Austin Real Estate Blog

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.

Over the last three years there has been sharp downswing in housing prices. In many markets the prices dropped out quickly, not stabilizing until only recently. As foreclosures rose, many didn’t believe they housing market was going to stabilize any time soon. This thankfully, has not proven to be the case. Recent reports and studies have revealed that in 2009, specifically since the second half has begun the housing market in stabilizing and reestablishing solid markets where a loss was drastic previously. Home sales are up creating the most stable market since the mortgage crisis began.

The 8 thousand dollar tax credit is being given some credit for easing the decline and initiating the incline in single family home purchases. This tax credit will expire on November 31st, 2009, this crucial deadline combined with lower interest rates have become the saviors of the housing market.

In May of 2009 the OFHEO or Office of Federal Housing Enterprise and Oversight announced the first of a steady increase in home prices, over previous months. It edged up that first month with .09% and has continued every month since. In one area of significant concern with the mortgage crisis, the pacific coast has registered one month with an increase of 2.7% showing significant improvement.

As the market continues to stabilize, buyers come out of the woodwork, and housing prices are starting to inch back up to more anticipated levels. This proves real estate and the economy as a whole has entered a state of recovery.

Once you have established you are the owner of the foreclosure property, have reviewed it with your agent and lawyer you are faced with a significant choice. Should you evict the current tenants or should you continue with the lease they have already? Do you want to initiate a new lease with the current tenants? Those are crucial choices that must be made.

Rental properties purchased through the foreclosure auction process are often one wrought with choices. Typically, a foreclosure purchased rental does not require the current lease be honored, like when it is sold prior to foreclosure. Generally speaking, the new owner has the opportunity to evict the current tenants. This also allows for the new owner to establish a new lease with the current tenants.

Should you chose to accept even one rental payment while still under the previous agreement; you are, in effect, honoring the lease they are in. This means that you, as the new owner, would be bound by those terms until the lease expires and a new one is drawn up. Eviction after such an accepted payment would be difficult if they do not violate the rules of that lease.

By taking some time to understand the rules of the process, you are protecting yourself and the tenant. Should you desire to purchase a property like this, it is prudent to discuss all of your options with a real estate attorney and a real estate agent prior to purchase.

A new law means there are some caveats! Here is a summary from the Legal Aid Society of Cleveland

Upon a Foreclosure Sale of Residential Rental Property,
the Lease or Tenancy Continues with the New Owner

1. Issue. Upon a foreclosure sale of residential rental property, what is the effect of the sale on the tenant’s lease or month-to-month tenancy?

2. New federal law. Protecting Tenants at Foreclosure Act of 2009. S. 896, Pub. L. No. 111-22, §§ 701-704.

3. Effective date. May 21, 2009 (or, more precisely, May 20, 2009, at the time that the
President signed the bill).

4. Application of effective date. The federal law applies to any existing bona fide lease
or tenancy for residing in a property when the property is sold at a foreclosure sale, if
the sale occurs on or after the law’s effective date.

5. Bona fide lease or tenancy. The federal law applies only to bona fide leases and
tenancies, which means:
• The tenant is not the child, spouse, or parent of the mortgagor (former landlord);
• The lease or tenancy was the result of an arms-length transaction; and
• The rent is not substantially less than the fair market rent (or the rent is reduced
or subsidized due to a Federal, State, or local subsidy).

6. Tenants with a bona fide lease. Upon a foreclosure sale, the lease continues with
the new owner as the landlord and, absent cause for termination, it continues until
either (i) the end of the lease term or (ii) the new owner elects to use the property as
a primary residence and provides the tenant with a 90-day notice of termination.

7. Tenants with a bona fide month-to-month tenancy. Upon a foreclosure sale, the
tenancy continues with the new owner as the landlord and, absent cause for
termination, it continues until either (i) the new owner provides the tenant with a
90-day notice of termination or (ii) the tenant provides the owner with a state law
30-day notice of termination.

8. Tenants with a Housing Choice Voucher (aka Section 8) lease. Upon a
a foreclosure sale, the voucher lease (which may be a written month-to-month
tenancy after the first year) is treated the same as other leases (see item 6, above) and
other month-to-month tenancies (see item 7, above). In addition, upon a foreclosure
sale, the housing assistance payments (“HAP”) contract continues, with the new
owner subject to the terms of the HAP contract. The new owner may not terminate
the voucher lease on the “other good cause” business ground that it will assist in the
sale of the property.

If you’ve conducted meticulous investigations on a foreclosure home and effectively placed the winning offer at public auction, it may still take time to be able to move in or start making repairs. There’s a possibility the previous owners of the newly purchased property may yet be living there, making it complicated to take possession. If you’re not equipped for that possibility, you may possibly be in for an arduous as well as messy eviction. Properties arrive on public foreclosure auction platforms at the conclusion of a pre-foreclosure phase, after property owner’s failure to pay the monthly mortgage expenses.

A hectic eviction procedure can be avoided with careful research in addition to effective planning. Though regulations and procedures differ from state to state, these procedures can be of assistance in learning the eviction process and how to avoid a lengthy eviction process.

First – establishing ownership

At the conclusion of the auction, make sure you are given every one of the essential documents from the auctioneer to prove you have made the purchase and are the new owner. At that time speak with the auctioneer and a real estate attorney concerning further steps that have to be taken before taking custody of the property. In several states the auctioned sale is confirmed by the court within a specified period of time, potentially up to 3 months. Verify as soon as the auction is completed.

For some locations and states there is a redemption period. This is designed to allow the original owners to purchase the property from you for the price paid at auction, plus applicable fees. In some states this period is as brief as one month or as long as one year. Review your state here: Applicable State Laws to identify if and how your state fits into this. This is often a reason given by the previous owners for not vacating the property..

