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Wednesday, October 21, 2009
Austin Real Estate Report
Friday, October 16, 2009
WHEN WILL RECESSION END?
COLLEGE STATION (Real Estate Center) – Three things have to happen before the current recession can be declared ended. One is underway, said Dr. Mark Dotzour, chief economist for the Real Estate Center at Texas A&M University.
"I think the economy will begin to turn for the better once the health care and cap-and-trade issues are settled. Those two political debates are creating substantial uncertainty for business owners and investors," he said.
The personal savings rate is the second trend to watch, said Dotzour.
"Over 70 percent of the U.S. economy is consumer spending," he said. "When the savings rate finally levels out, consumer spending will start to increase again."
Increased corporate profits are the third trend that must occur to bring the recession to an end. There is some indication that has already begun. The last three data points were all up. Rising profits lessen the urge for companies to lay off workers.
Research Economist Dr. Jim Gaines added that the increased corporate profits have come from reduced costs, not the kind that leads to expansion.
"Keep your eye on these three issues," Dotzour said. "When they are resolved, the economy will begin to turn the corner."
Thursday, October 15, 2009
Monday, October 12, 2009
8,000 Reasons To Buy
If you've been dreaming and saving to buy your first home, the next few weeks present a unique opportunity.
For first-time home buyers whose income falls within certain limits, purchasing a house, condominium or townhome might make them eligible for a tax credit worth 10 percent of the purchase price of their home, or $8,000, whichever is less. This amount reduces the amount of taxes you owe, or increases your refund, dollar for dollar, according to the IRS. For example, if you normally would have a refund next spring of $100, with a qualifying home purchase your refund could be $8,100.
Because of the tax credit and other factors, "my perception is that it's a great time to buy," says Carol Dochen, who has been in real estate for 28 years. She is the owner of Carol Dochen Realtors.
"Interest rates are at a historic low," Dochen says. "Because the market has dipped, you will be buying at a lower price point instead of a higher one."
Amy McGowan, an agent with Keller Williams, says she's been urging her clients to understand the unique benefits of this tax offer.
"The biggest thing I try to tell them is, say they are looking at a $200,000 home, the tax credit is equal to a 4 percent appreciation in value," McGowan says. In fact, it's a financial bonus that requires little effort on the buyer's part. "It's money that comes to you in your mailbox."
Here is a guide to what you need to know to take advantage of the tax credit and get into your first home before the holidays:
Who is eligible for the credit?
People who filed individual income taxes for an income of $75,000 or less, or couples who filed jointly with an income of $150,000 or less. You must not have owned a home within 36 months of your date of purchase. You must occupy the property you buy as your primary residence (this program is not for people who want to buy something and rent it out, nor does it apply to vacation homes).
When do I need to have found a house?
Right now. Late October might be pushing it. "The program as we know it ends Nov. 30," says Diane Dopson, owner of Diane Dopson Properties. "This means that you must have closed on the house by that date. It is possible that the government will extend the deadline, but in case this does not happen, the latest time to have a house under contract would be mid-October," Dopson says. "Loan approval is taking four to six weeks." In other words, once you find a house and put it under contract, it could take another four to six weeks before you are able to close on it, and that needs to be done before Nov. 30.
"Try to be under contract no later than Oct. 25," Dochen says.
What should I do first?
If you have not already done so, you should get preapproved for a home loan and find a reliable real estate agent to help you shop for a home. You need to know what price range to search, as well as the part of town you'd like to live in.
"We sit down with our clients and have them talk to a lender, so we can show them the right-priced property, and we match neighborhoods to that price range," Dochen says.
Should I buy a house just because the tax credit is available?
"Be careful and make sure that for your personal situation, you are ready," says Nancy Taute, an agent with Carol Dochen Realtors. "You need to be ready to accept responsibility for homeownership." She cautioned that buyers need to be prepared to be able to sustain six months to a year of mortgage payments in case they lose their jobs.
For those who are financially ready, the time couldn't be better.
"If you are prepared, if you have done your budget and your job is secure, it's time to get serious," McGowan says. "The combination of low interest rates, the tax credit and affordability in the market" make it worth pursuing homeownership now, she says.
What types of properties does the credit apply to? Can I buy the property from anyone?
You can buy a single-family home, townhouse, condominium or mobile home (and the land under the mobile home), as long as it will be your primary residence, according to the IRS. You cannot buy the property from your parents or grandparents, or from your children, grandchildren or your spouse.
If I buy a house and receive the tax credit, but end up moving next year, do I have to pay the government back?
Yes. You must repay the credit if the house stops being your primary residence (your home) in the 36 months following the purchase date. As long as you live in the house for 36 months after you buy it, you don't have to pay the credit back, Dochen says.
How do I receive my tax credit?
You can file an amendment to your 2008 taxes, or wait and file it with your 2009 tax return. You will be filing Form 5405. Go to www.irs.gov for more information at http://www.irs.gov/newsroom/article/0,,id=205416,00.html.
