Downtown Fort Worth condo bust says more about the product mix than the market

By MITCHELL SCHNURMAN

mchnurman@star-telegra,.com

Study the condo market in downtown Fort Worth, and two numbers stand out even more than the 43 percent drop in sales.

The average price, at $235 per square foot, is the highest in North Texas. And the supply, at 30 months of inventory, is about the biggest of any submarket.

By comparison, the nationwide supply has fallen to 12 months, as condo sales are recovering.

In Fort Worth, high prices and a lot of unsold units are not a good combination, even if it’s not a surprise. Three years ago, when many downtown projects were ramping up, Fort Worth was adding jobs and residents at a rapid clip. And drilling in the Barnett Shale was lifting income and confidence across the board.

Developers seized the moment, and by the end of this year, downtown Fort Worth is expected to have 1,038 condos and town homes. That’s almost triple the number in 2005.

After credit markets froze up last year, a bust was inevitable. One high-priced, high-profile project, Le Bijou, went into foreclosure this month. Other properties are leasing units in the hope they can generate enough cash to keep lenders at bay. Some told my colleague, Sandra Baker, that they’re simply holding on until buyers come back.

With their troubles, it’s fair to wonder about Fort Worth’s appetite for downtown living: Just how strong is it?

"We’re not overbuilt; we’re just top-heavy," said Tom Struhs, who spearheaded housing projects on the Trinity River bluffs and elsewhere downtown. "In the next 24 months, if things break right, we could take care of it."

In other words, it’s the product, not the market. Too many luxury units and too few affordable ones — as Struhs has learned firsthand. His Villa de Leon project, on the bluffs in downtown, has 23 units for $780,000 to $2.1 million each, and most are unsold.

If he had a do-over, he would change the timing but not his philosophy. Because the site is unique, he said, "We had to put our best foot forward."

The problem is that others see their pet projects the same way.

"If you can prove to a developer that there’s a great market for 1 million square feet of anything, then eight of us will build it," he said about bubble psychology.

Higher prices are a natural consequence of a building boom, especially downtown. The costs of land and construction are generally higher, and developers zero in on the big-dollar customers, because the potential profits are greater.

But the top of the buying pyramid is a small target audience. If downtown Fort Worth is to become the vibrant place that many envision, it has to have a better mix of low-priced choices.

More than two-thirds of the downtown condos that are for sale are listed at more than $234,000, the median price in downtown, says Nasser Haghighat, research director at Downtown Fort Worth Inc., the local advocacy group.

That median price is already twice as high as a single-family home for Fort Worth in general, which gives you an idea of the limited selection for regular folks. Condos also carry homeowner fees that can easily add $500 a month, depending on the size of the unit and the amenities.

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