Austin Real Estate Blog

The state of Texas began performance reviews and initiated state criteria in 1993 as a way to streamline the education system for the state. Since its beginning, Austin has received an academically acceptable rating. The Texas Education Agency is responsible for rating each district, as well as each individual school in that district, every year. The most recent rating for the 2006-2007 school year once again places the Austin Independent School District in the acceptable category.

The school ratings are based on many factors, including grade level testing in math, English, writing, science, and social studies. The district must pass in each category. The testing is further broken down into student groups, including ethnic groups and underprivileged students. Due to its diversity, Austin has over 1500 accountability measures that must be met in order to receive the acceptable rating. For the 2006-2007 school year, the district passed over 1400 measures for a success rate of more than 95%. When broken down by individual school, the district had 25 campuses receive an exemplary or recognized rating. There were 69 acceptable ratings, and 10 school received and academically unacceptable rating for the year.

The AISD will continue to focus on areas of improvement within the district. Internal checks and balances are used to recognize where attention is required. The district has created a scorecard for success, including specific goals to accomplish by 2010. This includes no unacceptable schools and better support for staff and students. The district is also looking for ways to encourage more parental involvement. Using state guidelines and local goals, the AISD will help Austin students reach their full potential.

What Did Interest Rates Do Last Week?

** according to Freddie Mac **

 30-yr Fixed – Lower

Last Week:  4.96% — lowest since 1971

Previous Week:  5.01%

1yr Ago:  5.69%

15-yr Fixed – Slightly Higher

Last Week:  4.65%

Previous Week:  4.62%

1yr Ago:  5.21%

5/1 ARM – Lower

Last Week:  5.25%

Previous Week:  5.49% 

1yr Ago:  5.40%

Highlight of Last Week’s Major Economic Reports

According to Freddie Mac, “Interest rates for 30-year fixed rate mortgages fell for the 11th straight week to another record low, due in part to the slowing economy and government actions.  So far, both the U.S. Treasury Department and the Federal Reserve have added over $100 billion in liquidity to the mortgage market since September 2008, which put downward pressure on interest rates for fixed-rate mortgages.  The Federal Reserve may add up to an additional $570 billion more this year, based on its November 25, 2008, announcement, to further shore up mortgage lending and keep rates low.”

On the economic news front, Retail Sales ended up being much worse than the already ‘horrible’ expectations for December.  Prices are falling all around, but fortunately we’re not in deflationary territory – at least not yet.  In December, producer prices dropped 1.9%, while consumers’ costs eased by 0.7%. 

What to Look for This Week

The economic calendar is very light this week, so expect the stock market to drive the direction of mortgage rates.  We’ve got the inauguration on tap, and that should generate some buzz with investors.

Short-Term Rate Outlook

Stable

As the country falls deeper into a recession, Austin has remained above many of the staggering statistics. As of the most recent reports, the nation’s unemployment rate has reached above 8%; it’s highest in about 16 years. More than 2 million people have been out of work for more than six months. For many years, Austin has kept a low unemployment rate when compared to the rest of Texas and with the nation. The technology boom here has helped the city maintain the low numbers. Even throughout the worsening economy, Austin has been doing well overall.

In August of last year, unemployment reached 4.5% in Austin. This is the highest it has been since June of 2003. This rate is expected to climb this year as the nation’s economy continues to struggle. It is important to note, however, that even with the increase in unemployment rates, several economic experts believe that Austin will remain above the nation’s unemployment rates. Job growth continues in the city. During the same month, there was a reported 2.4% increase in employment opportunities in the Austin metro area. There have been increases in government and hospitality jobs. Hardest hit in Austin has been the manufacturing industry, which has lost around 2800 jobs in the year.

As the economy weakens, unemployment rates are expected to climb further throughout the country. Austin unemployment rates will most likely climb as well. There are many factors here that should prevent the city from suffering as many other metro areas have. Several businesses still have plans to move here to take advantage of the technology industry and proximity to new graduates from nearby colleges. With incoming employers, the unemployment rate in Austin should remain lower than comparable cities.

