Austin Property Talk

Is a Housing Shortgage Coming?

As the nation struggles to shrug off the worst housing crash since the Great Depression, it may be hard to believe a housing shortage could be on its way.  The nation is simply not building enough homes to keep up with potential demand. Just 672,000 new homes were started in April, an annualized rate and less than half the long-term run rate needed to meet the nation's natural population growth.  Read the article: Is a housing shortage coming?

The growth of the Austin economy will continue to outpace the rest of the nation over the next year, according to a forecast from one Texas economist.  Mark Dotzour, chief economist at Texas A&M University's Real Estate Center, predicts that the U.S. economy will slow in coming months--in part the result of forces such as increased global construction costs and the rising price of oil. But Austin is likely to add 20,800 new jobs over the next 12 months, a 2.9 percent increase in employment that will significantly outpace national job growth, he says.  Read the article: Austin will add 20,800 jobs in the next 12 months.

Real estate seller Trulia, Inc. reported 24 percent of its Austin listings reduced prices in June, which is down from 30 percent the same month in 2009. Austin was among metros with the best improvement in price depreciation, with 20 percent fewer homesellers cutting their listing price. The report compiled data from about 9,280 listings. Sellers reduced prices an average 7 percent, shaving off a total $73.2 million.  Read the article: 24% Austin home listings lowered price in June.

Austin Real Estate Wrap-Up

Im reading a book by Robert Cialdini about the "weapons of influence."  One of the major weapons of influence is scarcity and/or artificially imposed deadlines. 

In the real estate market, we've recently gone through one of the biggest time periods of scarcity in recent memory, in dealing with the impending expiration of the first time and repeat home buyer tax credits.  By imposing a final deadline (scarcity) for receiving the $6500-$8000 the government did a great job of giving the industry an artificial boost.  

I personally helped a handful of people who moved quickly to make sure that they were under contract before they lost the chance to take advantage of the opportunity.  These are people who had been considering buying and/or selling at some point in the next 12-18 months but decided to do so prior to April 30th to cash in on the incentive.  You can see this phenomenon reflected below in the Austin real estate market data through May 2010.  

Through April, the number of pending contracts and closed sales increased dramatically while the days on market required to sell a house decreased monthly.  Some of that change can be attributed to the natural (seasonal) sales cycles of the real estate market, but much of it is a direct result of the artificially infused buyer/seller motivation.  

You can also see that things slowed down a little bit in May which is typically one of the strongest months of the year.  It is going to be very interesting to keep an eye on how the data varies year over year in the months of July, August and September.  Since a buyer looking to take advantage of the tax credit must close before June 30th to maintain eligibility, the numbers will continued to be slightly skewed through June.  After June, the numbers will be more representative of the health of the real estate market in general. 

Over the past three weeks, I have seen a significant drop in buyer activity on my listings and in speaking with other Realtors in other areas, the experience has been the same across the board.  Most anyone who was going to buy a house and close prior to June 30th, did so before the end of April in order to take advantage of the extra incentive offered. 

We are all crossing our fingers and hoping to see an infusion of late summer buyers hit the market in the next few weeks now that school is out and people are aiming to be moved by the beginning of the next school year.  Only time will tell.

Austin Texas Picked as No. 1 Best City

Austin Texas and Real Estate news for the week . . .

Austin was picked as the No. 1 best city to live in for the next 10 years in Kiplinger's Personal Finance ranking Wednesday. The magazine cited the capital city's innovative thinking, plentiful music venues, lakes, parks, unique business climate and job-creation tendencies. The report said "arguably the country’s best crucible for small business, Austin has spawned many companies with unique twists that have gone nationwide." Kiplinger's chose cities with positive business climates, but also unique livability appeal.  Read more Austin Called Crucible for Small Business.

Austin was ranked among the top 20 Memorial Day vacation spots, according to a survey from Web booking engine Priceline.com.  The Texas capital took the No. 18 spot, ranked according to a survey of more than 30,000 hotel booking requests for May 29-31.  Austin top Memorial Day destination reflected in Americans' travel plans.

