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.

New rules proposed by the Community Development Commission could spell big changes for builders seeking variances for new developments in Austin.  The proposal is modeled on a similar law already in effect in Massachusetts and would require that builders who receive special permission to build larger-than-allowed residential buildings must devote a portion of their development to affordable housing for low to moderate income families.  The Community Development Commission is comprised of thirteen political appointees who are tasked with the development and implementation of programs intended to serve low income families and households in the Austin area.

Recent developments have also led to the appointment of a new Downtown Density Task Force, a result of stalemate on the part of the previous task force which could not come to an agreement at a meeting last month.  Many builders have noted that a proposed “pay-to-play” system that would require payments to a community development fund may also constitute a deterrent to new construction in the area during a time of economic uncertainty; most economic experts believe such requirements are unwise given the current housing market downturn.

Some experts have noted that the proposal as it currently stands is in direct conflict with Texas state law, which prohibits requiring builders to include affordable housing in their planned developments.  Supporters of the proposal, however, note that the rules do not force builders to include such housing, but simply withhold the required legal variances from builders who do not make such accommodations a part of their development plan.

The timing of the proposal is unfortunate, given the recent prediction in the 2010 Texas Construction Outlook that Austin construction projects are expected to increase by approximately 30% in the coming year.  Federal stimulus funds and projects are credited with a portion of this growth, and new housing starts are expected to make up much of the rest of the increase.  Many builders feel that adding new layers of expense and paperwork will put a damper on these expected gains and stifle much of the economic benefit Austin could derive from this infusion of cash and projects to the local building industry.  While the public works and utilities projects are not expected to be affected by the proposed rule changes, some new housing developments may be delayed or even canceled if these rules are put into effect at this crucial time.  Given the fragile nature of the housing market recovery, most builders believe that these rules should not be implemented or should be delayed until the housing industry is more robust and the recovery is well underway.

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.

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.

By MICHELLE CHAPMAN and J.W. ELPHINSTONE

AP Business Writers

NEW YORK — In a deal that will create the nation’s biggest homebuilder, Pulte Homes Inc. is buying Centex Corp. for $1.3 billion in stock as both companies try to survive the worst real estate recession in a generation.

The transaction, which also includes $1.8 billion of debt, will combine Pulte’s strength in active-adult and retirement housing with Centex’s hefty market share of first-time homebuyers.

The acquisition also will give Pulte large tracts of land in Texas and the Carolinas, two of the most resilient real estate markets. But Wall Street analysts are concerned about the risk of taking on so much land in other areas where home prices are still plummeting.

The new company, which will keep the Pulte name and headquarters in Bloomfield Hills, Mich., will have cash reserves totaling $3.4 billion and pay off $1 billion in debt by the end of the year.

“We believe the combined companies will allow us to return to profitability quicker than a standalone. Secondly, the cash position allows us to pay down debt while at the same time provide ample liquidity for the future,” said Richard Dugas Jr., said Pulte’s president and chief executive, who retain those titles over the combined enterprise.

Centex’s chairman and chief executive, Timothy Eller, will become Pulte’s vice chairman and will also work as a consultant for two years following the acquisition’s completion.

read the rest at The Miami Herald.

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.

As the recession strengthens its grip on the economy across the nation, Texas realizes that we won’t buck the trend. Kimball Hill Homes filed for bankruptcy earlier this year. Now, Kimball Hill Homes has decided to shutter operations. Yep, bankruptcy will not solve its problems. This is the first, in what appears to be a long line, of failures awaiting the local housing industry. I hope someone is able to buy the company and resume operations. It is a bit disconcerting to see such a large builder go down.

Here is a link to the full story.

http://www.chron.com/disp/story.mpl/headline/biz/6144784.html

Two new homes on Riley Road in Rollingwood have received kudos from Austin’s Green Energy Building Program. The first home was rated a five-star example of an eco-friendly home, while the second should meet the same requirements, once construction is completed over the next several weeks. Those involved with the project have worked to include many home features that will allow the home’s occupants to have as little contact with dangerous chemicals as necessary, protecting both their own health, as well as that of the environment.

Included in the features of these homes are efficient fixtures and appliances, such as toilets, washing machines, dishwashers and numerous windows, all of which cut the need for excess water and electricity. Both homes have private pools with special filtration systems that remove impurities from the water, without the need for chlorine or other chemicals.

They also feature induction stoves, rather than gas or electric models, further reducing the carbon footprint of the homeowner. The paint used within the models is as chemical free as is available, making the home safe for those who have problems with allergies or those who are sensitive to chemicals. The floors are made from sealed concrete that does not require the use of chemical cleaners and can be washed with pure water.

When shopping for a new home, buyers that employ the services of a Realtor can assure that their purchase has the “green” features that they want, without overpaying. A Realtor will work with the builder and buyer to develop a suitable agreement about what materials are used and what features are added to the home, preventing misunderstandings and unethical practices. A Realtor can help a buyer to make the right choices when selecting their home that will meet both their budget and their needs, leaving everyone satisfied, once the deal is complete.

Plans are in the works to develop a 1,000 acre area northeast of Round Rock near the new Seton Medical Center and the Higher Education Center. The land is owned by the Avery family and they have partnered with the Waterstone Development company to begin a mix use development project in the area.

The project, named the Avery Center, calls for as many as 1,200 single family homes and 5,500 rental units. Townhouses, student housing, and higher end homes are planned, along with a 132 acre retail area which will include stores, restaurants and professional office space. Open space is planned, with a lake, trails and park areas, with 100 acres being set aside for this purpose. The plans also include a church, school, and a child care center.

The developer is working with Round Rock city officials on a plan for bus service for residents of the development to Seton, Austin Community College, the State University, and other places of study and employment.

The project is expected to take 10 to 15 years to complete and add $1.6 billion to the tax rolls. This area of Round Rock is one that is doing well developmentally, in spite of financial troubles that have slowed or halted other projects. The national real estate and credit crisis that has affected so much of the markets hasn’t had the same impact in the central Texas area.

Robert Wunsch, chief executive officer of Waterstone, is being picky about who he chooses to build the homes and rental units. He wishes to stay close to the vision that the Avery family has for their land and intends to maintain a high set of standards for construction and design. The houses will range in price from $180,000 to over $1 million.

The Dallas based Trammell Crow Co. is heading a partnership to redevelop the five block area between Second Street and the Seaholm Power Plant and includes the Green Water Treatment Plant, right smack in the center of downtown Austin. Joining the partnership is Constructive Ventures Inc., based in Austin, and USAA Real Estate Company, from San Antonio.

This all-Texas team is looking at an ambitious project that will include 2.6 million square feet of office and retail space, for sale and for rent residential units, hotel and public spaces, as well as parking garage areas that will offer spaces for Austin Car Share and electric car recharge stations.

The partnership proposes major community improvements such as $500,000 toward improvements to Shoal Creek and a grant of public easement for completion of the trail running between Fourth and Fifth Streets. A pedestrian bridge is planned over Shoal Creek to connect the site with the Second Street District. Twenty-five percent of the rental residential units will be made affordable to lower income families. In addition, the group plans to fund public art and music programs and will create an endowment to fund a lunch time music series.

The project includes plans for local retail making up a bulk of the space in the Green Water Treatment Plant and Austin Energy sites. And the icing on this cake is that the firms are aiming for a sky high LEED Gold status for all the buildings, with designs that will reduce energy use up to 50 percent.

Construction is expected to begin in 2009.