Understanding the eviction process

Every state, and at times every county has a different eviction law and process. It is vital that before you enter the auction, you contact a local real estate attorney or the county sheriff. They are best equipped to prepare you for the eviction process in the location you are reviewing for purchase. By doing this you will be protecting everyone involved with the sale and purchase of the home, every step of the way.

The court process often takes months, so knowing your rights and the rights of the previous owner are vital. Contacting the court system for the eviction process should occur at the soonest possible moment, to assure everything is handled correctly and fairly. As the case comes to an end, the judge will give you are writ of possession and order the local sheriff to evict the occupant. AT this time the sheriff will serve the notice and remove the occupant 24 hours later.

Obviously this is general, so verify locally to make sure you are aware exactly what the process is.

As companies downsize their budgets, commercial loans have defaulted by more than double over the last year. It is currently at 7% which is double the default rate from the previous year, but that does not stop there, the rate increases will harm small and regional sized banks. As the commercial side of mortgage loans defaults, the smaller banks find larger gaps to fill. Today it is nearly impossible to obtain a new commercial loan.

New construction options have been limited by lack of funding and many businesses are foregoing the commercial ownership prospects. This creates other options. For many businesses who are not ready to buy have options to rent, and finding a prime location that is available in their budget. This enables expansion options, even in an otherwise difficult market.

For companies who are ready to buy, with minimal or no loan, this is the time to do it. There will be no better time to find a deal on a commercial property, and there is no better city than Austin. Contact Joe Cline today to get started finding the best location for your business and budget.

1. Affordability is available at the moment. Austin home prices have remained constant regardless of the national results. There is no reason to consider they will lose considerable value.

2. There is a huge selection available.

3. Historically low Mortgage rates are beginning to climb. This effects your monthly budget.

4. Federal Tax Credit, developed and launched by the American Recovery and Reinvestment Act of 2009, allows for qualified buyers to receive up to 8000 dollars credit.

Austin has been called one of the Top Ten Recession-Proof cities, but that does not mean the city hasn’t been affected by our nation’s economic woes. February saw an astounding 67% increase in foreclosure listings from the previous month. While some of this jump has been attributed to the fact that the January auction was held on New Year’s Day, which caused some delay, that can only account for about 15% of the spike. There are over 1400 homes listed in foreclosure in the Austin area, according to the RealtyTrac website. Of those, over 700 are bank owned.

The housing market is where we first began to see the beginnings of a recession. States like California and Florida were hit the hardest, with homes losing more value each passing month. Austin had not had a housing boom like in these other states, so throughout the ordeal, the area has been fairly stagnant in terms of home values. It was the more creative loans that first allowed the foreclosure binge to begin. As many homeowners saw dramatic increases in payments, the foreclosures began to pile up. Throughout it all, Austin has stayed well below the national average for comparable cities. Businesses and families alike still view the area as better off economically than other parts of the country.

It is important to note that one month of increase does not mean it will continue. Many experts feel that this may be the bottom of the barrel, and it is only up from here. While the recession is expected to continue, the credit crunch and the countless homes being sold for taxes owed has allowed for more prepared buyer’s to take advantage of the market. Austin is expected to maintain its overall economic health.

The United States has been gripped in an economic downfall for years. The first and most dramatic show of the dwindling economy has been the national real estate market. Home foreclosures have risen so dramatically that the Federal government has had to bailout several financial institutions and in the process of creating a new plan to help save homes. The national job market has equally been affected by economic woes, making it even more difficult for many people to even consider buying a home. For all of the hardships that we are currently coping with, it appears that opportunity is knocking for foreign investors.

Homes in many of the nation’s hardest hit areas are being sold for taxes due. This has encouraged many foreign buyers, as far away as Australia, to purchase several homes in the U.S. as investment opportunities. Homes have been listed for as low as $1. Australian vacuum cleaner manufacturer Theo Szinger has already purchased several homes in the Detroit, Michigan area for less than $5,000. There are many houses available now for mere thousands of dollars that less than two years ago had been valued at more than $200,000. Many of these homes are in excellent condition; the current owners are just unable to keep up with payments.

As Americans continue to struggle to keep their homes, foreign parties are expected to continue to take advantage of the deals now offered throughout the nation. Homes are now available for less than the price of a used car. These homes have become a good source of income for buyers.

The real estate market was where we first noticed a problem. Nationwide, homeowners began to fall behind on mortgages that may have been the epitome of poor lending practices. It has been a whirlwind for about two years now. According to a report by Foreclosure Listing Service, Inc. the numbers are set to rise in March for Central Texas. Despite what may seem like bleak numbers, the areas around Austin have fared well during this crisis, mainly because there was never a real estate boom here for the market to fall from. Though foreclosures are reportedly up again, many feel that 2009 will mark the beginning of the end for the crisis.

The report shows Travis County foreclosure rates up by 56% since March of last year. Hays County was up by 51%, and Bastrop County was up by 28%. The majority of foreclosures were for single family homes. Some commercial buildings were included in the auction listing for March 3rd, including Chinatown Center. Attorneys for the complex stated that the listing was made to gain leverage while in negotiations with its lenders and many stores within the complex were unaware of the listing at all. The increase in foreclosures stems from many factors, including poor lending practices, the increase in daily living expenses, and the stagnant wages of employees. In other words, the cost of living is increasing, but overall income is not.

Austin has seen harder times in the past. In the late 1980s, there were a reported 1200-1400 foreclosure listings monthly. Lenders have become stricter due to the defaults on subprime loans. A nationwide credit crunch has made it more difficult to finance a mortgage. Many experts feel that Central Texas has reached its peak in foreclosures, but are still adopting a wait and see attitude as the first quarter winds down.

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.