Austin Real Estate Blog

According to the Forbes Business Journal, Austin is tied for first place as the metropolitan area showing the most signs of economic recovery; Washington, D.C. was the other first-place contender.  This is in line with 2009 estimates by Forbes that Austin was positioned for a swift rebound; financial analysts predicted at that time that Austin’s economy would grow by $5 billion before 2011.  Austin’s speedy recovery was attributed to its strong government sector; as the capital of Texas, Austin benefits significantly from stable government employment in the area.

Aggressive moves to attract new companies by both the city of Austin and the state of Texas have also provided additional employment opportunities.  The Austin area has attracted several new employers in recent years including the Hanger Orthopedic Group; Austin is currently in negotiations with Facebook to open an office, as well.  Austin’s historically strong education, healthcare, and green technology sectors have ensured that unemployment rates in the metropolitan area remain lower than the state and national average.

Recent figures indicate that Austin’s employment picture continues to improve.  Job growth in Austin over the past two years approached one percent, the best in the nation; while this growth rate may seem small, it’s worth noting that over the same period the United States as a whole lost jobs and saw unemployment rates skyrocket.  In fact, Austin’s employment picture is expected to improve even more over the next three years, with jobs in the area increasing by approximately eight percent overall.

One major factor in the stability of the Austin economy is the housing market.  While other regions experienced serious declines in property values and increases in foreclosures and unsold homes, homes in Texas retained almost all of their initial value and demand for these homes remained high throughout most of the industry crisis.  Most analysts credit reasonable real estate pricing and lack of overbuilding for Austin’s relative stability and economic performance; because Texas real estate prices were never overinflated due to real estate speculation, the collapse of the housing bubble had little effect on the area.

These recent figures and predictions spell good news for the Austin real estate and business community.  Increased growth and employment is expected to bolster the commercial and residential real estate market and boost new construction, creating still more jobs and growth in the area.  This synergy will maintain Austin’s position as one of the best cities in the nation in which to live and work.

New rules proposed by the Community Development Commission could spell big changes for builders seeking variances for new developments in Austin.  The proposal is modeled on a similar law already in effect in Massachusetts and would require that builders who receive special permission to build larger-than-allowed residential buildings must devote a portion of their development to affordable housing for low to moderate income families.  The Community Development Commission is comprised of thirteen political appointees who are tasked with the development and implementation of programs intended to serve low income families and households in the Austin area.

Recent developments have also led to the appointment of a new Downtown Density Task Force, a result of stalemate on the part of the previous task force which could not come to an agreement at a meeting last month.  Many builders have noted that a proposed “pay-to-play” system that would require payments to a community development fund may also constitute a deterrent to new construction in the area during a time of economic uncertainty; most economic experts believe such requirements are unwise given the current housing market downturn.

Some experts have noted that the proposal as it currently stands is in direct conflict with Texas state law, which prohibits requiring builders to include affordable housing in their planned developments.  Supporters of the proposal, however, note that the rules do not force builders to include such housing, but simply withhold the required legal variances from builders who do not make such accommodations a part of their development plan.

The timing of the proposal is unfortunate, given the recent prediction in the 2010 Texas Construction Outlook that Austin construction projects are expected to increase by approximately 30% in the coming year.  Federal stimulus funds and projects are credited with a portion of this growth, and new housing starts are expected to make up much of the rest of the increase.  Many builders feel that adding new layers of expense and paperwork will put a damper on these expected gains and stifle much of the economic benefit Austin could derive from this infusion of cash and projects to the local building industry.  While the public works and utilities projects are not expected to be affected by the proposed rule changes, some new housing developments may be delayed or even canceled if these rules are put into effect at this crucial time.  Given the fragile nature of the housing market recovery, most builders believe that these rules should not be implemented or should be delayed until the housing industry is more robust and the recovery is well underway.

