Austin Leads, Are you keeping UP?

HAPPY NEW YEAR!!

An update to my first blog in graphs.  Afterall, a picture is worth 1,000 words.

Austin Area Market Inventory

Source: Alamo Title

Texas and Local City Unemployment Rates

Austin, Round Rock, Cedar Park and Pflugerville

12 Month

5 Year

Source: Texas Workforce Commission: Labor Market Information

 

Positive Blip in the Market and 10 Year Profile of a Leased House

This week compared to last year this same week, there is some positive news as reported by Alamo Title in their weekly email update:  Alamo Title's Market News Bulletin for Dec. 6, 2010 - Current Active Listings = 10,331. (http://www.alamotitle-austin.com/)

The Austin Area Market:
-  The number of active listings are up 2.74% from last year during the same week.

-  New listings are down 15.54% this week compared to the same week last year.

-  Pendings are up this week 10.78%.-  Sold residential units are up 1.34% compared to the same week last year.

 The best news I see here.... New Listings are down 15.54% and Pendings are up 10.78%.  I see this as a breather in a market where throughout the year to the end of the summer inventory numbers kept climbing and did begin to come down until after August.  We were at the highest inventory of homes with over 13,000 residential properties on the market.  I can hear Florida markets laughing at this compared what they have been dealing with, as well as Nevada.  We have been relatively fortunate, but this has been a slow developing year after the home buyer tax credits ended this spring.


...we had 10,055 active listings during the same week in 2009.. Today there is 10,331 active listings!  That is 2.74% increase from last year. 
The inventory should continue to look stable compared to last year, but I expect Pendings and Sales through the months leading to May 2011 will look very low compared to 2010 because of the run up caused by the tax credit this year.

With this market environment as a backdrop, leases are doing very well.  Since my last blog I have been digging into the Multiple Listing Service database to isolate some graphs that might depict the situation.

Investor Scenarios: 1 Story, 1500 - 2000 Square Feet, 3 Bedroom, 2 Full Bath, 2-Car Garage

If you had bought such a home in selected areas of Austin, Round Rock, Cedar Park, or Pflugerville, here are some graphical presentations of what the average sold prices and lease rates did during that time period.

Graphs by George Mora, REALTOR(R), Realty Austin

(Austin Board of REALTORS(R) deems the Multiple Listing Service data to be accurate but it is not guaranteed)

Let me know if you would like a copy of one of these and I would be happy to send it to you.  The lighter color is the sold values and the darker color is the leased values, over an eleven year period starting in 2000.  These are for 3 bedroom, 2 full bath, and 2 car garage single-family residences with 1500 to 2000 Square Feet. only.  Each graph represents an geographical area: NW = Northwest Austin, N = North Austin, CLS = Cedar Park south, nearest Austin, and RRW = Round Rock west of I35.

Bear in mind that the year 2000 was a peak year in real estate just before the internet boom went bust, bringing down values for a couple of years.  Still, values stayed fairly stable while leases took a dip and continued to recover.

If you would have bought a house in NW Austin in 2000 for $140,000, and leased it throughout these eleven years, it would now be worth somewhere approaching $180,000 (depending on the maintenance program).  To be conservative, let's say it is now worth $160,000.

Certainly, if such an investor would have put 25% or $30,000, down when purchasing at an investor mortgage rate of 7% on a $110,000 loan, the current loan balance would be approximately $92,000.  Your tenants over that period of time would have paid down $18,000 of the mortgage, while the value would have gone up 10 - 15% or more. (http://www.freemortgagecalculator.net/)

At this time when mortgage rates are lower and prices are more negotiatable, with well qualified tenants snatching up the leases quickly, the next ten years looks at least equally good for the single-family house investor.

Going, Going, Gone. Single Family Home Leases are Flying off the Market

Now would be a great time to consider, or reconsider, investing in single family homes as a “passive” income investment opportunity in your retirement strategy.

For the second time in a row, my same young clients have missed an opportunity to put an application on a lease house because another lease application was submitted first.  Not only were we beaten to the punch, but the first submitted application actually looked acceptable.  Both leases were for $1195 / mo, both houses were in great condition, and both went Pending approval status in days.