In many parts of the country, homeowners are faced with mortgages that are above their home’s actual value. This is due to the mortgage crisis that has been gripping the nation for four years now. Austin has been spared a dramatic impact thus far, as home values have not reduced here as much as in other cities. Many who are in the market for a new home are looking to take advantage of the lower mortgage rates created by the crisis. It is important to understand, however, that there are fees associated with any loan, and they have not decreased at all.
A mortgage point is equal to 1% of the total loan. When lenders offer a mortgage loan, they will generally provide both the dollar amount and the point amount. Fees will usually be at least one point, and perhaps more. During the mortgage crisis, these fees have nearly doubled from .4 points to .7 points. It is also important to know that paying more points up front can reduce the interest rate on the loan. There are also discounts available for those who are able to pay more points. As a result of the current real estate market, it has become much harder to secure a loan. Lenders are looking much more closely now at credit scores and ability to repay before approving any loans to avoid a default down the road.
For those who are able to secure a mortgage loan these days, it is very important to be aware of all fees and points involved. The Federal Bailout Plan did include the stipulation that lenders need to provide all of this information, so be sure to ask about everything.

What Did Interest Rates Do This Week?

** according to Freddie Mac **

30-yr Fixed – Lower

This Week:  5.01% — lowest since 1971

Last Week:  5.10%

1yr Ago:  5.87%

15-yr Fixed – Lower

This Week:  4.62%

Last Week:  4.83%

1yr Ago:  5.43%

5/1 ARM – Lower

This Week:  5.49%

Last Week:  5.57%

1yr Ago:  5.63%

Highlight of This Week’s Major Economic Reports

Despite a recent uptick in Treasury yields, mortgage rates actually fell during the first full week of the New Year.  One major catalyst driving this dip is the start of the Fed’s foray in purchasing mortgage-backed securities.  The $500 billion budgeted for this shopping spree is helping to increase demand, which in turn has kept rates low.

Stocks also took a hit throughout the week as retailers and other corporations took turns issuing earnings warnings.  This then led to a ‘flight to quality’ mad-rush over to the bonds markets, thereby further driving down rates.

And, lastly, there was the much-anticipated Employment Report.  We knew it wasn’t going to be pretty.  524,000 jobs lost in December, which brought the final 2008 tally to 2.6 million.  The unemployment rate now sits at a level we haven’t seen in 16 years – 7.2%.  Despite the gloomy outlook for the job market, most economists do not anticipate the unemployment rate to hit double-digit levels, since the economy (i.e., GDP) is expected to make a comeback (albeit a modest one) in the second half of the year.

What to Look for Next Week

We’ll get to find out just how bad the worst holiday shopping season in years was when the latest Retail Sales figures come out on Wednesday.  Then, of course, there are the all-important inflation gauges in the Consumer Price and Producer Price Indexes.  Inflation is not expected to be an issue at all; it’s more so seeing if the numbers start to creep into deflationary territory, as many economists fear.

Short-Term Rate Outlook

Fractionally Lower

Marie Funston

Senior Mortgage Advisor | Cell:  (512) 750-7270

Commercial Sale
Austin may be enduring the economic slowdown less than other cities, but it has felt it. Since September of last year, especially, the market has slowed dramatically. As the new year starts there is concern over a deepening recession across the nation. Austin is still a great location for business and investors are aware of this, proven by a sale of two buildings in downtown Austin. This is the first major commercial sale since September.

Barton Oaks Plaza 1 and 2 have been purchased by Austin-based HPI Real Estate Services and Investments and Dallas-based Sarofim Realty Advisors. These buildings house several businesses, including LifeSize Communications and TBG Partners. Barton Oaks 1 is currently fully leased, while Barton Oaks 2 is at 90% occupancy. The buyers were impressed by the buildings location on South MoPac Ave and its proximity to higher end residential communities. HPI has developed several buildings in Austin and has confidence in the city’s ability to keep the local economy strong. Since only a few of the current leases are up next year, this purchase should not adversely affect the investors. HPI did report that it was more difficult to find financing than in previous sales, a side effect of the credit crunch.

While the nation expects 2009 to be a slow year for real estate, Austin’s economy is expected to stay above the national rates. The city is expecting job growth in the next year with many mixed use properties currently underway. Most comparable cities are not looking so good. Austin is still considered one of the best investment locations in the nation.

Austin has seen better days when it comes to real estate. The market has slowed during the mortgage crisis and ensuing credit crunch. Foreclosure rates have gone up. The city has not been immune to the national economic strains. It has, however, done much better than many other markets in the country and is expected to end up better as well. The basic principles of a good market are here. There is supply and demand. Homes are still affordable, and jobs are still available.

