Posted Jul 22, 2006, 11:06 PM
Join Date: Jul 2002
Gulf Coast Real Estate Articles
Thought you guys might find this of interest. The following are articles appearing in this morning's Austin American-Statesman about the hot Texas Gulf Coast real eastate market, particularly Galveston and Port Aransas:
First Article, Galveston:
Growth wave hits Galveston
Signs of transformation mingle with small-town charms in coastal community.
By Shonda Novak
Saturday, July 22, 2006
The twin 27-story towers of the Palisades Palms condominium project rise above Galveston's East Beach. How hot is the market here on the Gulf Coast? Of the project's 288 condos, 237 already are sold.
GALVESTON — It's all still there.
Institutions such as Gaido's, serving fresh seafood since 1911. Timeworn hotels. Oceanfront beachwear stores and tackle shops. Stately historic mansions. Balmy brown saltwater and the sense of calm that comes as the Gulf of Mexico announces itself and the rest of Texas disappears behind the causeway into town.
Galveston retains much of its old character and charm, just as it has for decades.
But there are jarring signs that a transformation is under way in this coastal city of 60,000 southeast of Houston.
Two giant cranes — not the avian variety — soar over the island's eastern end, where twin luxury condominium high-rises are under way.
Signs hawking $500,000 residences are posted on the Mayflower Inn, which will be razed to make way for the luxury Tuscany Beachfront Condominiums on Seawall Boulevard. Elsewhere along the eastern seawall, Emerald By the Sea is rising, a 15-story condominium with units called Topaz, Diamond, Princess, Sapphire and Ruby.
On the west end of the city, the lime-green-and-white 10-story Ocean Grove Condominiums urge prospective buyers to call 1-866-SEE-GULF. Developers are charting a new course for Galveston, one that is bringing high-rises, new businesses, more residents and new challenges for city leaders. The surge of new development is ushering in new businesses, including chain restaurants overlooking the Gulf of Mexico such as Chili's, Saltgrass Steak House and soon, a Hooters.
Residential development, propelled by an aging population looking for retirement, second-home and resort properties near saltwater, is also booming: An additional 9,500 residential units are expected to be built here by 2014.
"Islandwide, we have not seen this rate and growth of development since post 1900," said Alicia Foyt, public information officer for the City of Galveston, referring to what locals call the "Great Storm" — the hurricane that destroyed many of the homes and killed more than 6,000 people at the turn of the century.
Last year, the city issued building permits for new residential and commercial construction valued at $2.5 billion. During the first five months of this year, the value more than doubled, with $5.3 billion worth of new construction permitted.
Brandon Wade, Galveston's assistant city manager, said the city is prepared to meet this growth head-on.
"We have been working diligently since 1996 to prepare for potential development on the island," Wade said. "Major expansions of our water system and sewer system have been necessary in order to address the demands today. Had we not started 10 years ago to expand our infrastructure, we would not have been able to keep up with the explosive development."
The city completed about $25 million in water and sewer improvements, Wade said. The city is now implementing a $30 million water and sewer bond program, and plans to begin charging developers and customers fees for new water and sewer taps to offset the cost of expanding city services.
"We have approximately $125 million in additional infrastructure needs on the five- to 10-year horizon," Wade said. "It is a very busy time for all of us at the City of Galveston."
The signs of what's to come aren't hard to miss.
Of the more than a dozen mid- and high-rise projects being built or planned, the highest-profile are the twin 27-story condo towers, Palisade Palms, under construction on the far east end of the island.
Other than an adjacent 14-story project, the Palisade Palms being developed by Houston-based Falcon Group is on a part of the island that has remained largely undeveloped — until now. It is the first residential project on East Beach since the 1980s, but it's not likely to be the last.
Falcon Group has purchased adjacent acreage for future projects, including more residential towers.
Of Palisade Palms' 288 condos, 237 already are sold, with Texans snapping up more than half of those units.