These are very nice homes that did not get the offers they wanted when they were on the market for sale.  So, rather than take a loss in this challenging market when there is so much inventory out there, the owners decided to lease.  This has been happening all year.  And, with the mortgage qualifying criteria not getting any easier, I expect this trend to continue for years to come.  Good houses at strong market rent rates will lease quickly.  Good, qualified prospective home owners will continue to lease a house first while they save for a house and improve their credit standing.

Although mortgage loan rates are at historic lows hovering under 4.5%, qualifying for a loan continues to be a challenge for prospective borrowers on the bubble.  So, think about all those home buyers who qualified for a loan back in the hey-day of “no document” loans, and interest only ARM loans.  (Interest only homes allowed borrowers to qualify because it raised their income ratio against the mortgage debt.).  The difference between those who qualified then and those who qualify now, are going to want to continue living in a house, not in an apartment.

Single-family Lease Houses built since 2005 that leased for over $1000

Austin, Cedar Park, Round Rock, Pflugerville

Source: Austin Board of REALTORS® Multiple Listing Service deemed to be reliable but data is not guaranteed;

Graph by George Mora, REALTOR ®

The bottom most line in the graph is for the year 2010.  This shows that houses for lease this year from April through August leased faster than in any of the same months since 2006.  September and October were not bad either with only 2007 showing shorter days on market.

If you are an investor you can appreciate that having a house on the market for less than a month will save you significant amounts of money and stress.

I am continuing to analyze the lease market for these four cities and breaking down the top rentable areas by subdivisions.  I am looking for the best neighborhoods where investors can get the best cash flow for the newest houses and least amount of time on the market.  Because of the shift in the sales market, I am finding some shifts to areas where the number of houses that have leaseD have increased significantly over the past two years, in some cases nearly doubling.  These are subdivisions where families have always flocked to for schools and community.

Whether you are an experienced investor or just starting out, I would be happy to share my research and show you where the best investments could be for you: cash flow, protection of value, and potential appreciation.  Contact me by email (georgemora@realtyaustin.com) or by phone, 512-917-8961.

Pent up Demand

The NAR's chief economist made an insightful point: "We've added 30 million people to the U.S. population over the past ten years, but sales are where they were in 2000, so there appears to be a sizable pent-up demand that could come to the market once the economy gathers momentum." Other analysts commented that "decade low mortgage rates and near record highs in affordability should help stabilize sales in the near term, however it will take meaningful improvement in the labor market to drive housing going forward."


Even here in Austin sold properties in the Multiple Listing Service for our area shows that activity is lowest for the past 10 years for the months July through September.  I also believe there is a great deal of pent up demand but I don't think low mortgage rates will be enticing people out.  Until we see consecutive months of positive employment numbers like we saw in October, I don't think people will be leaving their leases to buy a house.  Better employment figures and low mortgage rates, that's what I want to see.

Starbucks report, my open house, and my fave mexican restaurant

What a nice crowd at my local Starbucks this morning.  I counted 9 in line, 6 waiting for their coffee and 23 sitting inside and outside.  It’s a gorgeous day too.  About 50 degrees, sunny, and I don’t see a cloud from a where I sit.  In my first blog I said I would observe the 8am – 9am crowd, but it is apparent from today the Saturday activity starts happening around 10am.

My open house in Anderson Mill West of Cedar Park went well today.  I consider it a success if I have just one qualified buyer come through the door.  Anderson Mill West is located just north of 620 along El Salido and is a pretty sizable area.  The open house I held today feeds to an exemplary elementary school and middle school in the Leander ISD.  That’s pretty exciting.   Especially since the elementary school is basically in the backyard of the house and the middle school is just down the street.  What more can you ask for at $183,000.

I drew the graph below based on data from the Austin Multiple Listing Service (which is deemed reliable but does not guarantee accuracy).  To me it shows a pretty stable market based on where the $ per square foot value starts 10 years ago and where it ends in 2010 so far.  It starts just under $80 and ends right in the middle of the 80 and 100 (the bars).  And look at the average sold price line…pretty darn stable.

Another thing I love about this area is the Mexican Restaurant down the street named Guadalajara.  I go there in the morning before 11am whenever I can (lately every other week) for the $2.49 Huevos Rancheros plate.  Whenever I am showing out of town clients that side of town I always invite them to have a genuine Mexican lunch with me to break up the day.  So far everyone I have taken there has gone back after settling in to their new home in Cedar Park or Northwest Austin.  The waitresses there are great.  Your cup of coffee never goes empty.  My usual is the plate with coffee, chips, corn tortillas, and a side of bacon (don't forget to exercise an extra 15 minutes or so the next day).