Austin home sales continued to rise last month, increasing 31 percent compared with April 2009, according to Austin Board of Realtors statistics released Thursday.  Home sales for the month totaled $486 million with 2,043 single-family homes sold, according to the Multiple Listing Service report. When compared to April 2009, the median price of real estate was unchanged in Austin at $190,700. Most promising, pending sales increased 47 percent to 2,813.  Austin Home Sales up 31% in April.

Continued instability in financial markets overseas drove U.S. fixed-rate mortgage rates lower this week, and Freddie Mac's chief economist on Thursday said the low rates could soften effects of the home-buyer tax credit's expiration. Fixed Rate mortgages continue to fall.  

Property Tax Time

If you are a property owner in the Austin area, you should have received your notice of property appraisal value in the past week or so.  Typically, this is the time of year that homeowners groan about tax hikes and high property values.   This year is a little bit different for most, as on average, property values in the Austin area have declined over the past year.  How was the value of your home affected this year? Click here to learn why this year is a rarity.

The notice of Appraised Value that you received in the mail from your appraisal district will breakdown for you the proposed value of your property as of January 1, 2010.  However, the actual local tax rates will not be set until later in the year.  So we wont know exactly what effect the difference in value will have on our property tax obligation for the year. 

I can tell you from personal experience that tax appraisal value and current market value are often not the same.  Depending on the history of the appraisal value tied to your property, these numbers can be off by as much as tens of thousands of dollars.  Sometimes positively and other times negatively.  Still, its important to make sure that the Notice of Appraised Value is as accurate as possible to avoid paying more than necessary in the future. 

If you do not agree with the assessed value, you to have the right to protest.  Make sure you file your Notice of Protest before the deadline which is usually June 1.  I've put together a brief resource for you explaining both the tax appraisal and tax protest process. 

If you have any property tax related questions or you need a little bit more information about one of your properties, I'd be glad to help.  Just shoot me an email or give me a call at: (512) 773-3493.

Link it Up

4 Links to interesting news & insight about homes, home loans and the real estate market for you on this Friday.  

You want to buy a foreclosure? Remember, there are both great opportunities and great pressures and pitfalls in this market.  First, you have to decide at what stage of foreclosure you want to buy. There are three options: 1. pre-foreclosure; 2. sheriff's auction; 3. repossession, called REO (for real estate owned by the bank). How to Buy a Foreclosure

The number of buyers who signed contracts to purchase homes surged more than expected in March, another sign that government incentives are propelling the housing market this spring. Pending Home Sales Rise 5.3 Percent.  

Taxpayers who labored to meet the April 15 deadline face an even more daunting endeavor: figuring out which documents to save and which can be safely assigned to the shredder.  Save it or Shred it?

You probably know that boosting your home's curb appeal is one of the most important ways to maximize its value. But that doesn't mean you need to take on a pricey job like replacing the windows or installing a blue-stone walk. In fact, you'll probably get a bigger bang for your buck with upkeep that costs a few hundred dollars at most -- like touching up the paint, mulching planting beds, and staining fences and decks.  The Best Outdoor Jobs to Tackle Now

Foreclosure vs Short Sale vs Resale

I always like to compare the sales data between regular resales and distressed property sales due to the recent popularity of bank owned homes and distressed properties.  Everyone is looking for a deal.   I pulled the numbers for the first quarter of this year to compare.

From January 1 through March 31, 2010 . . . . .

