Early Austin Home Pending Trend

I was curious about how the pending sales this year compared to previous years in the Alamo report (Austin Alamo Title).  They don’t use numbers so I thought seeing the trend in pending % changes might draw an interesting picture.  If you think of 2006 as the starting point 0.00%, it looks to me that we are almost back to 2006 pending activity for the same week.  What do you think?

Footnote: Below is a table with the corresponding weeks and the dates they cover.  The week being measured starts on a Sunday so whether it is the end of the year or not, settlement dates can only take place on a business day since banks do not fund transactions on weekends.

*  Week 1: I can see the 2009 and 2010 probably have an extra day since the holiday for New Years Day might not have been on that Monday like the other years.

	Week 1		Week 3
2007	Dec 31 - Jan 6		Jan 14 - Jan 20
2008	Dec 30 - Jan 5		Jan 13 - Jan 19
*2009	Jan 4 - Jan 10		Jan 18 - Jan 24
*2010	Jan 3- Jan 9		Jan 17 - Jan 23
2011	Jan 2 - Jan 8		Jan 16 - Jan 22

Welcome Back Austin!!!

My apologies for the time away from writing but my family suffered a tremendous loss over the holidays and I am just now getting back to a routine.

This morning's Austin American-Statesman article on the front page of the Business section also made me just want to get out and share.  Angelos Angelou, a highly respected local economist who offers annual outlooks on the Austin economy states that we will be at a 6% unemployment rate within the next two years.  If you look back at the graphs I posted last month on the local unemployment trends, you will see that Austin has already been boasting a relatively low rate of 7% last January and 6.6% this January, while Texas was 8.6% and 8.3% respectively.  We have been leading in this way throughout the downturn.  Angelou continues to say that he is concerned about the types of jobs that are being created in the absence of the Sematech chip consortium that recently located, and the downturn of employment at Dell.

At the same time, other sources are citing a very interesting statistic about the Texas economy since the last census numbers were released.

"Today, one out of 12 Americans lives in Texas — the same proportion that lived in New York City in 1930," wrote Michael Barone recently in the Wall Street Journal.

This is amazing to me.  Already the hot-bed of creativity, I think Austin will only continue to attract high end skill to its labor market as entrepreneurs and small businesses continue to relocate for our talent, universities, and natural settings.  When a large organization like Dell sheds highly talented individuals like they have been, many continue to congregate and create based on that experience.  The next two or three years will see the product of this entrepreneurial energy and another round of buy-outs will occur.  It's all good.

Already, from my perspective I am seeing this optimism reflect in healthy activity in the residential real estate market.  An improving economy puts upward pressure on mortgage rates and people who feel more confident about their own employment situation are beginning to make buying decisions.  That confidence will continue to grow through the spring season, and I see us having a more normal seasonal curve throughout the year.  With the hangover of the home buyer tax credit behind us we should also see a more normal mix of homes being sold, across all price ranges.  Homes under $200,000 which normally make up 50% of sold homes but fell to under 40% post tax credit deadline, will make a come back.  The weekly Alamo Title report from this week shows that pendings compared to last year are only down 2.35% ( http://www.alamotitle-austin.com/mls_statistics.php).  That is a good indication.

Austin December 2010 Preliminary Real Estate Stats

From this weeks Alamo Title weekly market update (http://www.alamotitle-austin.com/mls_statistics.php), I see great news for the Austin residential real estate market that is really should be no surprise.  After seeing 10 year lows in residential sales from July through November, December shows a 10% increase in closings when compared to 2009 for the same month.  The income tax home buyer credit that expired last May had pulled many sales in.   Still, sales were ahead for the year by 10% around the August timeframe when compared to the same period for cumulative number of closings in 2009.  But after 5 months of depressed sales in the market, demand began to pile up, and threats of increasing mortgage rates helped people to make buying decisions during the holiday season.  Now with more good news coming down the news wire about an increase in hiring activity early in the year, I expect this first quarter for 2011 will compare well versus non-tax credit years.

ALAMO TITLE'S MARKET NEWS REPORT
JAN 4 2011

New Preliminary December 2010 Data:

Units for Sale: (compared to December 2009)

New listings are down 7.45%.

Pendings are up 1.75%.

Solds increased by 10.53%

As for Average Prices:

The "New Listings" average list price is down 8.78% to $253,934.  In December 2009 the average list price was $278,378. 

Sold average sales prices decreased 4.76% to $246,533.  For December 2009 it was $258,861.

Expect Changes in 2011 Austin Real Estate

Below is news from the Real Estate Center Online News describing home sales for November throughout Texas was down 24%, prices were up.  Expect a change in December numbers.  I expect our sales numbers, especially for the Austin market will be about even.  From July through November in 2010 Austin sales were at 10 year lows after the build up to the May deadline for the $8,000 home owner tax credit incentive.  Although our numbers per month were low, on an annual basis we were ahead of 2009 by 10% when I checked in August.  December will likely breakeven with last year December.  Then, with a bit of optimism in the employment news, I expect January through March to be pretty good compared to non-tax credit years.  We should have some pent up demand, and I have been seeing more substantial job positions posted by local employers.

RECON Real Estate Center Online News  (http://recenter.tamu.edu/recon/)
December 21, 2010 Texas’ November Home Sales Down, Prices Up COLLEGE STATION (Real Estate Center) – More than 13,700 existing homes were sold in Texas last month, according to newly released data from Texas Multiple Listing Services (MLS). That’s a 24 percent drop from November 2009.

Austin 1,345 down 22% $181,300 up 3% 6
Dallas 2,736 down 27% $156,100 up 3% 6.9
Houston 3,905 down 23% $151,000 No change
San Antonio 1,249 down 22% $152,900 up 8% 8
Texas 13,745 down 24% $146,700 up 3% 7

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.