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.

Recent figures from the Mortgage Bankers Association suggest that the worst of the housing industry downturn may be over.  For the first time in three years, fewer homeowners are falling behind on their mortgage payments; this spells good news for mortgage lenders as well as borrowers.  While economists hesitate to say that the worst is over, the reduction in new delinquencies is generally regarded as a positive sign by housing industry experts and real estate agents throughout the country.  Even in Austin, where housing prices remained surprisingly resilient throughout the nationwide woes, these figures offer fresh hope that an economic upturn is on the way.

Current national figures estimate that fifteen percent of all mortgages are at least thirty days delinquent; this includes homes currently in foreclosure as well as seriously delinquent loans.  The worst figures are seen in the subprime mortgage field, where twenty-five percent of loans were thirty days or more delinquent.  The state of Texas has fared somewhat better as a whole than the nation, but fifteen percent of the Texas subprime mortgage market loans are seriously delinquent by sixty or more days, and many of these are currently facing or undergoing foreclosure proceedings.  Only two percent of all mortgage loans in Texas are currently in foreclosure, which represents a markedly better performance than the national rate of approximately five percent.  Texas is one of only seven states currently showing foreclosure rates of two percent of less.

Austin foreclosure rates have remained lower than both the national and state averages, with one percent of loans in foreclosure in December 2009.  These low figures will likely shield Austin from the brunt of the foreclosure crisis expected when banks finally begin unloading already foreclosed homes on the housing market.  Certain hard-hit regions are expected to see plummeting home prices due to the depreciation caused by this expected glut of homes on the market; as many as six million foreclosed homes may be sold by banks over the next three years, according to economic analysts at Barclays Capital.

The strong housing market and stable home values in Austin make it one of the most desirable places to live in the U.S.  Austin’s vibrant computing, healthcare and green tech sectors provide outstanding employment opportunities and have cushioned the Austin metropolitan area against the worst effects of the recession.  With mortgage delinquencies on the decline and the national economy showing signs of recovery, there’s never been a better time to consider moving in or moving up in the Austin community.

Austin leads the nation in economic growth due to the diversity of local and statewide businesses, the University of Texas, and overall good business climate.

A recent Brookings Institution report shows that Austin’s economy continued to grow in 2009 while other cities experienced slumps and downturns in their economies. The report finds that Austin grew more from 2008 through 2009 than any other major metropolitan area in the United States. While that growth was a mere two percent increase, it far outstripped the country’s overall metropolitan performance, which decreased by an average of 2.4 percent nationwide.

Austin’s economic growth was spurred mostly by consumer spending and professional and technical services, according to the report. While manufacturing and durable goods decreased, technology-based industries continued to thrive in the area. Austin’s economy has grown approximately 35 percent in the last decade, and the last census showed a 48 percent increase in population in this highly desirable metropolitan region. Austin’s location in Texas has helped it to maintain a healthy economy, but the Brookings Institution report indicates that Austin easily outperformed other major cities in Texas including San Antonio and Dallas.

One major area of growth that has kept Austin’s economy strong is the health care field. Major health care insurers, service providers, and manufacturing concerns have flocked to Austin in recent years, drawn in part by the highly-trained workforce and the business-friendly attitude of Austin’s city leadership. The increasing population of Austin requires large-scale health care service providers, and in recent years more than $1 billion in health care construction and investment has taken place in the Austin area. This provides jobs for area residents; in fact, in 2009 health care employment increased 5.5% overall in the Austin metropolitan area in contrast to a two percent increase nationwide.

Austin’s diverse employment base is also cited as a reason for its economic success. In addition to health care employers, the state government, educational institutions, and many other corporate interests provide jobs for residents. The resilient housing market in Austin is due in part to the stability of these employers, along with consistent population growth creating constant demand for properties in the Austin area. Austin consistently ranks in the top tier of American cities for quality of life and economic opportunity, which attracts many businesses and individuals to the area.

The Brookings Institution report ranked three Texas cities in the top five cities in terms of economic growth. The top five in order are: Austin; Washington, D.C.; McAllen, Texas; Virginia Beach, Virginia, and San Antonio, Texas.

You can view the interactive map on the Brookings Institution website. Below is a snap-shot of the overall economic growth situation.

Brooking Insitution Map of Economic Growth

After a year of sluggish sales, Austin saw a large jump in November '09.

A last-minute scramble to take advantage of tax credits and low interest rates is credited with a 58% increase in Austin home sales in November 2009 over the same period last year. The increase in sales is the largest in over a decade, and offers hope for recovery in the beleaguered residential real estate market. While overall home prices in Austin continue to fall, the decrease has begun to level off and seems to be reaching a state of equilibrium, allowing anxious sellers a well-deserved sigh of relief.

Analysts point to the recently extended First-Time Homebuyer Credit and interest rates that have dipped below five percent as the primary causes for this significant increase in sales. Additionally, while median home prices in Austin have not fallen as sharply as some experts had predicted, appreciable reductions in the asking prices of many homes have led to a surge in bargain-hunting by home buyers who might otherwise be priced out of the market. The median price of a single-family residence in Austin has decreased only two percent over the past year, demonstrating the resiliency and stability of the housing market in the metropolitan area.

Most real estate experts are cautiously optimistic about Austin’s residential real estate market going into 2010. Sales are expected to continue to grow more slowly, with no repeat of November’s record-setting figures. The expansion of the federal tax credit for first-time home buyers and continued low interest rates will likely continue to attract buyers to the market, especially in entry-level communities. However, as the economy begins to rebound, interest rates are expected to return to over five percent, and home sales will slow as a result.

