Condo Liquidity Analysis: Will You Be Able to Sell?

If you are thinking of buying a downtown condo unit that you will eventually sell, you need to think about liquidity. Unfortunately, rapid growth in the number of downtown units has also meant fierce competition among sellers in some projects. With so many sellers and ongoing competition from new units in projects like Spring, it can be difficult to sell.

When thinking about liquidity, you need to start with the building. Since most buyers pick a building and then a unit, being in the wrong building can make it very difficult to sell. Since most units are similar, the market is extremely efficient and the only way to sell in an unpopular building is to drop your price — often significantly.

Last year, buyers purchased units in 22 different downtown buildings through transactions listed on the MLS. Of the 112 2009 downtown sales, there were only eight projects that sold 5 or more units. While we have pointed out many times that MLS statistics ignore developer sales and thus provide and incomplete market picture, they are in fact very accurate for sales by owner as very few units are sold without agents.

To analyze liquidity, we compared the number of units currently on the market in each building with the number of units sold in each building during 2009. We looked for buildings where the total inventory would sell within 9 months. Of the 8 projects profiled, only two buildings met this criteria, The Nokonah with an amazing average of 6 months and Milago with an average of 8. Not far behind, with an average of a year, were Austin City Lofts and the Penthouse condos.

The Nokonah, which leads the list, was the first high-end downtown project. It has an older and less likely to move owner population than projects like 360. While Milago is newer and more affordable, it is notable in the volume of units that sell. In 2009 alone, 24 of it’s 240 units — 10% — changes hands over the MLS. Austin City Lofts has always been a popular and well-respected building with relatively brisk sales.

On the other end of the liquidity spectrum are three slow-moving projects: Five Fifty Five with an expected time to sell of 45.6 months, Cambridge Condos with a 28 month average, and 360 with an average of 27.8 months. It’s hard to understand why 360 — one of the most desirable and successful projects — fares so poorly on the liquidity front. Likely, the issue has to do with the projects success as buyers who successfully purchased units on a well-subscribed wait list are now ready to sell. Many buyers may be holding out for more money than buyers are willing to pay. In addition, year 2 of the project may be a peak time for turn-over.

Equally concerning is the number of projects that did not make the list because sales volumes were too low to evaluate. The Brown Building and Plaza Lofts each had 3 sales during the year. Brazos Lofts, the Shore, and Brazos Place each had just one sale during the year. The Sabine did not have any successful unit resales.

Here are the full statistics on downtown Austin Condo liquidity for the eight projects with enough transaction volume to evaluate: