Austin Texas Real Estate Blog

The National Association of Realtors has come to the conclusion that the home buying market is depressed, not because people don’t want to buy, but because the lenders don’t want to hand out the money. Stung by the sub-prime debacle, lenders are tightening the purse strings and raising the requirements for mortgages, effectively dropping back to 1975 standards. There are low interest mortgages out there, yes, but the lenders are looking for higher credit scores and bigger down payments, as well as higher standards for appraisals on properties sold or refinanced.

This article paints a somewhat gloomy picture for the future of real estate sales, placing the blame on gun shy lenders who are turning down even those potential borrowers who have stellar credit scores and histories. They’re basing their refusals on second opinion appraisals that, if they come in below certain set standards – such as more than $20,000 below low prices homes in the neighborhood – the credit score doesn’t count for much. In fact, lenders are looking much more closely at those criteria they probably should have been looking at the past 10 or so years – trends in house sales, age of inventory, debt-to-income ratio, and so forth – these days. Condominiums seem to be a particularly sore point with them, also.

The bottom line here is, with the housing inventory at a 20-plus year high, and with lenders adopting these far – some say unrealistic – sets of standards for approval criteria, it doesn’t seem as if the state of the real estate market will improve any time soon.

Back in April of 2007, Inman News reported a 42% increase in suspected mortgage fraud rates nationwide over 2006. Well, the trend seems to be escalating, as the FBI warns in a report out recently. The Bureau warns that the pace seems to be quickening, given figures for the first half of fiscal year 2008. The figures include losses from the sub-prime mortgage fiasco.

Mortgage fraud includes inflating income or assets, forged documents, misrepresenting intention to occupy the property and exaggerated appraisals. The FBI report warns of increases in fraud, probably due in part to the depressed real estate market, opening the door for perpetrators of fraud. The FBI also warned of an increase in identity theft mainly targeting people with good credit ratings.

In March, ABC News reported on mortgage rescue scams, where con artists purport to help cash strapped home owners pay off their mortgages, only to abscond with the fee they charge, leaving the home owner more strapped than ever and facing foreclosure. The technology of today unfortunately adds to this because it allows easier access to personal information for identity thieves. When home owners submit information to get a home equity loan or line of credit, thieves steal the information and send the financial institution a fax, requesting them to transfer the funds elsewhere.

The FBI bases its gloomy predictions on an increase in fraud complaints, saying they “could be headed for 70,000″ suspicious activity reports. The higher rate of complaints enforces FBI director Robert Mueller’s warning that “as housing prices continue to fall, more financial misdeeds will no doubt come to light.”

The FBI is currently investigating over 1,300 cases of mortgage fraud and 19 investigations into subprime lending cases.

Housing Starts Down in Austin

November 9th, 2007 8:55 AM

In the last two weeks, I’ve seen a slowdown in the amount of traffic visiting my listings and the listings of my officemates. It is getting to be holiday season so part of the slowdown is to be expected seasonal decline in activity. When the buyer pool and activity declines you can imagine what most seller’s do. Price reductions are more common, seller concessions are often offered, and best of all buyer’s can get a good deal on the home of their choice. This is not to say right now you can make a 30% off offer on a home and expect the seller to thank you for your efforts, but with less competition, as a buyer, you’ve got a better chance of being the only person offering on the home and of having a reasonable seller.

If you’re a seller, you can make this market work for you. First you must realize that if you are moving within the Austin area, you’ll get less for your home, but you’ll pay less for your new home. Oftentimes seller’s and buyers see the market only from the position that they are in at any given time. It’s important to look at the market from all positions that you will be in as you calculate your bottom line and prepare to start negotiating to both buy and sell your home.

Below is a great summary of what the Austin market looks like and will look like in th enear future.

One of the reasons the Austin housing market is better than most other metros is the vibrant job market. But because new home construction is slowing, the number of construction jobs is diminishing. It’s a dichotomy that will impact the remainder of this year.

Large homebuilders, especially those with corporate offices elsewhere, are feeling the pinch of sliding sales in other states and are re-trenching here as well. It’s part of the corporate cut-your-losses-system-wide philosophy. Builders are reducing starts of single-family homes, townhomes and condominiums. How much has homebuilding dropped? Consider:

According to Eldon Rude, director of Metrostudy’s Austin Division, builders continued to reduce starts in the 3rd quarter. Metrostudy recorded 3,700 starts during the 3rd quarter of 2007. This is down 27% (1,361 units) from the 3rd quarter 2006. The annual starts rate was 14,436. This is down 23% (4,235 units) from the 3rd quarter 2006.

New home prices range from around $100,000 to the multi-millions. Are all price points impacted the same? Those that are, are not necessarily for the same reasons. The tighter mortgage loan policies are having an impact on the low end. Rude said: “a sharp reduction in starts priced below $200,000, especially in starts priced under $150,000, indicates where tighter credit policies have had the most impact.”

But this is not all. Within the Austin metro “move-up market,” (homes priced between $250,000 and $500,000) demand has also slowed and builders have reduced production in recent quarters. Rude observed that “buyers in this price range have become increasingly cautious about making purchase decisions.”

What does the future hold? “The Austin area will experience less demand for new homes in upcoming quarters,” Rude predicts. Rude’s reasons: “A sharp decline in relocation buyers, a competitive resale market and more hesitant home buyers are factors leading to the slowdown – as are decisions by corporate offices by the region’s largest builders.” He says “these decisions play a role in land acquisition, pace of starts, marketing and staffing.”

The good news? Rude echoes what we have reported previously: “Austin experienced only moderate appreciation in new home pricing in recent years, and this will, to a large extent, insulate the area from large price reductions that will plague the new home and resale markets in other parts of the country.”

October 30th, 2007 10:54 AM

As a Realtor in Austin’s ever changing market, I often get questions about the bubble. Sometimes, I even get the uninitiate investor’s summary of a plan that involves waiting for the bubble to break and then swooping in and offering seller’s pennies on the dollar for their real estate. I RUN, not walk away from these investors.

As far as I can tell, there is no bubble in the Austin/Central Texas real estate market. We tend to see regular, steady appreciation in our market. We have a reasonable amount of inventory, property taxes high enough to keep rampant speculators at bay, and a strong economy and work force that is supporting our growth. That said, the Austin Texas real estate market does fluctuate from a buyer’s market to a seller’s market to a balanced market. Like most markets a broad generalization such as “Austin is a buyer’s market” is usually wrong. The market can be segmented various ways and those segments are whatreally shoudl be commented on. As an example, ACTRIS (the Austin Central Texas Realty Information System - our MLS), shows over 15 months of inventory for homes over $1MM and only 4 months of inventry for homes up to $100k. Clearly both market segments are different for the buyers and sellers playing in those markets.

The excerpt below from The Neal Spelce Austin Letter (www.AustinLetter.com) supports the idea that we’re not facing a dwnturn in the market.

Austin area home values, as reflected by sale prices, continue to rise. This is in sharp contrast to the housing downturn in the former go-go states along the east and west coasts. For years we’ve been telling you of the insane skyrocketing of home prices on the two coasts. Others likened it to an ever-increasing bubble that was sure to burst when it was stretched beyond reality. In some cases, home prices soared 20%-30% per year in the first part of this decade. Well, no surprise, the bubble did burst and this was a trigger to the current housing crisis in those cities and states.

The Austin metro was different. New home prices have steadily increased over the past three years, not skyrocketed.Mark Sprague, the Austin area partner for Residential Strategies Inc. (RSI), points out the median home price in the 3rd Qtr 2005 was $181,108, in the 3rd Qtr 2006 was $197,103 and in the 3rd Qtr 2007, it was $208, 583. “The area median new home price is up 5.8% for the past 12 months,” he noted. Bottom line: there is no bubble to burst in the Austin area.

Another factor to consider is the number of vacant, developable, lots. Currently, Sprague estimates there are 26,058 lots and at the current absorption rate, this represents a 22.3 month supply. RSI, a market research and consulting firm, considers a 24-month supply to represent equilibrium. As Sprague put it: “The fact of the matter is that, although the housing market has slowed over the past year, Austin doesn’t have the problematic excesses of lot and housing inventories that are prevalent in most other major markets of the United States.”