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.

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.

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.

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

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.

I am pretty much addicted to magazines and newsletters about a few things. Green building, architecture, home stuff, computers, and real estate. I thought I’d finally put some of my subscriptions to wider use and share a few links every day on this blog and on my West Austin real estate blog. Be sure to check out both sites for links of interest and let me know if you suggest any other magazines for me. I currently subscribe to about 25 or so and always love to get new ideas.

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Interested in Green Building and Sustainable Living? I got this a few days ago. I’m going so if you want to go and meet up, I’d love to meet ya.

Designing for Food Resources
Food is among life’s most basic needs.  Our current food production model is centralized and sells to a global market.  Like any other massed-produced commodity, our food product is cheap, abundant, and easy. There are many problems with the current model, leaving our food resources far from secure or sustainable.  Food production, transportation, consumption, and disposal each have a huge impact on our carbon footprint.

On a local level, grassroots groups are working hard to reduce Austin’s carbon foodprint. This presentation explores ways in which our planning process, building infrastructure, and operations policies can incorporate goals for responsible food resources. Changes in our single-family homes, multifamily homes, and commercial buildings can lead to more sustainable, reliable, and environmentally-responsible food resources.

This seminar will feature three speakers:

• Pamela “Sweetpea” Hoover is the assistant grounds master at Natural Gardener and a certified teacher of the square foot gardening method.  Sweetpea will address attainable and appropriate food production in Austin on a single-family scale.
• Marla Camp is the owner/publisher of Edible Austin magazine and also sits on the board of the new Austin Food Policy Council. Marla will speak on local food production, consumption and education on a community scale.
• Justin Doak is the founder of BlueBin LLC, a sustainability guidance firm for the retail industry and a partner in Austin Refuel, a Texas-based company that has developed a closed loop waste-to-resource network. Formerly the Program Manager of LEED for Retail, Justin will address marketing and money-making strategies in food waste-management for Commercial retailers and developers.

A Question/Answer period will follow the presentations.

You can get the full details of the meeting at Austin’s Green Building site.

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PROJECTS READY, CREDIT NOT

AUSTIN (get the full story at Austin American-Statesman) – Large Austin projects set to begin construction are stalled because of the recession and frozen credit markets.

JMI Realty is ready to start work on the Hotel Van Zandt, a 327-room boutique hotel at the eastern edge of downtown on Red River and Davis, but cannot receive the financing to do so.

“We have lots of jobs ready to be created with this project, but until the banking environment improves, we will be on hold,” said JMI Senior Vice President Greg Clay.

In north Austin, Atlanta-based Novare Group and its local partner Andrews Urban are holding off on a 28-story tower that would house condominiums and the 145-room Twelve Hotel at Endeavor Real Estate Group’s Domain. The developers say the delay of the $100 million-plus project stems from the postponement of three major retail projects at the mixed-use Domain. These include new stores for Nordstrom, Saks Fifth Avenue and Whole Foods Market Inc.

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From the Niel Spelce Austin Letter ( I highly recommend subscribing for anyone trying to stay abreast of what’s going on in Austin)

The information was released midweek that seven states posted an unemployment percentage above 10%.Texas was not in the group of seven.In fact, it was among the best overall.

The totals, as well as some major shifts, provide an interesting comparison. Let’s start with a few of the best states.Wyoming was the only state, at 4.8% unemployment, that came in under the 5% mark.Texas was one of the best, at 6.8%, ahead of New York at 7.6%.

…

But some of the hardest-hit states appear to be reeling because of the suddenness of the impact. For instance, North Carolina (a state many consider competitive to Texas because of its technology industry centered in the Research Triangle) suffered the worst upswing in unemployment.At the beginning of 2008, its unemployment was a very reasonable 5.3% then, wham!, it hit 10.3% at the start of this year.A swing of five full percentage points!The number of workers looking for a job almost doubled.This is how you define “impact.”

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So what about the other big states?How do they compare to Texas January 2009 total of 6.8%.In addition to those mentioned above, Florida recorded 8.8% unemployment, Illinois notched 8.5% unemployment, Massachusetts tallied 8.1%, Ohio nudged near the 10% mark with 9.7%, and Pennsylvania came in at 7.7%.It’s pretty clear that Texas still stands out among the states that matter for future leadership and growth.

