When I began my career in real estate in 1992 I was still in college and not completely sure which direction I would go within the real estate.  Quite frankly, I wasn't fully engaged into getting into the real estate business for my career until 1993 when I switched majors from the PPA program (a professional accounting degree) to my eventual Real Estate/Finance major. 

In 1994, upon graduating from The University of Texas at Austin, I went to work at Keller Williams Commercial, Shopoff-Gurkin, for Doug Gurkin.  Doug was one of the two brokers who owned KWC and much of the business that he had done over the prior few years had to do with helping investors, many of whom hailed from California, buy investment properties, mostly duplexes and fourplexes, in the Austin area.  Most of them had purchased their investment properties between 1989 and 1992 so by the time 1994 rolled many of them had experienced significant gains on their property's valuation and were looking to exit the market, via a 1031 exchange, and reinvest somewhere else.

If you've very much of what I've blogged about you've probably noticed that I enjoy studying and discussing market trends.  Much of this interest was sparked during my time at Keller Williams Commercial and during my previous time at Brock Consulting Group.  Even with my dealings with my clients who are looking to sell and buy a home, I bring that extra ingredient of analysis to the equation and take pride in making sure my clients get a good deal for whichever side of the deal they are on.

This takes me really to one of my main goals in real estate - to help my clients achieve financial security through their real estate transactions. 

It starts with the first time homebuyer, who moves from renting to owning their first home.  The statistics show that the average net worth of a renter is less than $5,000 whereas the average net worth for a homeowner is over $170,000.  Its a fantastic feeling to help someone find that first home, at a good price in a solid neighborhood, and know that they've just taken a monumental leap toward increasing their net worth and financial security.

From there the next step many of my clients take is moving up.  In en effort to help my clients financial situation I typically offer a move-up program to my clients.  Many time moving up in price range can make the percentage increases in the market have a bigger effect on your bottom line net worth.

After that, most of my clients start to consider buying an investment property.  It really is a fantastic idea for someone who really is looking to increase their net worth and provide a future income.

Recently I went to an investment class and I will share more on buying an investment property, the art of getting in with no net first year cash cost as well as 100% financing in my next blog.

If you have any questions feel free to contact me off of the West Elm website or email me at Brink@WestElmProperties.com .

The smell of new paint. 

The feel of new carpet under your toes.

The smile that comes across your face as you look out at the new home you got to build and help design.

It's filled with your upgrades, your taste and your style and it's a very tempting draw for many buyers.  In fact, many buyers wouldn't do it any other way.

It's the new home.  Truly yours.

But do you know everything you need to know to protect yourself on this purchase?

Surprisingly, many buyers of new homes go it alone when they buy a new home.  The common scenario goes like this - You know you want to buy a home.  One evening or weekend you are out driving around looking at new home communities.  Maybe you've seen a subdivision or area that grabbed your interest.  Maybe you looked through the paper and tore out or circled the new home subdivisions that looked like they would fit your needs the best.  However you found it, there you are, walking into the new home model.  A friendly person greets you and you mention you are just looking around.  This person is sometimes called the sales counselor, sales consultant, on-site rep or builder's rep - I'll call them sales counsultant for now.  The sales consultant asks you to fill out a registration sheet just for their records and many times asks you if you are working with a Realtor and you tell the sales consultant that you are just looking around and not working with anyone at the moment.  You finish filling out their short information sheet and go peek in the model.

Oh wow!  Amazing.  It's beautiful. 

This is the home you want.

You walk back in through the sales office and the sales counselor asks, "So what did you think?" ...and before you know it you are signing an offer for the home and writing out an earnest money/security deposit check.

Hey, I understand.  Every time I go with my wife to a new home community for a builder event she will turn to me at some point and say, "let's move here!" 

Let me ask you this though - how many times have you went to buy a new car and not done some research as to the dealer's price or, as I did, signed on for Consumer Reports comparison service which helps guide you in determining a reasonable price?  Another question might be, how many times have you bought a home?

Many people go into a new home builder without a Realtor on purpose believing it will help them negotiate a better price for the home since the builder will not be paying a commission to the Realtor.  On the surface it sounds logical.  In reality it usually doesn't come to pass. 

For most homebuilders, if they do not pay a Realtor commission they take the money that would have been paid and put it back into the marketing budget.  The commissions are already factored in by the builder in their marketing budget and, if not used to pay a Realtor who will assist the buyer through the transaction, the money goes toward other marketing avenues - billboards, signs, commercials and the like. 

