High-rises: No holding back

Steve Brown:

But developers face a challenge in filling so many costly units

01:55 PM CST on Friday, December 16, 2005

Dallas developers aren't buying all the chatter about a housing bubble.

You can tell it by looking at all the high-rise condominium projects in the works.

There are about 15 projects with more than 1,700 luxury condo units being offered in the Dallas area.

Although that's a fraction of the total housing construction in North Texas, the pool of buyers willing to pay as much as $450 per square foot for high-rise living can go only so far.

Compare that price tag to the average cost of a home in the Park Cities – $273 per square foot. And the average pre-owned single-family home in North Texas sells for $89 per square foot.

At least seven more condo projects are on the drawing boards for Uptown.

With the high-rises already on the market, the neighborhood could add 1,000 units or so.

Most of the latest deals have something in common: They're all getting larger.

With rising land and construction costs, most developers can't afford to build fewer than 100 units.

That means even more high-rise condos to find buyers for.

And their success won't depend just on the strength of the local housing market.

With as many as 30 percent of the pre-sales in these buildings going to what are believed to be investors – some from California and Florida – a housing crash in out-of-state markets could affect demand here.

If that happens, some of the condo projects being touted won't make it out of the planning stage.

Stoneleigh project

Speaking of high-rise condos, the developers of the Stoneleigh Residences, a $60 million project adjacent to the historic Stoneleigh Hotel, have hired McCarthy Building Cos. as general contractor for the project. McCarthy is also building the new W Dallas Victory Hotel and Residences.

McCarthy subsidiary Residential Constructors LLC is scheduled to start work on the building in the first quarter of 2006.

Developers Prescott Realty Group and Apollo Real Estate Advisors LLC plan to have the 97-unit condo tower, plus a remodeling of the hotel, done by late 2007.

B&N off to the mall

Barnes & Noble is joining the tenant lineup at the new Prestonwood Town Center shopping mall under construction at Montfort and Belt Line roads.

The bookseller has announced it will build a new store in the shopping complex, and then close its store at 14999 Preston Road.

Wal-Mart is also opening a store in the center.

Big business in Big Easy

There are signs that the storm-battered city of New Orleans is returning to life.

The Dallas office of Jones Lang LaSalle recently completed the sale of Causeway Plaza, a 336,599-square-foot office building in the New Orleans suburb of Metairie.

The sale of the 90 percent leased building to the Feil Organization of New York was arranged by Evan Stone and Linda Simpson on behalf of an institutional investor.

"While the company invests nationally, its willingness to further commit to the Gulf Coast is testament to their belief in the resiliency of the market and bright future for New Orleans and the surrounding communities," Mr. Stone said.

In a bigger coup for the Crescent City, the National Association of Realtors has announced that it will hold its annual convention in New Orleans next November.

The Realtors considered moving the show – which attracts more than 20,000 visitors – but after research decided to stick with New Orleans.

Note ...

Robert Lynn Co., a Dallas real estate service firm that has been in business since 1962, has joined NAI Global. The New Jersey-based firm is an international network of independently owned real estate brokers with 300 offices.

Housing Price Appreciation Cooling Slightly

by Kenneth R. Harney

The housing price appreciation boom isn't dead, it's shifting to new real estate markets. Arizona and Florida are on fire, but San Diego and Boston -- once the hottest markets in the country -- are now distinctly moving into a cooling phase.

The third quarter appreciation report issued by the Office of Federal Housing Enterprise Oversight (OFHEO) last Wednesday documented a modest decline in the national average annual appreciation rate -- 12 percent versus 14 percent last quarter. But the report also identified a new batch of leaders in house price growth: Arizona, where the average home soared a stunning 30 percent in resale value between the third quarter of 2004 and the same period this year, and Florida, which now accounts for 11 of the top 20 fastest-appreciating metropolitan real estate markets in the U.S.

Arizona and Florida replace California and Nevada, which had dominated OFHEO's hot-spot list for much of 2004-2005. Now California has just one market in the top ten, and that is relatively tiny Merced. Phoenix-Scottsdale was the fastest-appreciating major urban area over the past year, with average price gains per existing house of 34.4 percent. Prescott, Arizona saw average gains of 28.3 percent and Tucson gained an average 24 percent.

Florida markets sizzled at record-breaking rates, higher than any time in the past three decades: Cape Coral (33.2 percent), Naples (32.3 percent), Sarasota (30.4 percent), Orlando (28 percent) and West Palm Beach and Fort Lauderdale (26.7 percent).

The slowest-appreciating markets in the U.S. last year, according to OFHEO, were in the Rust Belt and parts of the Rocky Mountain region. Mansfield, Ohio, for instance, came in dead last among 260 markets with a 0.76 percent annual appreciation rate. Greeley, Colorado, was next slowest with average value gains of 0.7 percent in the third quarter but a net 2.2 percent gain for the full year. Denver saw just a 4.1 percent gain during the 12 month period covered by the study.

Texas markets continued to show generally modest growth rates -- Fort Worth gained an average 3.8 percent, Dallas 4.2 percent and Houston 4.6 percent.

Among the previously-sizzling markets now showing pronounced slowdowns are metropolitan Boston, which registered a 7.2 percent annual appreciation rate -- down from double digits throughout much of 2001-2004 -- and San Diego, which saw appreciation in excess of 24 percent last year. San Diego's third quarter rate of gain -- 1.7 percent or 6.8 percent annualized -- portends more significant cooling ahead. Boston's annualized quarterly rate was even lower -- 3.6 percent.

The new OFHEO numbers support the view of National Association of Realtors chief economist David Lereah that the real estate market is headed for a "return to more balance" -- especially in the once-superheated markets of the West Coast and New England. The appreciation action instead has now shifted south -- to the desert and to Florida -- in part because of net population inflows to those areas plus transfers of investment dollars out of the cooling markets.

A front -- page New York Times article last week, for instance, described a Long Island homeowner who sold his house for $550,000 and bought a larger home in St. Augustine, Florida, free and clear of mortgage debt for half of his tax-free gains. The seller said he knows of "dozens" of others from his area who were making similar moves.

But once prices inflate in Florida and Arizona to noneconomic levels -- out of line with what's affordable by in-migrants and local households -- those markets too will inevitably correct and begin to cool off.

After that, where are the next potential hot spots? Look to areas where prices are relatively moderate by national standards, and where appreciation rates have been steadily moving up after long periods of low annual gains. The new OFHEO data suggest a possible future contender: Utah, which had a 15 percent rate of gain this past year, after being among the slowest-growth states for years.