What price range are most first-time home buyers looking in?
Most first-time home buyers are probably looking at properties between $100,000 and $350,000, Dopson says.
Angela Brutsch?, spokeswoman for the Austin Board of Realtors, says there has been a definite rise in the percentage of sales in houses in the $100,000-to-$150,000 range.
In August 2008, sales in this category made up only 3.7 percent of the houses sold that month, but this August, that category made up 7.9 percent, more than double the former amount.
In August, 55 percent of the houses sold were in the $100,000-to-$200,000 range, and another 19.2 percent were in the $200,000 to $300,000 range. Together these made up 74.2 percent of the homes sold.
The number of sales in "these price ranges are trending higher than last year," Brutsch? says, because they are popular with first-time buyers taking advantage of the tax credit.
What Central Texas neighborhoods are popular with first-time home buyers?
First-time home buyers looking in the $100,000-to-$200,000 range and seeking a three-bedroom, two-bath house are looking in Cedar Park, Leander and Round Rock, as well as in Rancho Alto in Southwest Austin and Olympic Heights in South Austin, McGowan says.
Other neighborhoods popular with first-time home buyers include Maple Run, Westcreek, Cherry Creek, University Hills, Windsor Park, Balcones Woods and Pioneer Crossing, Taute says. Pflugerville, Buda and Kyle are also in demand.
Any other last words of advice?
The real estate agent's mantra is "location, location, location," and that holds true in this situation as well, the agents say. "Make sure the location works for you, job-wise, community-wise, school-wise," Dochen says.
Arlene Maze, an agent with Carol Dochen Realtors, says, "Do the morning and afternoon commutes from the house. Go to your activities to and from there. It has to work with your lifestyle."
Where can I look if I have other questions?
Talk to your real estate agent. In addition, there is a lot of information about the program at the IRS Web site: http://www.irs.gov/news room/article/0,,id=206291,00.html.
Thursday, September 24, 2009
Upscale Riverside development a test case for lakeside high-rises
Houston developer offers to pony up for affordable housing - but is it enough?
AMERICAN-STATESMAN STAFF
Thursday, September 24, 2009
As part of a special zoning agreement, a developer who wants to build an upscale East Riverside Drive apartment complex has offered almost $4 million for low-income housing in Austin. But as the City Council prepares for a possible vote today on the plan, a last-minute question has emerged: Is $4 million enough?
Grayco Partners says it's giving the city a generous contribution to offset the loss of 600 relatively low-cost units, in addition to enhancing public waterfront access and numerous other concessions.
But critics of the project say that, based on an opinion issued late Tuesday by the city's legal department, Grayco should have to pony up closer to $8 million — an amount Grayco says would kill the project.
The $200 million project — which pits a Houston developer, Grayco, and advocates of a denser urban core against neighborhood activists who oppose high-rise development near Lady Bird Lake — was postponed by the council a month ago and has become a test case for new city zoning rules and priorities.
Differing interpretations of those rules have bogged down the project and may further delay a final council vote.
Grayco and city officials were working frantically Wednesday to resolve those differing interpretations.
Council members said some significant questions remain unresolved going into today's council meeting.
"Clearly there's some confusion in all this," said Council Member Randi Shade, who added that she thinks a final vote is unlikely today.
The developer wants to build four buildings, with 1,200 apartments and 97,000 square feet of street-level retail space, on about 30 acres bounded by Riverside, South Lakeshore Boulevard and Tinnin Ford Road.
Grayco wants permission for one building to be up to 120 feet tall and two others to be up to 90 feet tall.
But the area's zoning rules cap heights at 40 feet.
So Grayco is asking for special status as a "planned unit development" — a designation that allows the City Council to waive height limits and other zoning regulations.
The over-arching idea is that a development can be higher, denser or otherwise different than zoning normally allows if its builders can prove the changes make it "superior."
That judgment is at the discretion of the City Council.
Previously, debate had centered on whether Grayco's buildings were too tall and whether the development would give the city enough other goodies to be worth the extra height.
Grayco's proponents said the project's height is fine given what the developer is offering in exchange: more people living in the city center, increased waterfront access, $25,000 for renovation of the historic Norwood House nearby, and a retention pond that will capture about 22,000 pounds of pollutants that wash into Lady Bird Lake every year, among other concessions.
But critics said the project violates the spirit of new height limits established along the lake earlier this year. Neighborhood activists pushing for those limits said they feared high-rise projects could spoil vistas of the lake and block public access.
Late Tuesday, the city's legal staff threw a curveball.
Earlier this year, the council passed guidelines to set criteria for a "superior" development worthy of special zoning status.
Among those criteria was a donation to build low-income housing or pay property owners to provide it. In this case, low-income means a household income of $58,650 for a family of four.