A new mixed-use project is expected to break ground in Austin in 2010. The University Park development is within walking distance of the University of Texas-Austin, and will incorporate townhomes, condominiums, and apartment residences as well as a new movie theater, medical office space, and a luxury Andaz hotel. Construction is expected to commence in the second quarter of 2010. Located on the former site of Concordia University, the development is already pre-leasing commercial space and lead developer Andy Sarwal has indicated he expects to have tenants for 90% of available space before construction is completed on this project.

University Park is centrally located within easy walking or cycling distance of many of the prime attractions of the Austin area, including the State Capitol, the downtown financial and business district, and of course the University of Texas. Onair Development has announced plans for a 120,000 square foot medical office building in University Park in close proximity to St. David’s Medical Center. The building offers significant advantages for physicians who lease office space, including an exclusive tenant equity partnership plan that provides the potential for ownership over time.

Texas Monthly has already taken up residence in University Park; an Aveda Institute salon training facility has also signed a contract and is expected to open for business sometime in mid-2010. Premiere Cinemas will offer six or seven screens in a planned 450,000 square foot mixed-use building, which will incorporate 340 apartments and additional retail outlets as well. Developer Andy Sarwal is encouraging builders in University Park to commit to green standards and LEED certification, making this development even more attractive to tenants in the Austin area.

Austin’s downtown area has fared better in the recent economic downturn than many other cities; this is due in part to the vibrant medical, solar, and green technology sectors in the Austin area. Additionally, Austin’s business-friendly policies have attracted major employers to relocate their headquarters to the area; one recent acquisition for the Austin economy is Hanger, a major manufacturer and supplier of medical prosthetics and durable medical goods.

Home builders are cautiously optimistic heading into the new year, according to a recent survey by John Burns Real Estate Consulting. The survey indicates that 57% of builders expect 2010 to be an improvement in terms of sales and revenues over 2009 figures. The extension and expansion of the First-Time Homebuyer’s Credit is anticipated to create increased demand for new home construction, while recent changes to the tax code have been advantageous to home builders as well.

The tax changes mainly affect net operating loss carrybacks; these tax mechanisms allow companies to offset profits in one year with losses in another, reducing their overall tax liability and allowing them to receive refunds for taxes paid in past years. These carrybacks usually are only allowed for two years, but the length of time has been sharply increased, allowing many firms to offset current losses against profits going back as far as 2003. This will provide more cash in hand for many financially-strapped builders and offer real help at a time when many home builders need it most.

Builders may get money back from taxes paid!

The survey follows on the heels of a recent prediction from Fitch Ratings that new construction and existing home sales will improve more than previously expected in 2010, due in part to the expansion of the tax credit and efforts by the government to stem the tide of foreclosures in recent years. Incentives and tax credits appear to be having a beneficial effect on the market, but many analysts worry that sales will slump as soon as the incentives are removed or phased out.

Austin builders are expected to benefit from the change in the tax code and the extension of the First-Time Homebuyer’s Credit. Austin’s real estate market has survived the recent housing crisis remarkably well; this is credited to Austin’s thriving economy and overall desirability as a center for culture and a great place to raise a family. While new building projects have slowed in recent years, the demand for new construction is still strong. Ironically, some Austin builders will benefit less from the tax code changes due to the fact they have fewer losses to offset against previous gains, and thus will not qualify for the full level of tax relief.

Seymour Fogel Mural

The Starr Building located at 107 West 6th Street, Austin Texas, has been sold. CB Richard Ellis represented the owner in the sale of the roughly 77,000 sq ft office and parking garage. The building has been around Austin some 55 years and houses a famous (to art and architecture folks mostly) mural by Seymour Fogel.

The mural itself is very pretty. I hope that the folks who purchased it try and make the finances work without plopping another high rise in a downtown that already has enough “towerage”.

Kemp Properties purchased the property and has previously restored other buildings like the Brown building. I think that’s a beautiful building so we ca assume that the Starr Building is in good hands.

Take a look at some of the photos from the listing agents at CB Richard Ellis. It looks like it would be a perfect set for Mad Men!

Starr Building Interior

Starr Building Exterior

On November 5, 2009, Congress approved an extension to the First-Time Homebuyer Credit, including changes designed to open up this valuable incentive to still more buyers. The bill’s main architects, Senators Chris Dodd and Johnny Isaksen, crafted the credit specifically to target the troubled housing industry and promote economic growth throughout the real estate sector of the economy; the expansion is expected to allow still more first-time homebuyers to take advantage of this $8,000 incentive. Current homeowners can also qualify for a $6,500 homebuyer’s credit if they have owned and lived in their current home for at least five of the past eight years; the five years must be consecutive, and income restrictions apply. The extension runs from December 1, 2009 to April 30, 2010, allowing current homeowners to take advantage of the credit anytime between those dates.

National Capital where the homebuyer tax credit was extended and expanded

The extension represents a compromise between those looking to decrease the government’s already over-sized deficit and consumer advocates who touted the benefits of the existing credit, which has been credited with prompting anywhere between 200,000 and 400,000 additional sales nationwide. While economic analysts may disagree on the total number of sales, it is widely accepted that the existing credit has been beneficial to the housing industry in general and to first-time buyers, home builders, and mortgage lenders in particular. By providing an additional incentive for buyers, the credit helped maintain home values and prevent further damage to an already weakened housing market; the expanded and extended credit is expected to help even more.

This will represent a real boon to Austin homeowners who may have felt “stuck” in their old home and unable to move up to a more desirable property. By providing a $6,500 credit to existing homeowners, the credit doubles its value; homeowners can count on this incentive (or the $8,000 first-time homebuyer credit) to help move their current home, while they can also rely on the $6,500 to help them make the move to their new home in financial comfort. This measure is win-win for the Austin market and for the country as a whole.

Prospective home buyers should be aware of the April 30th deadline, however. It is unlikely that Congress will extend the credit past this date, although home buyers who have signed contracts as of April 30th will receive the credit provided they close within 60 days. With home prices at affordable levels and the economy on the upswing, there has never been a better time to buy in Austin; these valuable credits provide one more incentive to buy now.

Increase in construction billing is a positive sign, but spending will lag a while longer.

The big factor is time-lag between billings and construction spending, which is between 9 and 12 months. A score below 50 indicates a decline in demand, and the current U.S. score is 43.1 for September, 2009. But it reflects a slight increase from the 41.7 from August.

However, new construction inquiries are up, showing a nice 59.1 percent increase. This could be showing that the government’s stimulus program is working. Or, it could be showing the stiff competition in the business is resulting in multiple submissions. The outlook depends upon the reality of this number’s creation. The optimistic eye will be hopeful, pointing at the stimulus program. It’s believed that some big stimulus projects will be beginning soon, helping to counter the big decline in private commercial construction.

It helps to look at one other factor: The rating for inquiries is the highest it has been in 2 years. That is encouraging. However, the only way to be certain is to watch October’s numbers, which should help us determine whether or not this is just a temporary upswing, or just a hillock which we have glided over. Until November, we can’t be certain of the figures final application. We must proceed with caution; not with unbridled enthusiasm. Yet, being too cautious could spell more difficulties. It’s hard to know where to set your accelerator when your speedometer isn’t working.

Downtown Austin thrives with incredible growth and opportunity. With the growth and development there comes constant conflict. The downtown historical locations are being lost by all of the development. At this time, not one building in downtown Austin has been submitted for historical protection or landmark status. Also perplexing, none of the local or national historic registers has listed the area, in whole or in part, as a place of value. One example of a future development that should concern local Austin historians is the recent permit obtained by what will become the Gables Republic Park, a 16 story apartment community. The demolition permit is intended to partially tear down the 1913 Nabisco warehouse. For the last fifteen years the location housed the Ginger Man company.