In other words, typically, the price to the buyer is the same, regardless of whether a Realtor is involved or not.

The sales consultant works for the builder and is an employee of the builder.  Don't get me wrong, most that I've met and worked with over the years are wonderful and friendly people and will deal fairly with you but make no mistake about it, they work for the builder.  They would love to put a contract together for you and they may be up front with you what they can offer in incentives and discounts but, in the end, their obligation is to their employer, the builder, not to you.

A Realtor, however, is there to represent you and your interest only.

So, now that you know it usually costs you nothing to have a Realtor work for you, let's explore a few of the reasons why it's not only cost efficient but also advantageous.

 1. A Realtor does the everyday - A home purchase isn't something to be taken lightly and it's something most of us do only a few times in our life.  As a Realtor, I do this everyday.  I understand the workings and details of the process from contract to closing, from the foundation pour to the handing off of the keys. 

2. A Realtor will have a better understanding of fair pricing for the area - Are you overpaying for the home?  Are you getting a good deal?  Has the builder sold other homes of similar size and quality for less or more?  I'll use this example - a fefw years ago I was working with a client in a neighborhood off of Bee Caves Road.  My clients found a home they wanted to make an offer on and the builder had several comparable sales in the MLS system.  The builder's list was $619,000.  The buyers and I looked through the comparables, looked to where we wanted to end up and submitted our offer - $480,000.  That's quite a bit different and the sales consultant/builder rep let me know so.  Our "final" offer was $520,000 and the sales consultant/builder's rep said there was no way they could sell the home for that price.  A week later we had the home under contract for $520,000 with some additional upgrades, nearly $100,000 below asking.  The majority of the comparables were above us and I know for a fact that another couple who went into the builder unrepresented paid tens of thousands more for their comparable home, but I was able to leverage the comparables and the market at the time into a great deal for my clients.  Will every home transaction be like this?  No, the market's changed, some communities have limited comparables, if any, and sometimes when the builder says it is their bottom line it is their bottom line.  But whether the pricing is fair or not is going to be something a Realtor will be more familiar with than the average home buyer.

3. A Realtor can meet with the homebuilder to make sure deadlines are met and the home is being built according to the buyers needs.  Sometimes it is difficult for the buyer to make it out to the home site during the day, due to scheduling or work for example.  I can be your advocate to help you out in certain situations.

4. A Realtor knows of special incentives and offerings from builders - Almost every day I get an email from one of the builders in the Austin area letting me know of special discounts and incentives as well as homes ready to deal for quick close out. 

5. Most Importantly - Having a Realtor means you have someone working on your side.  Not only can I help you with potential comparable sales information or at least determining whether the pricing is fair, plus the knowledge of what incentives are being offered, I can also negotiate from a non-emotional position since I don't have an emotional investment in the home.  Some buyers are uncomfortable with being too aggressive fearing it will strain their relationship with the builder's salesperson, a relationship that has to exist sometimes for 9 months.

Additionally in certain situations I can offer my own incentives and rebates to new home buyers.  For instance, I have a move-up program for people who are planning to sell their home and buy a new one.  This can result in my client paying very little out of their own pocket for my services.  Sometimes I offer other incentives so check with me before you even go looking for a new home.

You can check out an inventory of many of the new home builders in the Austin area right on the West Elm Properties website - Click Here to see the inventories as well as streaming video.

A recent article from the Los Angeles Times discusses a complaint that has been lodged against the recently launched Zillow.com website.  Zillow, which was 'turned on' 8 months ago, is being accused by a fair housing advocacy group of being purposely misleading.  The complaint apparently says that misinformation about values of homes is being used by many within the real estate industry, such as lenders and real estate agents, to take advantage of consumers.

I have actually been quite curious of the Zillow experiment.  Over the past few months I have noticed that they have made strides to provide information regarding local markets such as historical trends and county and state averages.  The trouble with Zillow, in a state such as Texas, is that our sales information is not public data.  With a system that is based on compiling sold information from public resources, Zillow will seemingly always be lacking in Texas. 