Grayco figured that amount was about $3.7 million to help replace elsewhere the 600 units that would be torn down to make way for the project.
But the city's legal department, interpreting the guidelines differently, calculated Grayco would need to contribute $7.8 million, according to a memo sent Wednesday afternoon to council members.
Steve Drenner, Grayco's attorney, said the requirement is "beyond the pale."
"We can't get anywhere near it," he said.
The council has discretion to deviate from that, or any other, criteria.
Council members reached this week said they generally wanted to follow the rules, but some were considering whether to make an exception. Council Members Bill Spelman and Chris Riley said they were still trying to determine the proper trade-off for 600 units.
"I'm pleased to see this kind of redevelopment in such a crime-filled area," Council Member Sheryl Cole said. "From what I can see, it meets our criteria and should be approved."
Council Member Laura Morrison, a Grayco critic, said the council should require the entire $7.8 million. Morrison said that's one of a number of problems she has with the project.
"At this point," Morrison said, "I'm not inclined to support it."
Tuesday, September 15, 2009
Austin among best performing U.S. metros
Austin Business Journal
Austin and San Antonio will be the first two U.S. cities to recover from the recession, according to a new national forecast from IHS Global Insight.
The forecast from the Lexington, Mass. economic research firm suggests the two Texas cities will bounce back to their pre-recession job levels sometime next year.
Eight other metropolitan areas are predicted to recover by 2011, a group that includes Texas’ two largest markets, Dallas-Fort Worth and Houston, along with Washington, D.C.
IHS Global Insight said most metros will start adding employment next year, but the increases are likely to be tepid. “Solid gains will not return for the majority of the country until 2011,” the report said.
Austin is also named one of the 20 best performing metropolitan areas in the second quarter of 2009, according to a study by the Brookings Institution.
The second quarter MetroMonitor report tracked nine metrics in 100 U.S. metro areas, and found Austin was a leader in many of those, from percent change in gross metropolitan product to percent change in housing prices.
Employment in Austin fell 0.5 percent from its pre-recession peak, that was the second-narrowest gap in the nation. The Texas Capital was also one of only three metro areas that surpassed their pre-recession peak output by the second quarter of 2009. Along with the other two cities, McAllen and Washington D.C., Austin was one of those least affected by the downturn.
The report’s authors said the figures reveal some stark differences in economic performance among metro areas.
“Signs at the national level that job and income losses are slowing continue to mask the highly variable performance of individual metropolitan economies,” said Alan Berube, co-author of the report. “While several metro areas may have reached a turning point, there are many others that still have not touched bottom, as well as a few that have almost fully recovered.”
Texas had the strongest showing, with six cities among the 20 strongest metro areas: Austin, Dallas, El Paso, Houston, McAllen and San Antonio. Florida dominated the list of the 20 weakest metro areas with eight, including Bradenton, Cape Coral, Lakeland, Miami, Orlando, Palm Bay and Tampa.
For the full report, click here.
Friday, September 11, 2009
Rehabbing? Value Added Repairs Are Crucial.
What repairs should you do when rehabbing a home?
When investing in rehab properties, you often run into homes that are in really bad condition. These are the homes I love that are in complete disrepair, ugly and unlivable. To many this is a turnoff and says headaches. To rehab investors it says profits and the evaluation process begins. When creating your rehab list and budget, it is crucial to focus on completing Value Added Repairs. Items that add value usually have to do with Kitchens, Bathrooms and Curb Appeal.
It is key to get people to fall in love with your property and get emotionally attached. They must imagine themselves living in the home and it starts with the property being inviting when they first lay eyes on it. The first impression must be “WOW.” The home is inviting with nice landscape, fresh paint and some pop in the colors used. Sometimes it is as easy as adding a little paint and cleaning up the landscaping. Putting about 2K into Curb Appeal can often increase value significantly.
Then they enter and find warm neutral colors and new or at least nice flooring. But the Kitchen is usually the place they head. Women love kitchens and this will be a huge part in the purchase decision. Don’t overdo it though, putting in a 40K kitchen into a 100K home does not make sense. Spending 5K could with nice appliances can already get the buyers thinking about cooking and enjoying dinner with family and guests.
The 3rd part of the home where significant value can be added is the Bathrooms, especially the bath in the Master bedroom, the one the buyers will be using. They will instantly imagine using the bath and what it will be like to sleep, live and spend time in this Master bedroom and bathroom. Adding a bathroom or converting a half bath to a full bath can also add significant value to buyers with children.
Finally, the mechanics, plumbing, electrical, roof, foundation, etc must not create red flags during the inspection period. That can kill a deal really quick. It is important to not go overboard on items such as finishing a basement, materials that overshoot what is common and expected in the neighborhood and doing any upgrades that will not add value. If you ask yourself, will the $ I am spending on this repair add value to the sales price? If not, save the money. Focus on Value Added Repairs with Kitchens Bathrooms and Curb Appeal.
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