Austin Texas Real Estate Blog

The first real sign of our impending recession began in the national real estate market. Thousands of sub-prime loan holders began to fall behind or default completely as the job market became stressed. Since 2007, home prices have been on a steady decline nationwide. According to a recent report, the decline is beginning to slow down, but it is still there. It has now been 31 straight months on record indicating the falling prices. February 2008 showed a dip of 18.6% when compared to the same month in 2007, down from 19% recorded for January. There have been no rises in median home prices since 2006. Overall, the market has fallen by 30.7% since July 2006.

While this slowdown shows promise, experts refuse to get excited quite yet. With unemployment reaching higher levels, and not expected to jump up throughout this year, the real estate market will not really have a significant chance to rebound yet. Real estate analyst Mike Larson of Weiss Research states “it’s just a moderation in the monthly declines and it fits in with the pattern we’re seeing of things getting less bad.” There has been some slowing previously, but it had not led to any real stabilization. Most experts feel we are closing in on the bottom of the weak market, so this trend may be coming at a better time than the last.

Consumer confidence has also seemed to grow in the last couple of months. More people are looking into buying to take advantage of the great rates this recession and weak market has created. The ongoing credit crunch continues to inhibit many potential buyers from securing a loan, but that is not necessarily a bad thing. One of the largest factors in the real estate bubble burst was the non-traditional financing that allowed those with less than perfect credit to buy a home. When the payments increased, many were simply unable to keep up. Now, with more traditional lending practices back in full swing, those who purchase a home are more than likely able to afford it.

It is the rare individual who today buys a home outside of a development. Almost all houses and units of property are a part of a planned community. As such, almost all houses and units of property are governed by a homeowners association (HOA). In fact, it is estimated by the American Homeowners Resource Center (AHRC) that 50 million Americans are members of HOAs. But what exactly does this mean?

A developer creates an HOA before he sells any unit in a new development. With the HOA, he is able to formulate a list of covenants, conditions and restrictions (CC&Rs). These rules are written into the deed, so no homeowner can contest them after moving in. More often than not, the CC&Rs deal with maintenance, exterior upkeep and community behavior.

There are many benefits of HOAs. For example, an HOA often creates a degree of conformity. For someone looking for a community in which certain values and terms are upheld, an HOA thus fosters an ideal situation. However, there are also a number of perceived disadvantages to living in an HOA-governed community. Many believe that an HOA is undemocratic and that it takes away the rights of the individual by forcing him or her to adhere to the community’s CC&Rs. An HOA can also lead to higher taxes and financial risk if the developer is less than forthright.

If you are buying a home, you should be aware before you sign any papers of whether your new house is in an HOA community. If it is, you should research it, so as to best understand if this HOA is serving the homeowners well. In Texas, you have many resources at your fingertips. There are a number of organizations, such as the Texas Homeowners for HOA Reform, Inc, working to ensure you are not hoodwinked by an HOA. Take advantage of them. Learn before you sign, and you’ll be certain to enter a community with the individual’s rights in mind.

Today’s links

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From the National Association of REALTORS

Promoting Energy Efficiency in the Nation’s Buildings

The American Recovery and Reinvestment Act of 2009 does much to promote energy efficiency in the nation’s buildings. And tax incentives are among the engines driving the shift. That’s great news for you and your clients.

Here is a sampling of the new federal incentives as reported by the Tax Incentives Assistance Project.

Residential Buildings

• Energy efficiency incentives for upgrades to existing homes, which cover improvements to building envelope and heating, cooling and water heating equipment, are now available through 2010. The cap has increased to $1,500.

• The existing home incentives are now calculated at 30% of the cost of installation, up to the $1,500 cap. Until further clarification on the legislation, it appears that labor is not included.

• On-site renewable energy systems, including solar photovoltaic and hot water systems, small wind systems and geothermal heat pumps, are eligible for a tax incentive worth 30% of the total cost of the system. There is no cap on the amount.

Commercial Buildings

• A tax deduction of up to $1.80 per square foot is available to owners or tenants of new or existing commercial buildings that are built or reconstructed to save at least 50% of the heating, cooling, ventilation, water heating and interior lighting energy cost of a building that meets ASHRAE Standard 90.1-2001. (The standard provides minimum requirements for the energy-efficient design of buildings).

• Partial deductions of $.60 per square foot are available for improvements to one of three building systems – building envelope, lighting or heating and cooling – that reduces total heating, cooling, ventilation, water heating and interior lighting energy use by 16 2/3% (totaling 50% when applied to all three systems).

• Buildings placed in service between January 1, 2006 and December 31, 2013, and covered by the scope of ASHRAE Standard 90.1-2001 are eligible.