Just to see how Zillow is doing, I went ahead and ran my own home through their system.  I did the same six months ago.  Over the past 6 months it says the 'zestimate' is up $30k.  Is the market really up $30k - no, not at all.  Additionally, they have a heading at the top that says my "30 Day Change" is down $10,464, which is interesting given that the market in Austin has shown consistent growth.  Also kind of weird to me is the "1 year value change" graph which looks like every stock performance chart I've ever seen. 

That said, I do believe the value of this home is within what they give as their 'value range', a task which isn't too difficult given they are giving me a value range of $120,000.  Other magic involved in their value is the 3 comparables they provided me with.  My home is in the Spicewood/Balcones area.  One of the sales is in my neighborhood.  In fact, it's only 1/3 mile away.  The second comparable is in Canyon Creek.  Huh?  Canyon Creek of down Anderson Mill Road, out on 620 and then into Canyon Creek, Canyon Creek?  That's not comparables.  Hmmmmm.  Let's see about the 3rd comparable sale...in....Northwest Hills?  Seriously?  The home they gave me is just west and south of the intersection of 183 and Mopac, 4.17 miles away, according to their own estimates.  I don't know how far in actual driving terms. 

Okay, I'm trying to be fair.  Really!  I am.  However, there are just so many quirks in the system I can completely see where the fair housing advocacy group is coming from.  I truly hate the fact that anybody would use the site and take anything away from it other than entertainment.  A Zillow statement referenced in the article states that "zestimates are designed to be a starting point for consumers who want to learn about the value of homes".  The problem is, what if the starting point is wildly inaccurate.  And honestly, in my own case, what good is a starting point with a range of over 35% of the value of the home?  I would guess that your average consumer is familiar enough with a neighrborhood they are researching to understand the values within 35%.  In truth, a valuation system that doesn't come up with a value within 10% is useless.

This actually brings me to my next point, and that is the treatment of the property valuation like a stock or some similar commodity.  To me, the 1 year value chart makes me want to laugh and shake my head at the same time.  Privacy precludes me from sharing the actual chart with you, but if I did you would see a chart that goes up $10k, then down $15k, then up $30k, then down $5k, then up $15k, then down $20k, all within a 12 month period.  I am not saying that there will not be fluctuations in what you can get for a home over the period of a year as the market conditions change and the seasons change but I don't believe it looks anything like a line graph of specific plotted points.  A better representation might be a range.  Real estate values are not a fixed, exact amount.  Two people can look at the numbers and come up with a different value for the home and honestly that doesn't mean either value is incorrect.  Typically there is not an exact replica of the property to use as a comparable so adjustments will need to be made to the comparable.  Typically new construction is the closest you will get to a set, standard value point.  In the end though a home is worth what someone who likes it will pay for it.  I think technology has opened up many doors and provided us, as the consumer, with so many tools and the ability to access so much more information.  I continue to believe that technology will lead us to some amazing places and provide us with so many new and exciting opportunities.  However, right now in Texas, online property valuation is not something that is tenable.  If you want a property valuation you best bet is to hire an appraisal or I can complete a free Comparative Market Analysis or Broker's Price Opinion.  Just contact me: James Brinkman, West Elm Properties, 512-698-3525, Brink@WestElmProperties.com

As an aside, I just don't feel the whole zillow, zestimate, zindex things is cute at all.  It's seems like one of those things that someone thought, 'let's be clever and throw a 'z' on the front of some words!' (typically words beginning with vowels other than the zillow itself).  Well, to me it's kind of zannoying!

The time does go quickly.  I can't believe it has been over a week since I wrote anything so it looks like I have some catching up to do with you this week - so let's get started...

First, there are a few articles in the Statesman that I found of interest:

This article is about how the internet has changed the real estate business for buyers, sellers and Realtors.  This isn't exactly anything new or profound, but it bears discussion.  As I mention to every one of my sellers, 77% of homebuyers used the internet to search for a home in 2005, and this is a number that has been increasing every year.  I have noted a leveling off of sorts over the last couple of years as we reach some type of critical mass.  The more surprising facet is that nearly one-quarter of all buyers found their home through an internet search - a ten percent increase over the prior year.  This is one reason why I stress property presentation so much to my sellers.  If you look at my website, and in particular the exlcusive listings section, you will notice that I take a great deal of care and time on presenting each listing so that homebuyers can really grasp what a home is about.  Too often, in fact far too often, I see agents who have put no pictures or 1 photo or dark photos up on the internet or in the MLS.  I'm not sure what those agents are thinking when they do that.  It certainly is not going to make a buyer think that they want to see that home.  Time and time again buyers tell me that if there are no photos are bad photos of a property they skip right through the property and cross it off the list.  Additionally, I try to write a description of each property so that the home buyer can visualize what I can't really show in photos.  For the home seller, the goal needs to almost be 'not being eliminated' at this juncture in the real estate business.  With buyers controlling far more of what they see, which is a good thing, it is important to put on the best 'face' you can.  Many sellers need to ask themselves, is my agent really showing my home in the best possible light?  If the answer to that question is no, the seller probably needs to have a discussion with their listing agent or maybe even find another. 

