Austin Real Estate Blog

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.

Taxes may be going up for real estate investments

Real estate investment providers could be adversely affected by a bill that recently passed the U.S. House of Representatives that would tax real estate assets at the higher “ordinary income” rate rather than the existing capital gains rate. The bill, referred to as the Tax Extenders Act of 2009, would exempt owners of real estate held for investment purposes, including rental properties; however, advisors, managers, finance experts, and other consultants and support staff would be taxed at the higher rate.

The bill specifies that gains derived from real estate investment would no longer be classified as capital gains; interest earned would be taxed at the higher rate, and investors who use their own capital will be exempt from the legislation. Investors who use other entities in order to finance their real estate investments, however, will be affected by the legislation, which is seen as a crushing blow not only to speculative investors but also to publicly traded partnerships and real estate portfolio providers.

Existing real estate corporations that directly fund and build their own projects will not be affected by the legislation. Service providers, fund advisors and real estate management companies are expected to be hardest hit, since they depend heavily on a narrow margin of profit to continue operations.

The bill specifies that earnings derived from an “investment services partnership interest” will be taxed at the higher rate. An investment services partnership interest is defined by the legislation as the interest held by an individual or corporate entity that:

• Advises the partnership regarding buying and selling of real assets
• Manages, acquires and disposes of real assets
• Arranges financing for purchasing real assets
• Engages in other activities in support of management, acquisition and disposition of real assets

If you oppose this bill you can send a letter to your congressman and/or senator.

Real assets include securities, commodities, certain options and derivatives, and real estate promotes held for investment purposes. Property managers and real estate investment companies will want to watch the progress of this bill closely as it moves from the House of Representatives to the U.S. Senate for consideration.

As many people today are inspired to enter into a business of their own, it is important to evaluate which business you enter. As many businesses have a 5 year window of make it or break it, there is one business that stays around year after year. Real estate investment, even in a down economy is always a good investment. This is one area where there will always be a need.  Perhaps making real estate the only constant market.

As all markets come in cycles, real estate has ups and downs. One major boon for real estate investing is that real estate always comes up, even after a significant price fall off like some markets have seen in recent years. This market is rooted in the basic needs of people, all people, thus there will be a need for it even when things are hard. With this in mind, people will always sell, buy or rent some form of property.  The constant demand enables the real estate investor to make smart choices in all markets.

If you are considering some form of investment, real estate is the first that should come to mind. Due to the nature of the business, and the stability of the industry as a whole, real estate endeavors are firmly planted on solid foundations for the future. Regardless of their situation, someone is always looking for a place to live. If you are looking for something that will weather any economic storm, the right place to start is with your real estate agent.

As with any investment, real estate has several categories to evaluate prior to making the best choice for your plans. In some cases the categories are broken down further, thus it is important to evaluate your goals, and your skills alongside the options available to find the best real estate investment fit for your budget.

Real estate investment begins by a simple and obvious division, commercial and residential. With each side there are specific guidelines to justify their function, and value in real estate. Once you are aware of the kind of investment you want to make, you can learn what each sub-category is for the respective options.

If you are considering residential real estate, then the next obvious division comes with single family vs multifamily units. A single family home is independent of all others, and as the name indicates, only one family can reside in it. A multifamily unit indicates that more than one family will reside in portions of the building. Often these are apartments, condos or duplexes.  They do not have yards and the leasing or sales agreements vary only slightly.

In commercial real estate the next category varies a bit more. These properties can range from office buildings in specifically designed clusters or parks to manufacturing sites that require adaptation from lessor to lessor. The difference between these and a residential option is the regulations and taxes associated with each end. With regard to commercial real estate, zoning rules also apply.

Under unique situations there is the option to own both residential property and commercial property. In this case, the mixed use development has unique zoning laws that apply. This will require a clear understanding of the laws and tax regulations associated there with. Talk to your real estate agent or broker for details on the area and where to find the regulations associated with this unique form of real estate investment.

As real estate is often the most stable investment you can make, long term considerations and consulting with the right team is crucial. Finding the right real estate agent such as Joe Cline, will enable your real estate investment venture to be built on a solid foundation.

In every business and industry there is a concern for deceitful behavior. Real Estate is not an exception to this, unfortunately. Should you encounter something that concerns you, the best place to start is the Federal Trade Commission site. The site can provide critical information that can protect you and help you steer clear of hidden snares used by unscrupulous real estate investors, or to simply clarify contract misnomers.

When focusing on the purchase of an investment property, there is no shame in nit-picking for clarity in every section of your contract. Typically this is a very large investment. Contracts tend to have terminology that we do not use on a daily basis. A slight misnomer in a contract can make a huge impact on whether or not you will be making a good investment or an expensive blunder. Make sure to contact your real estate agent or attorney to answer any questions and provide any options that may be available to you, before making any commitments.

Taking a logical pragmatic approach to making your investment is vital to making your investment a good one. There are common downfalls to resisting this pragmatic approach. The most common downfall is fixating on the “perfect property”. Once you put yourself in that position, you lose perspective on the fundamental issues that must be addressed. In addition, you may overlook or simply ignore problems or imperfections in the property or contract. It is essential for negotiations to stay focused.

Making an investment in the right property and making sure you understand the contract, can be tricky, but following a few worthy tips and consulting with a trusted real estate agency or attorney are highly recommended.

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.

Refinancing is on the minds of many, even today. There are several options available and we’ve worked out a short list to assist in determining what would be the best choice for you.

First list your goals for the refinance. This includes even the most simple or obvious reasons. It is a crucial step to choosing the right refinancing product for you and your needs. Some of the common reasons people will refinance include:

• Reducing monthly payments
• Debt Consolidation
• Lower interest rates
• Achieving equity sooner

These popular reasons are not necessarily the only reasons a person would want to refinance. The above short list is a good way to get started thinking about what you need and what your goals are for the refinance of your most fiscally valued asset, your home.

The next step is to contact and consult someone who is an expert in refinancing mortgages. They are versed in products and options available. They undergo several levels of training and receive updates steadily regarding market numbers, financing options and new banking strategies. Together with the homeowner it is their job to identify the best fitting product, obscure or popular, for you.  Meet with the expert regardless of the level of research you have done personally. Markets can change in the blink of an eye. It is the job of the refinancing expert to achieve the best possible results for you.

The next step in this process is to keep your mind open to the possibility that refinancing is not the best choice for you. As you initially begin to research you will learn many options available, however until you have sat down with your refinancing expert, and evaluated all of your options, you will not know if refinancing is the correct choice for your situation.

Many small businesses find that sharing a facility with other companies, while receiving the same benefits available to many large corporations, to be an economical and reasonable solution for their business needs. Which benefits are used here? The option to share copy costs, energy pricing and in some cases, phone or secretarial services as well. This offers the cost cutting over head choices and still allows for the prestige of having an office for your business.

Business Office Centers can be used by start-ups and small businesses, or organizations. Historically speaking, when a larger corporation has used them, it has been as a remote office for sales teams or investment holding. Now they are the alternative to their real estate holdings. This means that this design of office building is becoming more in need. For Austinites this equals the most efficient use of green resources for large corporations. There is no need for new building construction or major upgrades. There is also the opportunity for the Virtual Office bundle, which often includes a bill for the office and covers all the major services required to present the major corporation image.

The Office Centers are both cost effective and green, making them an ideal commercial location for many businesses. It enables a company to know they are creating the basis for a successful growth while helping the environment, and bettering Austin along the way.