Foreclosures in Downtown Austin: Fact, Fallacy, and Analysis

Foreclosures in Downtown Austin: Fact, Fallacy, and Analysis

In this article I hope to share some of the knowledge that I’ve gained by researching foreclosure properties for clients.  Buyers may believe foreclosures are complicated and out of reach.  Generally, I believe this is accurate, but certainly not all of the time.  Knowledge is power, so let’s see what we can learn…

Foreclosures are not new.  Every community is dealing with them.  Austin has escaped the worst of the problem because we didn’t develop to great magnitudes as did Miami, New York City, or all of California.  Certainly downtown Austin is not immune to foreclosures.  We also tend to receive a greater level of interest from the press.  Rather than deny that foreclosures exist in downtown Austin, lets temper misinformation with facts, and if we discover opportunity along the way then all the better.

The facts
In June there were 671 properties posted for foreclosure in Travis County.  155 ended up selling.  Approximately 380 were reposted from prior months.

Foreclosure Statistics

Foreclosure Sales Since January 1st, 2009

A property can be posted for foreclosure and never end up at auction.  This scenario is not uncommon if the borrower and the lender can work out an agreement prior to the auction date.  Also, third party investors can negotiate with the lender to purchase the mortgage (not the property), and work out a new agreement with the borrower.

2009 downtown Austin foreclosures
Since January 1st, 2009 there have been five recorded foreclosure sales in downtown Austin.   Four have been condos.  Two were owned by one person.  Two of the foreclosure sales were won by the banks themselves for the balance of the mortgage.

The four downtown Austin condo foreclosure sales:

1) Avenue Lofts #308, 1092sf, $187,302
2) 360 Condos #2210, 770sf + 105sf, $242,909
3) Avenue Lofts #208, 1092sf, $183,274
4) Nokonah #410, 1849sf + 524sf, $555,624

The opportunity
The current asking prices at the Avenue Lofts, 360 Condos, and Nokonah are $274/ft, $410/ft, $403/ft respectively.  So we can calculate that the two Avenue Loft foreclosures yielded a discount of 37% and 38%, respectively.  The single 360 Condos foreclosure yielded a discount of 23% from the average asking price.  The Nokonah foreclosure yielded a discount of 26%.

The foreclosure discounts above are identical to the opportunities we’re seeing in the open market.  As I’ve reported before, developers are negotiating 25-30%-off discounts, the Brazos Place auction generated a 29% discount.  Buyers are responding en masse:  54 transactions at The Shore since May 1st, and 20 transactions at Brazos Place in one day.

The market is working efficiently and it seems to have found equilibrium.  Market and auction clearing discounts for new developments are 25-30%.

Summary
Even though the number of foreclosure sales in downtown Austin is low, it’s difficult to predict what the future holds.  It’s the best buyers’ market in the past 20 years, maybe more.

Focusing on downtown Austin condos, the data suggests that there are similar opportunities for discounted pricing outside of foreclosure auctions.  The challenges for the majority of buyers interested in foreclosures are limited information, time, and money.  Sifting through the foreclosure postings takes time.  Choosing a property requires knowledge of the neighborhood and the condition of the property.  The most significant hurdle for savvy buyers is the velocity of the all-cash transaction.  A pre-approved mortgage will do you no good.  Fortunately, in this market buyers have traditional channels for finding similar opportunities.

As the saying goes, “cash is king.”  Interested in pursuing opportunities in Austin’s urban core?  Feel free to send me an email.

Jude Galligan, Downtown Austin Realtor
512-226-3414
judegalligan [@] gmail.com

About Jude Galligan

Jude Galligan, REALTOR, Principal of REATX Realty and publisher of Downtown Austin Blog (aka. "DAB"), spends his time matching remarkable people with remarkable properties in Austin’s urban core. A resident owner in downtown Austin, Jude serves on the Board of the Downtown Austin Alliance (DAA) and the City of Austin Downtown Commission. Contact Jude.

Comments

  1. Great research. This flys in the face of downtown being overpriced.

  2. That’s a really good one. Thanks.

  3. avatar Amber Gugino says:

    GREAT post

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Based on information from the Austin Board of REALTORS ® (alternatively, from ACTRIS) for the period through 10/21/14 12:18 AM PDT. Neither the Board nor ACTRIS guarantees or is in any way responsible for its accuracy. All data is provided “AS IS” and with all faults. Data maintained by the Board or ACTRIS may not reflect all real estate activity in the market.

Information being provided is for consumers’ personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing.

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