The local Preserve District Council has put forward some ideas and proposals to save at least part of Downtown Austin. The tools of the proposal made by the ROMA Design Group and HR & A advisers have created a significant and active debate among property owners and local groups like the Heritage Society of Austin and the Downtown Austin New Alliance. Also chiming in actively is the Central Texas Chapter of the Congress for the New Urbanism, the Downtown Austin Neighborhood Association and the city of Austin’s design and planning commissions. ROMA’s recommendations were then presented in public on July 23. Until now, this issue is in hot debate, as many of the supporters of the concept do not support the specific idea’s laid out here: www.cityofaustin.org/downtown It will be debated and discussed in council again on the 24th. Members will provide policy direction and a vote may occur to direct a draft of the density bonus and applicable ordinances with specific warehouse district rules.

There will be much debate on how to balance historic preservation while still allowing for development to progress as needed. Before the council votes on the measure, and before they determine exactly what tools will be used, the community will need to voice their opinion. The public meeting will be held Sept 24th

You can listent to a former CBS anchor and Austinite in the know… Neil Spelce. From the Neil Spelce Austin Letter….

Volume 31, Number 12

June 19, 2009

Dear Client:

One of the least-discussed aspects of getting a home loan is becoming an impediment to an efficient closing of a home sale in the Austin area between a willing seller and a willing buyer.

This scenario is being replicated daily in the Austin area: A home seller and a home buyer go through the normal negotiations and agree on a price. The home buyer is pre-approved for a loan to cover the purchase. The home is inspected and the seller and buyer once again agree to make the deal. The lender requires a 3^rd-party appraisal. All well and good, so far. But the appraisal process is turning out to be a big hitch in the closing process.

Appraisals in and of themselves are a good thing. But the process is causing real problems for Austin buyers and sellers. It ratcheted up to a new level 5/1/09, when a new national Home Valuation Code was adopted. The Code bars loan officers, mortgage brokers or real estate agents from any role in selecting appraisers for mortgages that will be owned or guaranteed by Fannie Mae and Freddie Mac

As a result, many lenders are outsourcing the selection to appraisal-management companies (that take a big slice of the appraisal fee). Some companies put appraisers under pressure to do it faster and do it cheaper. Experienced appraisers are turning down requests to pay them only 50% to 70% of their fees and may also include a requirement the appraisal be completed in as little as 48 hours.

This process has resulted in such anomalies as appraisers being hired from outside Travis County to conduct appraisals in neighborhoods they don’t know very well. The end result: less accuracy and certainty about a property’s true value.

And no one can discuss the appraisal with the appraiser under this new Code.

Anecdotally, you can find examples where some of these appraisals are challenged regularly. (No hard numbers are available) Home values differ from neighborhood to neighborhood, street-by-street. And in many cases no current comparable sales exist. This is where an appraiser who knows the area can more accurately appraise the home’s true value – more so than an appraiser from out-of-area who is charged with doing a “quick” turnaround.

This causes a number of problems, including the possibility a buyer must seek another appraisal. It is slowing sales and as the sales pace picks up, the problems may increase.

Ok. check my post previously where one of my clients got rogered… HVCC rant I hate to say it, but, “I told you so.”

joe

These days, it has become very important to keep the environment in mind with pretty much every aspect of our lives. With so much emphasis on green living, it can sometimes be difficult to know if the choices that you make are actually eco-friendly. Of course, there are the obvious, like recycling and reducing energy output. What about when you are building a home, or just remodeling? Again, there are the obvious green choices like sustainable materials and energy efficient appliances. Beyond that, what is considered green living?

First of all, you will want to look at the site. For new construction, green living starts from the ground up. Take a look at the location itself. An eco-friendly builder will want to find a spot that reduces the need for car travel. Austin is becoming a hot spot for mixed use properties, making it an excellent place to be eco friendly. Smaller sites are also more environmentally sound, as they will require not only fewer materials, but less energy when complete. Older areas are also more eco-friendly in that they may have originally been designed with a walking commute in mind. While most of Austin is not necessarily convenient to the local grocery store, the newer designs are definitely taking it into account.

Austin is a city at the forefront of green living. There are several incentives offered by the city that encourage homeowners to make better energy decisions. The Austin Green Building Program has a rating system that can assist in making more environmentally friendly choices not just in building, but in day to day living as well. A little research can bring you to the proper choices in green living.