Also of note though is that 81% of those buyers who used the internet to search for homes did use a Realtor.  Of course this brought out the whole "Realtors need to be prepared because we're no longer the gatekeepers of the information", which always makes me laugh.  Honestly, if all you, as a Realtor, could provide was which homes were on the market and the ability to show them, you really shouldn't be in real estate.  Of course, that is just my humble opinion.  A Realtor should be a resource for their client on the transaction, the market, the values and should make their client's lives less stressful and make the purchase as smooth as possible.  There are too many agents who actually interject themselves too much into the transaction and thus disrupt it or cause more drama than is necessary.  Maybe I'm just a little more prepared to embrace the changes in the industry, after all I did spend four years with eRealty or, as they were known in Austin at the time, the devil.  Of course that experience actually brought me to where I am today with my company.  Too often with these 'internet' real estate companies (you know who you are!) they lose sight of what is most important in a real estate transaction - trust!  Too much of the focus is placed on reduced commissions and, due to the reduced commissions, volume becomes the paramount issue because the profit margins are so slim.  In the end when you focus on volume the company starts to lose sight of the individual - the home buyer or seller - and, as my old broker who shall remain nameless used to say 'they just want you to treat them as johns'.  (Yeah, it sounds as horrible now as it did then.)  How disheartening that thought was.

My creation of West Elm Properties, Realtors was in direct response to my experience at eRealty.  I still wanted to be on the cutting edge of technology, to use it in any way that would benefit by clients, but I wanted to get back to the roots of the fact that the real estate transaction is a very human thing.  Buying or selling a home is one of the most stressful things to do and can stir up a whole lot of emotions.  Its important to not only use the best tools available for a buyer or seller but to also 'see' and understand the very specific, very unique needs of each client.  I really believe that having West Elm Properties helps me accomplish the marriage of the two facets new and old, better than any other company out there.

jb

It's time to do a little catch-up on the week that was in real estate, given that some interesting national statistics were released this week.

According to the US Commerce Department the median price of a single family home was down 2.5% from September 2005 to $219,800, the largest year-over-year price decline in records going back four decades.(from the National Association of Realtors).  Even more staggering was the news for new home sales, which saw a decline of 9.7% on the median price to $217,000 (also the largest year-over-year decline since 1970).  The number of new homes sold did rise 5.3% in September but new home sales are down 14.2% in the past year.  Nationally there was a 6.4 month inventory/supply of homes, given the sales rate in September.  Mortgage rates inched up to a 6.40% average for the week of October 26.  I read recently that rates were thought to be headed to 7% by the end of the year but now the thought is that it won't get to that point, at least not yet.  The Federal Reserve's decision Wednesday not to raise rates was at least part based on the housing market slowdown.

September in Austin looked like this:

Current Market Summary
September 2006

All Single Family Sales

2006 2005

2,341 2,280

+  3%

All Active Single Family Listings

2006 2005

8,203 7,835

-  5%

Single Family Median Price

2006 2005

$167,000 $161,750

+  3%

Single Family Pending Sales

2006 2005

2,332 2,030

+ 15%

The average home price in Austin was up 6.5% year-over-year to $227,948 from $213,946.  These are all certainly respectable numbers in light of the sharp declines in national numbers.  Of course, as I always say, all real estate is local.  It is interesting however to keep track of how the national averages shake out.  It will also be interesting to see how long this downturn in the national numbers will continue.

