Austin Property Talk

October Newsletter

My October newsletter is now posted in the Newsletter archives section on the left had side of this page.  I didn't have the content to put together a personal letter with pictures this month but I will in November.  Enjoy - as always if you have feedback, I welcome the input.   ryan@stonehavenrealty.com

Mortgage Market Watch

Here is your mortgage market watch for the week of October 26th. 

One of my goals as a real estate consultant is to provide my clients with as much valuable information as possible.  Naturally, one of the biggest questions on the minds of home buyers and sellers is; how do interest rates look?  Its important to pay attention to the details because the headlines can sometimes be deceiving.  I receive weekly briefs from my mortgage partners and I will summarize and pass along the important facts.  This information is provided by the Mortgage Market Guide.  

Its important to remember that weak economic news normally causes money to flow out of stocks and into bonds, helping bonds and home loan rates improve.  While strong economic news typically has the opposite result. 

Two weeks ago, the Core Consumer Price Index (CPI) was reported higher than expected, indicating inflationary forces may already be underway.  Inflation erodes the value of the fixed return that a Bond provides - therefore inflation has harmful effects on bonds and home loan rates.  Just a hint of inflation can cause home loan rates to worsen which is what we have seen over the past couple of weeks and what economists predict will continue to happen over the next year. The truth is that we may never see interest rates at these levels again in our lifetime. 

In national housing news, Housing starts and Building permits both came in slightly lower than expectations which may indicate that builders are exercising some caution in the face of the First Time Home Buyer Tax Credit which is currently scheduled to expire on November 30th. 

On the flip side, existing home sales came in better than expected.  A vast majority of those sales (45%) were sold to first time home buyers - rushing to move in on the tax credit. 

If you have specific questions about interest rates or the mortgage market as a whole, email me and Ill introduce you to one of my trusted mortgage partners who would be happy to enlighten you on any questions or concerns you might have. 

Elance.com

One of main focuses for the latter half of this year is on increasing my web presence (for instance this Blog - that I still have yet to formally announce) and my overall business branding.  As a result, I'm in the process of rolling out a new business logo to use in conjunction with a number of creative projects.  

My first thought was where the heck do I start with something like that.  Then I remembered hearing about elance.com through the grape vine.  So I logged onto the website and posted the job for the professional e-lancers (graphic designers in this case) to bid on.  I gave a brief summary about what I was looking for and what level I wanted to potentially take the branding to in the future.  

Within 24 hours I had over 25 bids to do my logo and 2-3 drafts of business cards and letterhead.  The bids ranged anywhere from $45 to $299 for that particular project.  I compared cost to each designer's portfolio of work and narrowed it down to 5.  From there, I picked the one that I felt was the best option and could also be useful in the future with other related projects that I might want to tackle.  

I was given 9 designs to choose from. I was able to quickly narrow that down to 2.  Then I had the designer make similar changes to both of the finalists and determine from there which one to go with. 

The tedious part has been the final minute details and changes to make it look exactly the way that I want it to look (or close enough).  I'm on my 5th round of revisions (usually 24-48 hrs) and the designer hasn't quite been able to capture the exact essence of what I'm going for.   

I thought I would share that tidbit with anyone who may have a design, web or creative job that they are looking to hire someone to work on.  I know for a fact that I could not have been able to hire a local firm to do the same work for the same price.  The natural trade off is that the turnaround has been slightly slower that one would anticipate working face to face with a professional. 

Ill report more when the job is completed and give my final feedback. 

Chris and Holly Have Lots to Celebrate!

When Chris and Holly married almost a year ago, they took public vows and made a private vow, as well: They would be out of their apartment and into their own home by their first anniversary. 

Now with their anniversary just two months away, Holly and Chris were ready to take the first step - but what was the first step?  Holly's sister, a client of mine, suggested that they meet with me.  At our initial consultation, I learned that the couple knew a lot about what they wanted in a house, but not nearly as much about what they could afford or what type of homes were available in their price range.  