Crystal Falls and Grand Haven Homes

Crystal Falls and Grand Haven Homes

This might sound like a paid advertisement but it’s not.  I have been previewing Crystal Falls neighborhoods and homes because these offer the most gated communities” properties under $500,000.

All neighborhoods with Crystal Falls in the name of the subdivision are not created equal.  You want to drive out to Grand Mesa Crystal Falls.  Take 183A (the tollway section) to Crystal Falls Parkway and turn left heading west then pass Baghdad and Lakeline Blvd.  Keep going until you see the rolling hills full of trees and roads winding around streets large beautiful homes, but watch out for the dividers in the middle of the road with those beautiful oaks.  It is the most gorgeous scenario you can find just north of 1431 off Lakeline Blvd.  It really has everything the hill country of Texas has to offer.

Last night I was there for the Grand Haven Homes grand opening event of their new home community in the Cap Rock section.

At the second section to the left is a huge stone structure that reminded me of La Sagrada Familia in Barcelona that serves as the entrance to the Cap Rock section.  While you are driving down the road be sure to take in the scenery.  WOW.  Ravines, hills, and tree tops lay before you like a bunched up fluffy carpet you want to roll around in.  When I see a view like that I want to tie myself to a glider and cruise across the tree tops.

Grand Haven Homes is one of my favorite builders.  The leadership comes from the past Frederick Harris Homes executive team and they tout the 5 Life Zones’ approach to how your home should be designed.  Drive by the Model Home to see what I mean.  Their customer service is among the best in the industry.  Mike Miloch is the sales representative at the Estates of the Ranch at Brushy Creek, a gated community with some of their higher end floor plans.  Located off Parmer just south of 1431 it might be a more convenient place for some of you to sample their work.  Give me a call at 512-917-8961 to arrange a tour, or just let Mike know I sent you.

Open Houses and The Coming Holiday Season

Open Houses this weekend

Saturday October 30 3pm – 5pm

2802 Buckeye Trail, Cedar Park  787613, Anderson Mill West  $183,900

4 bedroom 2 full bath one story 2173 SQFT, high ceiling, exemplary schools

MAP

Sunday October 31 2pm – 4pm

23703 Shemya Cv, Austin 78729, Milwood  $194,987

3 bedroom 2.5 bath, 2 story, .35 acres, tall trees on big lot, walk to Rattan Creek Park

(I don’t understand why this hasn’t sold already)

MAP

Open houses are a great indicator of home buyer activity in the market place.  I have done an open house at the Shemya address on 4 Sundays over the past 2 months and the number of people who come through on Sunday afternoons has not changed that much.  The biggest difference is whether the open house is posted on the internet or not.  The INTERNET is such a HUGE factor on getting a house sold these days.

If you are selling your house, or planning to sell your house, you MUST have a professional internet presentation that shows off the model-like condition of your home and compels prospects to contact their agent for a showing.  Depending on your price range you can expect 90% of home buyers or more to find your listing online first, and 70% of these prospective home buyers will drive by the houses they like:

36% will buy that home they found on the internet.

24% of home buyers called on the yard sign of the house they bought.

36% will buy the house their real estate agent found for them.

That accounts for 96% of the possibilities for attracting a buyer to your house.

36% - online presentation

24% - curb appeal for the people calling from the sign

36% - pricing, for the real estate agent search

The other 4% is print ad and miscellaneous.  So, where should you be putting your marketing energy?  What kind of internet marketing strategy and system can your listing agent demonstrate for you.  (Not tell you about, but demonstrate.) 

Go on Google and do a search for “homes for sale in [insert your favorite neighborhood] and tell me if the Realty Austin website isn’t at the top of the results page.  If it is not, I will let my office know and we will make sure it is next time you look.

The Coming Holiday Season

The end of the year always sees a little seasonal pick up in home sales.  For the past 4 years November and December have been very good business months for me, and for many other agents who continue to work through the holidays instead of going on their ski vacations.