If you've been to a football game at The University of Texas this year, it's hard to miss the advertisement for the new Texas Gameday  Center coming over godzillatron.  For those longhorn fans who don't know, or <i>somehow</i> missed the ad, the Texas Gameday Center project includes the renovation of the 51 units in the Windsong Apartments to luxury condominiums as well as a 136 unit luxury condominium hotel located at Dean Keaton and Red Rive, just across from the practice fields.  The units at Texas Gameday Center will range from studios to 3 bedrooms, from 350 square feet to 2,000 square feet and the pricing is expected to be from $160,000 to $1,000,000.  The renovation of the Windsong should be complete by the start of the 2007 season.  The new building is expected to be ready by Fall 2008.  I read that it will include a clubroom for 'tailgating' before games (although I'm not sure how they are going to fit all of those grills and pop-up tents in the there - kidding, of course).  Two more smaller projects are planned for Lubbock and College Station.

If you are interested in more information on the Texas Gameday Center or would like buyer's representation, please email me or call me at 512.698.3525 and I will be happy to assist you.

Speaking of The University of Texas, it looks like Augie Garrido has put his condominium in the Nokonah up for sale.  The asking price?  $1.15 million.  The interior was designed by Dick Clark and the furnishings are included. 

Time to catch up a little on recent articles.

First is on Allandale.  The article writes on how Allandale is becoming increasingly popular for "young families and professionals".  A good percentage of my clients over the past few years have bought in that general area and I have actually noticed that as well.  When areas closer in to town, such as Hyde Park, became cost prohibitive for many younger buyers, neighborhoods such as Allandale provided the right combination of affordability and the older home charm/funkiness that many of those buyers sought (and still seek).  There are actually several sections of Allandale including Allandale Estates, Allandale North, Allandale Oaks, Allandale Park, Allandale Terrace and Allandale West.  There are over 2,200 homes in these combined areas.  Between October 2005 and October 2006 there were 122 homes sold.  The average size of those homes was 1,680 square feet with an average sales price of $256,797, or $157.20/per square foot.  The average list price was $261,570 and on average it took 29 days to get the home under contract.

Sales in the New Home market remain strong.  Nationally sales of new homes are down 14.4% whereas Austin is up over 18%.  Nationally there is a 6.6 month supply of unsold new homes.  In Austin that number is less than 2 months.  Interestingly enough I still get plenty of broadcast emails from certain builders offering incentives for some of their inventory.  Typically I share any commission incentives above 3% with my clients if they decide to purchase one of the new home builder's home.  It seems appropriate to me.  The article does urge caution as the new home sales might be slightly inflated by investors, which I have seen myself.  I've read a couple of articles quoting out-of-state 'investors' saying that they couldn't believe how low some of the prices were for some of the new homes, mostly bedroom communities outside of Austin.  It would seem common sense but maybe it should be said - just because something would be a 'deal' where you live, doesn't mean it's a deal where it sits.

Six years ago, in the summer of 2000, I sat in my car outside a home in Jester Estates waiting to meet a client.  It was a Friday morning, about 8:50AM.  The instructions posted in the MLS said the home would not be shown until Friday at 9AM.  When I pulled up to the home I thought I might as well be going to a party because of the amount of cars sitting outside the home.  Outside my windshield I saw no less than 6 other Realtors and their clients waiting in a scattershot, makeshift line in front of the house.  The listing agent might as well have put a number dispenser at the front of the house and a little “Now Serving Number” digital board over the front door.  As I got out of my car I thought to myself, “Well, this is no good”.

Demand.  I saw a lot of the ‘Demand’ side of supply and demand that summer.  I’ve mentioned it before, but I had 7 different buyers that lost out on a home in best and final situations in July of 2000 alone.  Being in a market with multiple offers, many significantly over asking and actual market value, is not the boon to real estate (and for that matter, Realtors) that many people believe it to be.  Buyers are frequently are disappointed or frustrated and many end up overpaying for the home in that market scenario.  (I, personally, tried to be diligent and make sure the prices my clients paid were supported by comparable sales.) 

While many were caught in the euphoria of the thought of never ending price escalation, I was stuck with the feeling that the Austin boom was about to come to an end.  The words of Dr. Stephen Pyhrr’s article “ Austin ’s Persistent Real Estate Cycle” were resonating.  He wrote that Austin has historically experienced ‘up’ cycles of 8-10 years and ‘down’ periods of 3-5 years.  In 2000, the last ‘bottom’ of the cycle, the beginning of that cycle’s ‘up', had begun in 1991.  We were well into our 9^th year of the ‘up’ and it was becoming evident that cycle had run its course.  The real question was starting to look like, how bad would be the down cycle?

At that same time, in California the market was just beginning to really heat up.

........................................