We spent a lot of time talking about their goals and dreams.  Then I referred them to my trusted Lender to get them pre-approved.  Chris and Holly fell in love with the fourth home we looked at.  I expedited the paperwork, and not they are preparing to celebrate their First Anniversary in their very own home. 

Who's the next couple you'd like to see in their own home?  Be sure to give me a call to discuss how we can introduce them to people they can trust to help make it happen. 

Further Evidence . . .

By this time, the dead horse has been beaten to a pulp by real estate professionals.  Yes, the government is offering a $8000 tax credit for first time buyers.  Yes, the tax credit is set to expire on November 30th (though there has been a heavy push to extend.) And last but not least - Yes, the Tax Credit is stimulating sales. 

A recent article published by the Austin American Statesman reported that according to data supplied by the Austin Board of Realtor, home sales in Austin rose by over 6% in September (year over year).  This significant jump in sales is the first comparable increase in the past 2 years.  Read how the First Time Homebuyer Tax Credit has help fuel sales. 

For many would-be buyers, the security of the tax credit benefit has been the deciding factor in making a decision top purchase.  For others, its allowing for some flexibility to make those all important cosmetic changes. 

The Go-Giver

One of my goals for 2009 was to read at least one book per month.   Learning and exploring new ideas if one of the most important and enjoyable things for me.  I haven't sat down yet to tally the books I've read, but I do know Ive completed some great reading thus far. 

On a recent family trip to the beach, I took along a book that Ive been looking forward to reading.  Its been on my shelf for some time.  I was able to devote more time than usual to reading while I was there and I finished the book in a little over a day.  This book is called the Go-Giver by Bob Burg and John David Mann.  As with most of the books that I read, it is a business philosophy book, but its principles can very easily be applied to the daily life of anyone who reads it. 

The book is written in the context of a parable.  The subtitle being:  A little story about a Powerful Business Idea.  The story follows an ambitious young salesman, Joe, who is a real "go-getter," yet struggling to meet his quarterly quotas.  He can't seem to get out of his own way and hes just recently missed out on a couple massive business deals that instead went to competitors.  Hes beyond frustration. 

Through the advice of a senior colleague, Joe schedules an appointment with a man named Pindar who happens to be an enigmatic speaker, author and mentor.  I picture him as an older Tony Robbins type figure.  Throughout the week, Pindar introduces Joe to a group of "go-givers," each in charge of teaching him one of the Five Laws of Stratospheric Success.  

Without going into great detail on all 5 philosophies, the basic message of the book can be summed up with the Third Law:  Your influence is determined by how abundantly you place other people's interests first. 

I truly enjoy reading these short business parables.  Off the top of my head, a couple of others that Ive read and enjoyed are Referral of a Lifetime and Who moved my Cheese.  I'd recommend any of these three books to someone who migh tbe struggling with change or stuck in a rut of some kind.  They are inspiring and enlightening. 

Benefits of Home Ownership

Aside from the personal and emotional reasons to buy a home, ther are also a number of financial reasons why owning a home is a great decision.  In addition to exceptional home affordability and near historic low interest rates, here are some important financial benefits to owning a home. 

Increased Net Worth:  Few things have a greater impact on net worth than owning a home.  The Federal Reserve Board of Consumer Finance Reports that homeowners have an average net worth of $184,400 compared to just $4,000 for renters. 

Big Tax Deductions:  One of the largest tax deductions available to anyone is the amount of interest paid on a mortgage.  For example, a $150,000 home paid at an interest rate of 5.5% can add up to approximately $8,000 in interest paid.  The applicable tax deduction amounts to a significant savings - effectively reducing the amount of a homeowner's monthly loan payment. 