Learn more about the incentives stemming from the American Recovery and Reinvestment Act of 2009 and download a matrix of energy efficiency incentives.

Individual states offer additional energy efficiency and renewable energy tax incentives. The Database of State Incentives for Renewables & Efficiency is a central clearinghouse for them.

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Green Statistics from Mcgraw Hill

Global: Early adopters are deeply involved in green, with 30% building green on over 60% of their projects in 2008. Over the next five years, more than half (53%) expect to reach this level of involvement.

Nonresidential Building: Industry Players in commercial and institutional buildings are getting increasingly active in green building, with those largely dedicated to green building (30% or more of their projects built green) reporting a 50% increase(10 percentage points) from 20% in 2008 to 30% in 2009.

Residential Home Builder: Builders heavily involved in green building (60% or more projects green) is expected to also increase from 26% in 2008 to 36% in 2009.

Statistics taken from McGraw – Hill Construction’s Green Outlook 2009

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While I don’t see the downturn the way the folks who sell papers need to see it, I’m all for presenting both sides of the story.

From the Austin American Statesman

RECESSION SLAMS INTO TEXAS

AUSTIN  – The recession has finally slammed into Texas after keeping away during most of 2008, says a new report from the Federal Reserve Bank of Dallas, and Austin and Dallas could feel the brunt of it.

Austin and Dallas were cited as being especially vulnerable because they have more exposure than other large Texas cities to cyclical industries, such as construction and financial services.

Statewide, employers could cut 296,000 jobs this year, sending the unemployment rate to roughly 8 percent, according to Fed economists Keith Phillips and Jesus Cañas, who co-authored the article in the Fed’s quarterly publication on the region’s economy.

In January, almost 120,000 Texans applied for unemployment benefits, 85 percent more than in January 2008.

You can check out the rest of the story at Austin American-Statesman.

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From The Austin Chamber of Commerce

Red Oxygen Chooses Austin for American Headquarters
The Austin Chamber and Opportunity Austin recently announced that Red Oxygen, one of the world’s leading developers and distributors of Enterprise Text messaging software applications and services, has made plans to open their American Headquarters in Austin, Texas.

“Red Oxygen’s highly efficient and innovative SMS platform is a perfect complement to Austin’s expanding mobile services and software industry,” said Gary Farmer, 2009 Opportunity Austin Chair and President Heritage Title of Austin. “The city welcomes Red Oxygen and hopes that the announcement will not only encourage other tech-based companies to consider relocating to Central Texas, but that it will also reinforce the fact that Austin is one of America’s most talented and qualified cities for an array of industries.”

In the process of launching their new 2,000 square-foot facility near downtown, Red Oxygen plans to create 10 to 12 new high-paying jobs for Austinites. The average office salary of $50,000 will provide excellent employment opportunities and take-home pay for Central Texans. Not only will the headquarters create new corporate jobs, but the move will also open new avenues and opportunities for local Austin engineers, sales associates and college graduates.

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Finish reading the story at The Austin Chamber of Commerce

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Found in my pile of magazines and folder of e-newsletters:

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Apartment REIT Stocks Fall to Five-Year Lows
Industry is hurting, but not as badly as other commercial sectors.
The stock market is falling to levels not seen since 1997-and apartment REITs are not immune. A number of leading firms-BRE Properties in San Francisco, Chicago-based Equity Residential, Apartment Investment and Management Co. in Denver, Essex Property Trust in Palo Alto, Calif., and AvalonBay Communities in Alexandria, Va.-have all seen their stock values plummet to five-year lows.

Read the full story at Multifamily Executive.

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UL begins certification of green products
January 14, 2009
Building Design and Construction
Underwriters Laboratories, the 114-year-old organization known for consumer product safety testing, has begin offering assessment and certification of environmental product claims.

UL’s two new programs launched in January 2009.

“The question of what’s green and what’s not green is being asked more and more,” Christopher R. Nelson, UL’s director for corporate development, said at Greenbuild in Boston.

“UL consumers really have been asking us how do you fit into this space, they look to UL for credibility, and retailers have been asking us (the same questions) as well.”

Get the complete details from Building Design and Construction.

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Currently, you are a buyer. You are operating from the point of view of someone who wants to obtain property. As such, you have located a real estate agent, conducted research on quality areas with even more quality prices and toured several homes. You’ve seen many that you wouldn’t mind living in, which if your ultimate goal, would be wonderful, but it’s not. You aren’t looking for a house to become a home; you are looking for a house that can become a profit. You want to resell.