Halloween is this weekend so I am advising my clients who are thinking of selling this year to start getting prepared for the professional photographer.  (I would have preferred to have a sign in the yard so the moms and dads with their little costumed monsters and princesses could grab a flyer.) 

Do whatever staging we are going to do and let’s get that photographer in your house next week or the week after.  We need to have your listing on the Multiple Listing Service (MLS) by mid-November at the latest.  People travel during Thanksgiving and use that time to drive through neighborhoods and see homes they like.  Those people want to be under contract with a close date before Christmas if at all possible.  Because mortgage loans are taking so much more time these days, people might be travelling earlier.

News reports that this year's retailing business will see an increase in overall revenue compared to the last two years.  People feel the economy stabilizing.  I hope to see more home shoppers out in force this holiday season.

Austin Leads, Are you keeping UP?

Will You See Austin’s Resurgence, or Will You Read about It 2 Months Later?

George Mora, REALTOR® , Realty Austin

By almost all reports, Austin leads the nation in attracting businesses and people.  When we finally read about the national economic recovery, Austin will already be riding the curve up, ahead of all but a handful of local economies around the nation.  That means mortgage rates will have started rising, houses will be selling just a little better, and chances are you will have missed the opportunity to buy closest to the bottom of the real estate market if you haven’t already bought or refinanced your mortgage.

So, we find ourselves here in Austin at the forefront, the vanguard, the leading edge of coming out of the economic slump our state and the nation seems to be in.  While national reports have our country at 9.9% unemployment, Texas Labor Market Information (www.twc.state.tx.us) shows our state unemployment rate over the summer at around 8.5%, Austin and Round Rock 6.7% , Cedar Park 5.7%, and Pflugerville 5.9%.  Isn’t that awesome!? (These are from the "not seasonally adjusted" numbers.)

* Update: I wrote this last week.  Since then the September numbers have come out (again, not adjusted) Texas: 7.9%, Austin 6.7% unchanged, Round Rock 6.2%, Cedar Park 5.4%, Pflugerville 5.3%. Perhaps the surrounding cities show movement because of the smaller economies, and they are moving in the right direction.

As awesome as that is, it also means that all this economic reporting we are reading and hearing tends to be dated.  It would make more sense for us who live here to find our own indicators to focus on.  If you read any article that talks about the economic recovery, they talk about consumer spending leading the recovery, and reduced unemployment as a necessity.  As a professional in the residential real estate business, I believe that people need to feel more confident about keeping their current job, or getting a job they don’t have.  Many of my real estate colleagues have voiced agreement.

That is why I have come up with a project for myself to keep track of consumer spending, employment, and pending residential sales (for houses only) at the local level.  I would also like to hear from any readers about what you can observe that might indicate people are spending more or people are getting confident about their employment.

People in line at Starbucks:  My first favorite thing will be counting people in line at my local Starbucks.  I plan to make it a point to go to the Anderson Mill / 183 Starbucks regularly two days out of the week, Mondays and Saturdays between 8am and 9am, and count the people in line.  The Anderson Mill and 183 location will be a great indicator for northwest neighborhoods like Anderson Mill, Milwood, The Mountain (Park at Spicewood Springs), Spicewood at Balcones, Barrington Oaks, even Avery Ranch, Forest/Silver Oaks, and others in that area.

Online job postings:  The other easy-enough-thing-to-do is to get a count of the job openings on some of the public web sites for job hunters.  Using no other criteria but “Austin TX”, at http://www.indeed.com/ and http://www.simplyhired.com/, those searches returned counts of 29,696 and 27,934 respectively.  For the same search, workintexas.org showed 425, and http://www.dice.com/ showed 912 for postings within the last 30 days.  I am thinking postings on these types of site will increase as companies begin to hire again.  (I tried http://www.monster.com/, but it limited the results to 1000 records.)

Pending residential real estate contracts: Since I am an Austin real estate agent with a constant pulse on the market, I am also going to keep track of Pending sales.  Lately a big story in local real estate has been the record setting inventory of Active listings for single family homes on the Austin Board of REALTORS® multiple listing service.  I want to be on top of the story when Pending contracts begin to surpass new listings over a given period of time.  With the current hold up on foreclosures, we should also see something happening in these numbers whether they continue to be stopped or released.

The Austin area markets are going to lead the way out of this economic slump.  Stay tuned with me to see how it moves.