Long-Term Appreciation:  Over the past couple of years, home prices have corrected and become more affordable in most parts of the country.  That is great news for buyers.  However, it has overshadowed the long-term appreciation of a regular home's value.  The reality is, despite market ups and downs, real estate historically appreciates around 5-6% a year.  Even taken at a conservative appreciation rate of 3%, a home purchased today for $150,000 should grow in value to $364,000 over 30 years. 

$8000 Tax Credit:  Im sure you haven't forgotten. The government is offering an $8000 tax credit for first time home buyers - or for folks that haven't owned a home during the past three years.  The program is scheduled to end soon.  Potential buyers must complete their first tme home purchases before December 1st to qualify for this special credit. 

If you are considering purchasing a home, this is the ideal time.  Call or email me today to discuss your specific situation and how you can benefit from today's market. 

Mortgage Market Watch

Here is a brief overview of how changes in the financial markets have affected mortgage rates over the past couple of weeks. 

Two weeks ago at thier regularly scheduled Open Market Committee meeting, the Fed decided to ration out their remaining purchase commitment of Mortgage Backed Securities through the first quarter of 2010. In other words, instead of committing to purchase more, as speculated, they will space the remaining purchases out over the next six months.  This will be  done in an attempt to provide a smoother transition back to "normal market conditions.

What effect does this decision have on mortgage rates?  In the interim, rates should remain fairly steady.  However, once the Fed ceases its purchases or MBS, interest rates are anticipated to climb steadily - most likely back above 6%.

Last week, the Labor Department's Jobs Report did not  provide promising news, with an uptick in unemployment rates to 9.8%. 

On the flip side, the report on Personal Spending indicated that spending rose in August at its fastest monthly pace in almost 8 years.  However that news must be taken with a grain of salt since a large part of that spending can be attributed to the "Cash for Clunkers" rebate program which is no longer in effect. 

Sales of existing homes were down in August, but pending home sales were up significantly at 6.4% (mostly as a result of buyers working to take advantage of the $8000 First time Home Buyer Tax Credit).

Remember:  With home loan rates still at near historic lows and slated to increase incrementally over the next 6 months, as well as the First Time Homebuyer Tax credit set to expire on November 30th, now is the best time for you to get off the fence and take action if you have been thinking about possibly buying a house. 

If you, a family member, neighbor, friend, or co-worker have been thinking about purchasing a house, email me and we can discuss the best way for you to introduce the two of us.  I have time to help a few first time buyers in the next few months and Id love to spend my time helping those people that you care about most. 

Down Market can be a Good Time to Move Up

As prices of resale homes have been trending downward over the past 12-18 months across many markets in the United States, most homeowners have logically decided that now is not the time to sell unless absolutely necessary.  Now is not the time to trade up for that newer, better and pricier home. 

While that is sound logic, an angle that most homeowners may not have considered is that the newer, better and pricier home may never have been more affordable.  It might make the most sense to sell at a slight loss and buy at a discount. 

What we have seen in the Austin market and is most markets is that the First Time Homebuyer tax credit has spurred on sales in the lower end of the sales price spectrum.  This year, 14648 homes have sold in the Austin area.  Of those, 54 percent (7973), had sales prices under $200,000.   

This influx of buyers has not yet translated to what would be considered the "Move-Up" market segment ($300,000-$500,000).  This segment of the market has accounted for only 15% of sales year to date.  On the flip side, this price segment accounts for almost 22% of the active listings.  

With a limited buyer pool and supply of homes that currently exceeds market demand, home sellers in this position have endured longer time periods to sell, which leads to more price reductions and ultimately a better deal in the long run for a buyer.

In the grand scheme of things, taking a $5,000-$15,000 hit on the sale of a property to turn around and save $20,000-35,000 on the purchase of new home can be a sound financial decision for those who have the means to do so. 

On top of that, when you factor in artificially low interest rates on 15 and 30 year mortgages that can potentially save thousands of dollars in interest payments, now might be the best time to buy that newer, better and pricier home?