Austin Real Estate Blog

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.

What Did Interest Rates Do This Week?
** based on Freddie Mac weekly average survey **

30-yr Fixed – Lower
This Week:  4.78% (lowest since April 30, 2009)
Last Week:  4.83%
1yr Ago:  5.97%

15-yr Fixed – Slightly Lower
This Week:  4.29% (record low)
Last Week:  4.32%
1yr Ago:  5.74%

Jumbo Fixed (Average 30-yr Fixed)
Last Week:  5.75%Previous Week:  5.75%

Highlight of This Week’s Major Economic Reports

Despite the nation’s economic challenges, there’s a lot to be thankful for this year.  For one, the housing market has started to see stabilization – thanks in combination to historic low interest rates and increasing affordability.  Then, there’s the first-time buyer tax credit, which was set to expire on December 1^st and has since been extended to April 30^th.  The original expiration helped to prop up home sales in October, which saw the fastest sales pace since October 2007, with existing home sales jumping over 10% and new home sales spiking 6.2% from September’s figures.

What to Look for Next Week

The latest unemployment picture will be framed with the release of November’s employment report.  Even though unemployment claims have slowly dropped in recent weeks, it’s expected we’ll see a rise in the 10% unemployment rate through the end of the year.

Short-Term Rate Outlook
Relatively Unchanged

Stay Informed:  What’s in the News

“America’s Fastest Recovering Cities” – Austin #3 from Forbes.com

http://www.forbes.com/2009/11/19/cities-recovery-unemployment-lifestyle-real-estate-top-ten_print.html

“Texas’s Existing Home Sales Climb, Prices Inch Up” from Texas A&M Real Estate Center

A total of 19,347 existing single-family homes were sold in Texas last month, a 15 percent increase from October 2008, according to MLS data compiled by the Real Estate Center at Texas A&M University.

The median price rose 1 percent to $143,300 during the same period, and the state finished the month with a 6.9-month inventory of existing homes.

Here is how select Texas cities fared in October (data current as of Nov. 24, 2009):

“US Job Losses to Bottom out Next Quarter: NABE” from CNBC.com

Economists expect the joblessness that has weighed down the nation’s economic recovery will start to slowly abate in 2010, but they predict consumers will continue to keep a tight rein on spending, according to a new survey.

“Fed Remains Cautious on Strength of Recovery” from The New York Times

The Federal Reserve’s new economic forecast and minutes from a session earlier this month reveal that policymakers continue to fret over whether the economy is strong enough to hold up without government stimulus efforts, such as the temporary fiscal programs for the housing sector. Concern about the recovery comes as Fed officials begin debates on when to start raising interest rates, which have been held at virtually zero since last December, and on ending their program to purchase $1.25 trillion in mortgage-related securities. The real estate industry fears an increase in mortgage rates, but the Fed also wants to focus on reducing its holdings and bringing its balance sheet back to normal.

Marie Funston | Sr. Mortgage Advisor | (512) 750-7270
9442 N Capital of Texas Hwy., Suite 1-600
Austin, TX 78759
Fax:  (512) 343-1224
Marie@austinmortgageadvisor.com

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.

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.

Commercial real estate has been as strongly affected by the real estate decline as the residential real estate markets, for some areas more so. With this in mind many commercial real estate agent have alter approaches and watched the market for the best spots to focus on. The good news is that as the residential real estate market is rebounding so is the commercial. The vast majority of the market turned to commercial leasing.

As 2008 came to a close, the numbers appeared to be more solid than previously anticipated. After reviewing the numbers across two profound years there were significant changes in sales and leases. The numbers give a lot to reflect on. Between 2006 and 2008 commercial sales dipped 13% however commercial leases increase a huge 33% over the same period of time.

This means that although real estate sales have dropped the commercial market as a whole has not been stagnate. It continued to move forward as businesses needed a place to call home. They turned to leasing and commercial real estate agents versed in lease and leasing agreements. This means that being versatile enables success both in business and real estate locations.

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.

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

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.

United States new home sales numbers have continued to increase between May and June. The numbers made available by the US Commerce Department appear to reflect a market recovery.

Between May and June the sales of single family homes increased 11 percent alone. This jump indicates a third consecutive increase, and surpasses the anticipated increase of 2.3 percent by many economists. This particular jump holds additional significance. Home sales have not made a significant increase of this nature since Dec. 2000, 8.5 years ago.

Additional positive news for the housing industry can be found in re-sales that posted an increase of 3.6 percent for the month of June. This puts the housing market in a more stable up swing than previous projection. This can be found in a report from the National Association of Realtors.

In the Austin area more than 2100 single family homes sold in June. This is actually down 4 percent from June of the previous year. According to a report from the Austin Board of Realtors, the year over year sales volume gap is decreasing every month, making Austin a steadier housing market then the majority of the country. The median price has remained the same, just under 200 thousand dollars, when comparing the same month in both years.

Overall, Austin sales volume is also increasing. The housing sales market report of this area indicates that sales have increased 61 percent since the onset of 2009.

Once again this proves the housing market in Central Texas is one of the most prolific.