You must then find a piece of property with resale value. It cannot simply seem like a place you would live in or appear to have multitudes of potential. It has to have potential. It has to be able to appeal to others, and others aren’t you. Therefore, don’t get caught up in the perks that you fall for, such as views or quaint external decorations. Focus on what will truly sell:

•Landscape – A house’s appeal doesn’t exist solely in the house. The yard is important, too. It should be of a decent size and normal shape with, if not actual, the possibility of gardens, playgrounds and other valuable additions.
•Size – You do not want a house six times bigger than its neighbors or ten times smaller either. You want one that although not an exact replica of the ones around it, fits in with the aesthetics of the area.
•Rooms – The number of bedrooms and bathrooms, and the size of the kitchen, as well as the closet space, garage area and appliances in a house will affect the sale. Talk to a real estate agent to determine what is the most popular in the market, and then look for it.

You may be buying right now, but soon you’ll be selling. Talk to your real estate agent, and think like a buyer and a seller. In the end you’ll have success . . . and profit.

You are about to put your house on the market. But before you list, given real estate’s current status, you decide you need an edge over your competitors – an extra draw for buyers. You are thinking along the lines of a remodel. You might renovate the kitchen, making everything huge, shiny and modern; you may knock down the wall between the den and the spare bedroom for a deluxe guest room; or you may turn the two-car garage into a one-car garage and a breakfast nook. They all sound good to you, but which possibility is the best? None of them.

In today’s economy, you don’t want to waste money on an extensive remodel. Chances are it will only cost you in the long run thousands of dollars, dollars you won’t gain back in the sale. Construction prices have risen, even as housing prices have fallen, and buyers are wary of homes priced higher than those around them. Further, lenders won’t go near the more expensive homes, meaning prospective homeowners won’t be able to secure a mortgage, and few out there can purchase a home without one. In short, you’ll be left with a beautiful kitchen, basement or garage, but no sale.

If you are looking to give your home a face lift, focus on outside touch ups. Fix the trim, the windows, the shutters. Invest money in what the homeowners will see from the street, so that by the time they walk in, they are already sold. If you can’t afford to install new windows, as your budget is only capable of small adjustments, don’t bother. Cheap fixes are more noticeable than grand refinishes or grand errors. You will have to accept that your house is going to be sold as is and hope there is a buyer who can buy it.

Now that you’ve reached your golden years, you’ve started thinking differently than you did when you were 40. Your needs and wants are not what they once were. You aren’t working; you’re retired, and so you need a little more money. What can you do?

You can obtain a reverse mortgage.

A reverse mortgage is exactly what it sounds like. Rather than putting money into the equity of your home, you take it out of your home. You get a loan based on the property’s worth, and then you get an income based on that. Should the value of your house fall below the value of the loan, you don’t have to worry. You can’t be evicted or forced to sell. The house is yours until you decide to leave. Once you do leave, payments on the loan will begin – either by you or by your heirs. However, any extra funds will be left to your heirs making the payments not too difficult.

To qualify for a reverse mortgage, you and any co-borrowers must be at least 62 years of age. The current mortgage must either have a very low balance or be paid off entirely. And you must live on the property. A reverse mortgage only applies to an owner-occupied house, be it a traditional single family home, an FHA approved condo or a two-four unit dwelling. The equity will be determined again by age, the value of your home and the loan limit for your county.

A reverse mortgage is an excellent possibility as something that could supplement your Social Security income or retirement savings. If you’re in need of a little extra funding, talk to a broker about going backwards with a mortgage.

Refinancing has its draw. If you have an adjustable rate mortgage, you can refinance and switch to a fixed rate mortgage, guaranteeing you the same level of payment every month. Or if you have an adjustable rate mortgage and simply want to switch to a loan with lower interest rates, refinancing will enable you to do that as well. And of course, if interest rates have suddenly dropped, refinancing will help you save a little money, which in this economy, is exactly what you want.

But how do you know if refinancing is the right choice?
You do the math. There’s no quick way to assess a situation and determine if refinancing will benefit it. You can’t choose an interest rate and decide that when the rates hit that number you’ll refinance. It simply won’t work, because refinancing is a complicated situation that depends the length of time you’ve had the current mortgage, how long you plan to have the new one and what other cost-cutting opportunities are available.

To determine whether or not you should refinance, first talk to some lenders. Get their numbers and details, so you know what you’re working with as you proceed. Then, find some way to calculate those numbers. Real Estate sites, such as thefool.com, offer calculators that tell you what to plug in where and give you real answers to your unique questions. Your main goal is to find out what the closing costs will be and how much you’ll save once you refinance. If the numbers work out in your favor, by all means, refinance. If they don’t, they don’t, and you can be relieved that you didn’t make a mistake based on a falling interest rate.