Regular Home Sale Transactions

• 2939 homes were sold that were not labeled foreclosures. 
• The average size home was 2190 square feet and sold for $116/sqft
  
• That equates to an average sales price of $259,345
• The average final sales price to original list price was 93.8%
• These houses sold in an average of 78 days
  

Foreclosure Transactions

• 518 foreclosed homes were sold via central Texas MLS
• The average size home was 2023 square feet and sold for $74/sqft 
  
• That equates to an average sales price of $148,873
• These houses sold in an average of 41 days
• The average final sales price to original list price was 92.7%

Short Sale Transactions

• 44 short sales were completed according to the MLS system
• The average size home was 2424 square feet and sold for $81/sqft
• That equates to an average sales price of $198,908
• These houses sold in an average of 95 days
• The average final sales price to original list price was 93.4%

Yes, the difference in the price per square footage numbers between regular and distressed properties is significant.  However, you have to consider the fact that the bulk of the foreclosures that are sold via MLS are usually located in areas further outside the Austin city limits.  As such, property values are lower to begin with. 

The majority of the prime foreclosure properties with the better yields and higher property value are sold at the foreclosure proceedings at the court house steps.  Also consider that these resale numbers include new construction home which on average sell for a higher price per square foot. 

Still, if you are not afraid of getting your hands dirty and taking a little bit of risk, foreclosure still offer a great opportunity to some. 

Austin home prices will increase Q1, 2011

Austin area home prices are expected to stop falling in the final quarter this year, according to Federal Housing Finance Agency and Moody's Economy.com data.

The Fiserv Inc. (Nasdaq: FISV) report released today projects Central Texas residential price tags rising in the first quarter next year, reaching levels from before the recession by 2016.

The document estimates prices will have fallen about 4.8 percent by the time it reaches the trough at the end of the year. It said prices began the free fall in the final quarter 2008.

Read more: Report: Austin home prices will increase Q1, 2011 - Austin Business Journal:

Travis Property Values face First Drop since 2003

The recession that wiped out thousands of jobs in Central Texas also erased $6.5 billion from the market value of Travis County properties.

The 5.3 percent drop in values from 2009 was the first decline since 2003, according to preliminary figures from the Travis Central Appraisal District.

The news means tough decisions for local government leaders, who must decide whether to raise tax rates, cut budgets or both to compensate for tens of millions of dollars in lost property tax revenue.

"It means more belt-tightening," said Travis County Judge Sam Biscoe, who presides over the Commissioners Court. "It'll probably be some combination of cuts and small tax increases."

The drop does not necessarily mean lower tax bills for all homeowners. Housing prices declined only slightly last year, despite the recession

Read the Rest of the Article

Foreclosures Hit the Rich and Famous

If you have yet to spend some time at my Austin Foreclosure Finder website, I'd invite you to swing on over and click around.  This is an exclusive member's only website that I keep updated on a weekly basis.  It includes all of the latest foreclosure information in the Austin area.

This week's tribute is to Nicolas cage who lost his Bel Air Mansion to Foreclosure this week.  According to a recent ReatyTrac study completed for the Wall Street Journal, houses with loans of more than $5 million are likely to see a steep spike in foreclosure activity this year. 

One of my favorite celebrity quotes of all time comes from Patrick Ewing, he said, "we make a lot of money, but we spend a lot of money too."  This article details a couple of the ultra wealthy who got in over their heads.  

In honor of Nic Cage and all other less fortunate rich and famous, I've added a Luxury Bank Owned Properties tab to the website.  This link will feature only those recent bank foreclosures listed at $500,000 and above.  Some range as high as $2-3 million.  If nothing else, they are fun to look at.

2009 Real Estate Market Summary

Every once in a while I like to give myself a good research project.  It's funny because I didn't realize how much I enjoyed reading and studying until I got away from school.  Now, I get to read and study the things that actually interest me. 

This time around I decided to do a detailed 2009 analysis of the Austin real estate market.  I especially wanted to focus on the differences between resale, short sale and foreclosure sales and how they reacted differently to market dynamics.  I also focused only on house sales.