As consumer confidence improves, economic conditions in Austin and throughout Texas are expected to continue to rebound, providing employment opportunities and spurring additional sales of new and existing homes. Home prices are expected to increase as well in correlation with the anticipated growth in demand. With ultra-low interest rates, federal incentives, and the current undervaluing of homes on the market, most real estate advisors believe that now is the time to invest in residential real estate, before interest rates and values return to higher levels later in 2010.

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.

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.

The number 107 doesn’t seem like a big number when you are talking home sales. But when existing home sales increase; it can be a good sign. In Austin, that 107 totals 6%. That’s a 6% increase in sales from last September, and it does make the economy seem a little more rosy than it was.

The median price increased, too, on a single family home in the Austin area. It is small, but noticeable. A 2% increase can only mean good for the sellers, and since the prices are on the way up, it means that someone has a little more to spend. Total quarterly sales from last year are still down, but hard times for the housing sales may finally be over.

We must remember, however: we are approaching the end date of the $8000 tax credit for first-time home buyers. In order to qualify for that credit, a home buyer must close on the property by November 30, 2009. It can be a slow process, anywhere from 14 days to 2 months. We could see a spurt in the growth of sales until November 30th, and then a drop. Currently congress is reviewing several bills that would extend the tax credit, but to date, none have passed. Keeping an eye on congress will help gauge the next phase in housing development.  There are still a lot of possibilities. If the recession is finally coming to an end, it will be good news for everyone.

Hold on to your hats, Austin. The wild ride may not be over.

While many home loan companies banked on a rising housing bubble, the Federal Housing Administration (FHA) remained steady with regulations and guidelines. This has allowed them to continuously support middle and lower income families and their effort to move into a home. When the housing bubble broke, the FHA continued as it had during the housing bubble.

The rules and guidelines for obtaining FHA loans have allowed the organization to maintain solid footing through a fiscal and real estate crisis. This means that FHA loans have been secured and have avoided the pitfalls of many banks and mortgage institutions.

With this solid footing in mind and all of the recent federal spending, Commissioner Dave Stevens has announced some new, appropriate steps to protect the tax payers backing FHA loans. The modifications are shifting the responsibility for the mortgages from the taxpayers who have shouldered it thus far to the lenders using mortgage brokers for the FHA home loan process. This enables a shield of protection for the taxpayers. Additionally, the FHA has modified requirements for appraisers, calling attention to geographic competence and appraiser independence from mortgage brokers and loan companies. This protects the home buyer and seller with a more accurate appraisal. Lastly, the approval process has been revamped with spot approvals removed and some loosening of the commercial space limits on subject properties.

With these changes, the Federal Housing Administration stands alone in the mortgage industry, and on solid ground. They are moving steady through the dangerous waters of real estate and economic decline. As always, give us a call if you have questions when seeking a FHA home loan or need information about your real estate related question.

The housing market is where we first started to see the inkling of a recession. For several years, lenders had offered mortgage options for those with less than perfect credit, including adjustable rate mortgages and $0 down payments. The result of which is our current real estate market. Homeowners began having trouble keeping up with monthly payments and foreclosure listings began to skyrocket. Austin has increased as well, though not nearly as badly as other areas in the country. Home values have remained fairly steady in the area. The crisis has brought down loan rates for both new mortgages and refinancing options.

It is this side effect of the real estate crisis that has increased the number of new mortgage and refinances applications. According to the Mortgage Bankers Association, applications went up more than 11% nationally for the week ending March 6 from the previous week. That is up 5.7% from a year ago. Of these applications, about 68% are requests for refinancing. The low rates have given homeowners the ability to refinance at a rate of around 5% for a thirty year loan. Fifteen year fixed rates are closer to 4.5%, sparking the increase in applications.

As lenders begin to use more traditional methods of credit and loan practices, the real estate market is expected to level out. It is now considered a great time to buy for those able to do so. Many experts feel at this point that up is the only way the real estate market can go.

Austin has been at the forefront of the green movement since it began. Many local builders have taken the time to learn green building techniques and guidelines. Some even offer green remodeling now to older homes. A green home is one that uses less energy and water, but that doesn’t mean the homeowner is missing out on anything. Just take a look at the 4,080 square foot home that is currently on the market sitting near Dripping Springs. The home offers majestic Texas hillside views, and is completely eco-friendly. There is an open floor design inside, a pool, hot tub, and over four acres to play on. What is really extraordinary is what the house is made of.

The house was designed by Gayle Borst and Elliot Johnson. As executive director of Design/Build/Live, Borst consistently strives for green living. The first floor of this beautiful home is no different; it is made of a naturally sustainable material: straw. Bales are placed within a framework of red iron steel for strength. Since the home sits atop a hill, it can be quite windy, and red iron steel is used in the construction of high rises. The interior walls are made of adobe plaster, and the exterior is concrete stucco. A huge benefit of the straw-bale construction is the material’s ability to hold temperatures. When the house is cooled on a hot day, it stays cool. This lowers not only the energy usage of the home, but the heating and cooling costs as well. The home also includes a 21,500 gallon rainwater collection system that provides all the drinking, bathing, and cooking water. Windows and doors are placed in such a way to optimize both the natural air flow and sunlight the location has. This home proves that living green can be lavish and environmentally friendly.