This new year is expected to bring more woes in regard to the national economy. Whenever there has been a recession, people tend to move to cities where the overall local economy is still strong. This is the case with Austin. During the recent crisis, home sales have decreased 10%-30% in Austin. Homes for sale are staying on the market longer than before, but they are selling. As the recession deepens, there will be more declines in retail sales and in home sales. Austin is expected to recover faster than most cities, however, due in part to the businesses that see the city as a good investment spot. Austin is still sought after by technology companies looking for young, educated employees.

Austin median home prices have been stable throughout the crisis, and with lenders now getting back to more traditional practices, will continue to have the supply needed for a steady market. Experts agree that while 2009 might start out tough for many, the real estate market here should begin to grow again as early as 2010.

Austin has been a haven for many businesses, even throughout the recent economic crisis. Dell has its headquarters here. The fast population growth, technology enterprises, and proximity to colleges have made it a great city for business development. The current state of the economy, however, has put a damper on planned building for 2009.

Mixed used properties are the most recent addition to the downtown Austin skyline. There remains demand for apartment space as well as commercial in this area. With an increase in supplies for building at lower rates has only helped in these developments. Unfortunately, it appears that the demand is not as high as originally expected. Many mixed use and commercial properties are being built without pre-leasing. There are many buildings that sit vacant in Austin. Experts blame the same factors that have drawn people here for the current crisis. Apartments have been in high demand here based on local college. The tech boom brought many new employees to the area in the last several years and while the population is expected to continue its increase, less people are able to move now with the credit crunch. Many developers have put construction projects on hold as they wait for the economy to steady.

Austin is still expected to come out of the recession in better condition than many other cities. Unemployment rates here remain lower than the national average, and it is still considered a good investment city for many businesses. The economy is expected to get better here by 2010.

Under the weight of the economy, more commercial space is opening up in Central Texas. There has been an increase in vacancies in the third quarter of 2008. Information released this week stated that available office space was up to 12.6%. This is slightly higher than the previous quarter, which reported 11.6% vacancies. Industrial spaces have also decreased in occupancy during the same time frames.

Many commercial properties have shown an increase in subleases, meaning that the property was vacated early, or the current occupants were subletting because the need for space diminished. More businesses were opting for better rates per square foot instead of looking for additional amenities when purchasing property. In Austin, the rate per square foot is down by 1.7% and expected to continue decreasing as the economy weakens further. New construction of commercial space was up for the third quarter in Austin, with a total of 28 new buildings. Most of this has been in mixed use properties. Warehouse vacancies increased from 7.6 in the second quarter to 8.1 in the third. Flex properties, or showrooms, did show more occupancy in the third quarter, going from 16.2 to 15.8 for vacancies.

Austin continues to do well overall amidst the economic strains of the nation. Of course, the city will be impacted, but most experts agree it will be felt less here. New businesses are still looking to Austin for development. There are several existing businesses that have expanded as well. As more mixed use properties are built, there is expected to be an increase in commercial occupancies.

Although Austin has done well overall during the real estate crisis, it has still been affected by it. A recent listing of foreclosures showed the rate in Travis County increased by 50%. This places the county second in Central Texas just behind Bastrop County, which was up by 78%. Loan modification requests by many homeowners are believed to be the reason for such a high increase.

In the last several years, banks and lenders moved away from traditional lending practices and many people who previously would not think of buying a home became eligible. The result was ARM mortgages with increased payments over time that the new homeowners had not been expecting. As the homeowners began to fall behind, the real estate market nationwide took a dramatic downturn. While lenders are now getting back to basics with regard to lending, those already in debt are feeling the burn. Many lenders have vowed to work with occupants to help through the crisis, but too many are behind and the loans are not being paid. Homeowners looking for ways to refinance are unable to meet new terms in regard to credit. These homes are set for foreclosure beginning January 9, 2009.

It is obvious that lending institutions are doing their best to modify loans when applicable and possible, however it may take months to be approved. It seems that they are overloaded with requests. The best thing for homeowners to do is start the process as soon as it becomes apparent that there will be a problem with staying current. The Federal Bailout plan was designed to help lenders assist in keeping many people in their homes.