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For Immediate Release Contact: Corinne Russell (202) 414-6921
February 24, 2009 Stefanie Mullin (202) 414-6376

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The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $6.3 trillion in funding for the U.S. mortgage markets and financial institutions.

RECORD HOME PRICE DECLINES IN FOURTH QUARTER;
ISOLATED POCKETS OF STRENGTH

WASHINGTON, DC – U.S. home prices posted record declines in the fourth quarter of
2008 according to the Federal Housing Finance Agency’s House Price Index (HPI). The
FHFA seasonally-adjusted purchase-only house price index, based on data from home
sales, was 3.4 percent lower on a seasonally-adjusted basis in the fourth quarter than in
the third quarter. This decline was greater than the 2.0 percent decline in the third quarter
and the largest in the purchase-only index’s 18-year history. Over the past year,
seasonally-adjusted prices fell 8.2 percent from the fourth quarter of 2007 to the fourth
quarter of 2008.

FHFA’s all-transactions House Price Index, which includes data from home sales and
appraisals for refinancings, showed significantly less weakness over the latest quarter than
the purchase-only index. The all-transactions HPI fell 0.2 percent in the latest quarter. It
was down 4.5 percent over the four-quarter period, the largest four-quarter drop in the
index, which extends back to 1975. These data reflect trends as of Dec. 31, 2008.
FHFA has also included its monthly house price index through December 2008.
Prices increased 0.1 percent from November to December on a seasonally-adjusted basis
after a downward adjustment for November and are down 10.9 percent since their April
2007 peak.

“Price declines continued in the fourth quarter although not as rapidly as some had
expected,” said FHFA Director James B. Lockhart. “We are hopeful the housing initiatives
announced last week by President Obama will begin to provide much-needed stability to
the housing markets.”

While the national purchase-only house price index fell 8.2 percent between the fourth
quarters of 2007 and 2008, prices of other goods and services rose 1.4 percent.
Accordingly, the inflation-adjusted price of homes fell approximately 9.6 percent over the
latest year.

Significant Findings:
Purchase-only Index:
1. Prices fell over the last four quarters in 44 states and Washington, D.C.
2. Four-quarter price declines exceeded five percent in 22 states and were in excess
of 10 percent in eight states.
3. All nine Census Divisions experienced price declines in the latest quarter. Prices
were weakest in the Pacific Census Division, which experienced a 7.1 percent
seasonally-adjusted price decline in the quarter and the West South Central
Division was strongest, with a seasonally-adjusted decline of 0.9 percent.
All-transactions HPI:
4. The MSAs with the greatest appreciation over the past year were: Decatur, AL
(6.6%), Monroe, LA (6.3%), Kingsport-Bristol-Bristol, TN-VA (6.3%), Austin-Round Rock, TX (4.4%).
5. Of the 20 ranked cities with the greatest price declines over the last four quarters,
all but one (Las Vegas-Paradise, NV) was in California or Florida.
6. The MSAs with the sharpest depreciation over the year: Merced, CA (-49.5%),
Stockton, CA (-40.2%), and Modesto, CA (-37.8%).
The complete list of state appreciation rates is on pages 15 and 16.
The complete list of city (MSA) appreciation rates is on pages 30–46.

Highlights/Technical Note
The quarter’s Highlights article updates an analysis that was provided in the last HPI
discussing alternative weighting systems that might be used in constructing the national
house price index. This release uses data through the fourth quarter to produce an
alternative, state-weighted national index and compares that index against the standard
Census Division weighted index. FHFA continues to study options for reweighting the
national index.

Background:
FHFA’s purchase-only and all-transactions house price indexes track average house price
changes in repeat sales or refinancings of the same single-family properties. The purchaseonly
index is based on more than five million repeat sales transactions, while the alltransactions
index includes more than 36 million repeat transactions. Both indexes are
based on data obtained from Fannie Mae and Freddie Mac for mortgages originated over
the past 34 years.