Foreclosures and distressed sales are the most popular thing with buyers.  Everybody wants a deal but I wanted to explore more about whether or not they really were good deals or just hype.   Keep in mind this is a very unscientific study.  The market data included the entire Austin MLS Area which spans a large area.  The number of regular resale transactions far exceeds foreclosure sales and even more so short sales (therefore the short sale numbers are a bit skewed)  

Id be happy to send the spreadsheet to anyone who is interested, but here are some highlights from the analysis.  In 2009 there were 18537 house sales tallied overall across the Austin market.

• The Median Sales Price for all House Sales in Austin for 2009 was $190,000
• The highest level of sales occurred in June (2051) followed by July (2013)
  
• The highest median sales price occurred in June ($200,000) followed by May, July and December, surprisingly (all $195,000)
  
• The average time it took to sell a house in 2009 was 75 days and the median was 47
• On Average, all Sales yielded 93% of Original List Price

There were 2195 Foreclosure Sales on Austin MLS for 2009 only about 12% of all recorded sales.         

• The Median Sales Price for foreclosures in Austin was only $122,000 for 2009
• The Average Sales Price was $153,203
• On Average, it took only 45 Days for Foreclosures to Sell (29 Median)
• The Quarterly Breakdown of Foreclosure Sales was evenly distributed (545, 604, 590, 514)
• On Average Foreclosure Sales yielded 93% of Original List Price
  

There were 506 Recorded Short Sale on Austin MLS for 2009 - about 3% of all recorded sales.  (These were sales that were accurately marked as short sales, there could have been more that were not labeled)

• The Median Sales Price for 2009 Austin Short Sales was $140,000
  
• The Average Sales Price for 2009 Short Sales was $191,306
  
• On Average, it took 102 Days to Complete a Short Sale with 80 days the Median
  
• The highest number of Recorded Short Sales took place in December 2009
• On Average, Short Sales yielded 90% of their Original List Price

For a detailed breakdown of the MLS Sales for all areas of the Austin Real Estate Market, you can download the comprehensive report here.  Plus a link to the MLS Area map for reference. 

2010-2011 Austin Economic Forecast (Angelou Economics)

Good News on the Foreclosure Front

This past Friday, HUD secretary Shaun Donovan announced a temporary lift on the FHA mortgage seasoning requirement.  This change will allow for quicker resale of many properties in short sale or foreclosure. 

Since that probably didn't make any sense to you, lets try that again in English.  Up until Friday, when this announcement was made, if the current owner of a property did not own that property  for a minimum of 90 days, it could not be sold to a buyer who planned on using FHA financing.  FHA financing is a government insured loan program that has become the program of choice for many home buyers these days due to its qualifying criteria and lower down payment requirements.  

The original primary reason for the "seasoning" requirement was valid.  HUD wanted to ensure that prospective house flippers were not purchasing properties under the premise of owner occupancy, using the lower down payment requirement, rehabbing the houses, and turning around and selling them quickly for a profit.  That part of it made sense.  However, a secondary effect was that many short sale or foreclosed properties that were held or purchased by an intermediary were no longer eligible for the FHA financing until they became "seasoned".  Thus, many would-be buyers were turned away as a result.

This temporary change will have a broader effect on areas outside of Austin and Texas that have been hard hit by foreclosure activity, but it hit very close to home last week.  

I am currently working with a first time buyer couple who's only option at this point is FHA financing.  Fortunately, we received news last we that we'd "won" out in a multiple offer situation on a great short sale deal, only to find out that it came with a stipulation:  No FHA financing.  It turns out that the loss mitigation company (short sale negotiation company) currently has an option to purchase the property and turn right around and sell it almost simultaneously.  This is a huge benefit to the seller because he almost assuredly avoids foreclosure, but we found ourselves in a situation where the "seasoning" requirement was not going to be met.  Talk about frustrating!

Then low and behold, the real estate Gods looked favorably upon us and this announcement was made on the very day that we had to make some sort of decision.

I know all of this might be a little confusing, but trust that this is going to benefit the Austin Real Estate market as a whole. Though our foreclosure numbers are lower than some, the quicker they sell, the quicker resale prices will come back in some areas.