One of those is Austin software engineer Tai Ly, who is buying a $700,000 condominium on the 24th floor of one tower. He and his family moved to Central Texas from San Jose, Calif., two years ago and plan to use the condo as a summer getaway. Like many buyers, Ly views his Palisades condo as an investment. He settled on Galveston after ruling out overheated markets in Florida and Hawaii.
"Galveston right now is the best deal I can find," Ly said. He expects the condo's value to climb by $300,000 in the next five years.
Many areas along the East and West Coasts have seen sharp run-ups in property values and home sale prices.
As a result, many home buyers are looking at alternative locations, such as Galveston, said Arnold Tauch, Falcon Group's president and chief executive, in a Houston Business Journal article last year.
Jim Gaines, a research economist with the Real Estate Center at Texas A&M University, confirmed the trend.
"If you want to buy anywhere up or down the East or West coasts, the market is extremely expensive, much more expensive than the Gulf Coast," Gaines said. "We're hearing that people from the East and West coasts are discovering the Third Coast because it's the only coast that has 'affordable' prices."
The remaining units in Palisade Palms range in price from $430,000 to $1.6 million, with the average unit selling for about $425 a square foot. By comparison, Falcon Group officials say, residential towers in Miami are selling for $1,200 to $1,500 a square foot.
Ly opted for a unit in a high-rise, seeing it as less vulnerable than a house during a hurricane, although he said he's not overly concerned about the storm threat. "We lived in California for 12 years, and you don't know when an earthquake will strike," Ly said. "A hurricane is a very manageable risk."
For longtime residents, the surge in development is a double-edged sword.
"There's a lot of construction, new buildings, new people moving in," said Mercedes Cortez, who was born on the island in 1940. "That's good for the economy."
But like many sizzling real estate markets across the country, property taxes in Galveston are rising along with home prices.
In 2001, Galveston's median home sales price was $115,750. So far this year, the median stands at $186,750, according to the Galveston Association of Realtors.
The 65-year-old Cortez said she pays nearly $3,200 a year in property taxes, up 42 percent since 2001; another resident said his property taxes have doubled in the past seven years.
"It's just staggering," said Cortez, who is on a fixed income. "If this house wasn't paid for, I don't think I could afford to live here." Driving along her tree-canopied street in Galveston's desirable and nationally recognized East End Historic District, Cortez points out several houses that Houston residents have purchased as second homes. On a nearby street, six houses are for sale with prices from $425,000 to $475,000.
Like her neighbors, Cortez also has thought about selling her home, one of the few left standing after the 1900 hurricane. But, so far, she always has reconsidered.
"I love my house," said Cortez, who inherited the home from her parents. "That house has seen and held a lot of people, a lot of memories."
The growth also has a negative effect on the environment, said Bob Stokes, president of the Galveston Bay Foundation, a nonprofit conservation group.
"Habitat loss, from wetlands to coastal prairie to uplands, is already the biggest issue facing Galveston Bay," Stokes said. "It really impacts all the bird and fish species that live on and around Galveston Island. Basically they're losing places to live."
Conservation groups have been working to acquire some large tracts to preserve as parks or open space, but skyrocketing property values have made this a difficult proposition, Stokes said.
For Steven Creitz, who lived in Austin for 23 years before moving to Galveston in 2003, the city today is what Austin was like in 1981.
"Galveston is a really cool place — it's hip, it's got it going on," Creitz said. "It's Texas' best-kept secret that everybody is finding out about now." Creitz is spending about $60,000 to renovate a 750-square-foot house in the East End Historic District. He paid $70,000 for the 136-year-old home in August 2005, buying it from owners who paid about $20,000 five years ago. He expects the house to triple in value in the next four years.
Like many locals, resident Nina McKenzie, 21, hopes Galveston's building boom doesn't ruin the city's edgy character and supplant its local hole-in-the-walls with an overabundance of national chains.
"I hope it stays raw," she said. "We like the brown sand and the murky water. Even though it isn't perfect, it's still home."
Home of the 2005 National Champion Texas Longhorns