FHFA analyzes the combined mortgage records of Fannie Mae and Freddie Mac, which
form the nation’s largest database of conventional, conforming mortgage transactions. The
conforming loan limit for mortgages purchased since the beginning of 2006 has been
$417,000. Loan limits for mortgages originated in the latter half of 2007 through
December 31, 2008 were increased to as much as $729,750 in high-cost areas in the
continental United States. The American Recovery and Reinvestment Act, passed on Feb.
16, 2009, extended those limits for 2009 originations in places where those limits were
higher than those originally calculated for 2009.

This HPI report contains four tables: 1) A ranking of the 50 States and Washington, D.C. by
House Price Appreciation; 2) Percentage Changes in House Price Appreciation by Census
Division; 3) A ranking of 292 MSAs and Metropolitan Divisions by House Price
Appreciation; and 4) A list of one-year and five-year House Price Appreciation rates for
MSAs not ranked. Note that the Office of Management and Budget (OMB) announced
three new MSAs in late 2008: Cape Girardeau-Jackson, MO-IL, Manhattan, KS, and
Mankato-North Mankato, MN. Metropolitan area index series are now available for these
cities.

So, I read this and it validated my gut feeling about the market that we are in in Austin. (You can read the full report here) Austin has been virtually immune to the housing market woes that are causing widespread panic, loss, and foreclosure. That is not to say that we haven’t felt some impact to the curent economic turmoil, but moreso that we have seen a market adjustment to the hay days of 2006-2007, but that Austin is still growing and appreciating within our 4-7% “norm”.

I have to admit that watching the local and national news has started to skew my own view of the local economy. It’s too bad that there’s not a more balanced way to get the daily news. I suppose we have to chalk it up to misery, crime, drama, etc sells. Getting back to the report, I pulled these snippets from the full report and wanted to share them.

What Did Interest Rates Do This Week?

** according to Freddie Mac **

30-yr Fixed – Higher

This Week:  5.25%

Last Week:  5.10%

1yr Ago:  5.67%

15-yr Fixed – Higher

This Week:  4.92%

Last Week:  4.80%

1yr Ago:  5.15%

5/1 ARM – Relatively Unchanged

This Week:  5.26%

Last Week:  5.27%

1yr Ago:  5.21%

Highlight of This Week’s Major Economic Reports

The hot topic of the week centered on the ongoing debate in the Senate regarding the stimulus package, which may have reached a compromise totaling $780 billion.  The final vote in the Senate is expected in the next few days, and it would then go back to the House of Representatives for approval.

One key aspect of the proposed bill is a revision to the home-buyer tax credit.  Currently a first-time buyer $7500 tax credit to be paid back over 15 years, the new proposal eliminates the repayment requirement, doubles the amount to $15,000, and would be available to all home-buyers.

On the labor front, the latest figures revealed that another 598,000 jobs were lost in January, sparking the biggest monthly job loss figure since 1974.  The unemployment rate now sits at 7.6% — the highest since 1992.

What to Look for Next Week

With the economic calendar lacking any notable headliners, both the stock markets and bond markets will be directed by the results of – and reaction to – the stimulus package.  It is expected that a final bill will be voted on by both houses of Congress before the end of the week.

Short-Term Rate Outlook

Stable to Slightly Higher

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.

The Federal Bailout plan continues to help banks and investment companies meet their obligations. The good news is recent reports show that less money has been needed in the last few weeks. Federal help is still much higher than it was during this same time last year, but this decline brings new hope to the current credit crunch that created the need for the bailout plan.

The Federal report stated that it lent banks $2.1 billion less last week than the previous week. The total was $86.3 billion daily during the week ending this past Wednesday, down from $88.4 billion. Last year, during this same time frame, banks had only borrowed $4.8 billion. Investment firms borrowed $45.7 billion for the week ending December 24th, down from $50.5 billion the week before. The Federal Reserve also stated that the central bank has increased its net holdings of commercial papers to $325.8 billion. Commercial papers are used meet obligations for everyday expenses. Beginning in late October, the Federal Reserve began to buy these in order to help banks meet those needs. All of this assistance is in response to the credit crunch, which has made it difficult for banks to receive loans.

The economy continues to slow and consumer spending has reached record lows. People are holding off on buying homes due to the credit crunch. Regardless of the fact this is the best market for the buyer, it is still a difficult road right now. The Federal Reserve will continue to help lenders as needed with the hopes that the economy will begin to pick up within the next one or two years.