure, especially if their home isn’t finished. “I’m intrigued and people want to walk the slab, but in this kind of market there’s absolutely no urgency to tie anything together at this stage,” Wilcoxon said.

Brandsman has a recently completed 3,000-square-foot home for sale in Boldin Creek, asking for $2.785 million, up from $3.695 million in July. He believes the builder has missed the market, with no higher price offers.”We thought he was five or six months too late,” he said.

Over the past two years, builders say rising house prices have helped offset higher land and material costs, supply chain delays and labor shortages. Without that price cushion, some stopped buying land altogether. Gossett & Co.’s Jared Gossett said his company is becoming more selective about projects. “It resonates with me because a lot of people are fed up with the price,” he said. “I think everyone is sick of paying top dollar.”

Gossett also builds custom homes rather than developing to spec. On several occasions, the company has sold land and signed construction contracts to build homes. It got its own equity and risk from the project. For example, he recently sold a piece of land in Austin’s Tarrytown neighborhood for his $2.1 million to a customer who agreed to pay an additional $2.5 million for a 4,600-square-foot custom home. Mr. Gossett predicted that the house would be worth just over $5 million.

In Zilker, homebuilder Jared Gossett has listed a 5-bedroom to be built for $7.95 million.


Photo:

Celeste Aguirre / Studio Celeste (rendering)

Moreland Properties’ Amy Deane said the stakes are even higher for more expensive lots. She cited a property that a local builder bought last year for millions of dollars. The builder is currently pitching the land for $23 million, including a rendering of her five-bedroom home. A year ago, Dean said there were many buyers willing to pay that amount. Today, however, few people pay the real estate premium before the home is completed.

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Worried about leaving unsold homes on the books, some builders have started discounting properties. One of Deane’s clients, a New York buyer, recently bid her $3 million for a new 4,000-square-foot home, asking for $4.4 million. She said the house would have been in a bidding war last year. This year, the builder responded to the low bid by slashing the price her $750,000. The parties are still negotiating, she said.

In September, Wilson’s Greater Austin Builders slashed prices on two recently completed homes. One, his four-bedroom property, is down from $3.85 million when it went public in September to $3.295 million. “Basically, you can zipline from the Google building,” Wilson said. This was a reference to a tech worker he once hoped would buy a house.

Urban ATX’s Bullard said some buyers have pulled deals in recent months. In mid-August, the buyer of a $5 million custom home in South Austin gave up a $400,000 security deposit after her husband lost her job in the tech sector. I am completing a house on the street.

AustinRealEstate.com’s Crystal Olenbush touts another Urban ATX property under construction in Barton Hills. The five-bedroom home is a month away from completion, but he’s currently listed on his private market for $5.28 million. Ms Orenbush said the property will be open to the public at a reduced price so that it can be moved quickly as soon as it is ready to move in.

Bullard said he is reluctant to cut the price of the $5 million home by more than 10% and Urban ATX is building up cash reserves so it can hold onto properties longer. “At least we need a break-even point, right?” he said. “Otherwise, we’re paying to sell the house. It’s not worth it. We’ll wait for the market to come back instead of renting something out and selling it at a loss.”

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