Six years later it’s hard not to see all the stories and articles about how the boom is over.  It has become one of the bigger business stories of the year and I would wager that most of the major media outlets have at least run one ‘Boom is Over’ in the past month or so.  Yesterday I ran across this article prominently featured on the MSN home page.  It is an article from Forbes magazine titled ‘How Low Will Real Estate Go?’ (Lacey Rose).  The first sentences in the article read, “Get used to it – the seller’s market is closing up shop.  The days of fat, fast home value increases are gone.  Pack away those flipping fantasies.  “The boom is definitely over, there’s no debate about that,” said Mark Zandi, chief economist of West Chester, PA – based research firm Moody’s Economy.com.  “Now the question is more how hard is it going to land, if it lands at all.” ”

So the boom is over, huh?  What boom?  Where have I been?  Last I check Austin went through its down cycle from the Fall 2000 to the Fall of 2004.  Here in Austin , we experienced zero growth, for the most part, between 2000 and 2004.  Since the Fall of 2004 we have seen steady growth, commensurate with that of a market in the beginning cycle of growth.  Growth, based on past history, that should continue through to 2012, maybe even 2014.

Even within the article there is a link title “How Low Real Estate Will Go In 15 Metro Areas” there are examples of markets that look like they will fair just fine during this ‘bust’.  The link graphs out the projected growth for the next 10 years in 15 different markets.  Seattle, Dallas and Houston all are projected to fair just fine during this terrible, terrible time (tongue firmly planted in cheek).  Boston, Los Angeles, Miami, New York, Phoenix and Washington are the only cities they show that appear to actually have a retreat in pricing at some point over the next 10 years.  For those keeping score, that’s 6 out of the 15 cities cited, and yet the article/link is “How Low Will Real Estate Go…”. 

I don’t think it is a big jump in logic to say that the stories we read and see, written for national consumption, are heavily influenced by the east and west coast in this country.  Is it too much to ask that broad brushes not be used when writing the stories though?  Of the 6 cities that actually appear to have price decreases on the way, only Phoenix does not fit the mold as a major east or west coast market.  It definitely appears that this is coloring the news and, in spite of evidence to the contrary in plenty of markets, is causing the writers and reporters of these stories to make such grand sweeping statements as “the seller’s market is closing up shop”. 

I’ve said it before and I’ll say it again: all real estate markets are local.  When a market is down in your town, I’ll find you a market that is up in another.  Point me to a seller’s market in one city and I’ll point you to a buyer’s market in another.  There is no ‘national’ real estate story when it comes to a national real estate market.  Yes, certain factors influence all markets.  A spike in interest rates will have some influence over all real estate markets, but the impact will be different depending on the local factors. 

In Austin we are influenced by technology and the state government, among many other factors.  When the tech options vaporized and the stock market fell in late 2000 and 2001, the Austin real estate market followed.  The record highs of the real estate market in Los Angeles and Miami over the next few years had absolutely no influence as to what was happening in Austin .  Of course it didn’t, why would it?  Yet we heard story after story about how the national real estate market was booming, just as now we are treated to the doom and gloom.  During the last few years, Austinites would ask, ‘What Boom?’ and now, just as easily, they can ask, ‘What Bust?’ 

So as you read and see these stories just remember some simple rules:

Real estate is local.  There are always some points of wisdom to be gleaned from the stories and they are a good way to know what’s going on in different parts of the country but, in the end, what happens with the real estate in New York City has little influence as to what is going on in Austin. 

Real estate cycles are just that – cycles.  They go up and they go down but over the long-term the growth trend line is up.  Nationally, the 50 year growth trend line is up 4.8% per year on average.  Over the past 30 years in Austin the growth trend line is up about 6.7% per year.  Real estate remains one of the best ways to leverage your money over the long term, regardless of the cycle at that moment.

 

Don’t buy into the hype and hyperbole that the reporters use in their stories and articles.  In the end, much of their job is to sell papers, magazines or whatever their medium might be.  The headline, ‘How Low Will Real Estate Go’ will certainly grab one’s attention a lot more than something more pedestrian.

........................................

Six years ago, as I got out of my car outside a home in Jester Estates and got ‘in line’ with my clients I thought to myself what a wild scene it was and how it certainly could not be a good sign for where the market was headed.  My clients actually got the house that day.  There were multiple offers but we stayed within the comparables sales and, after an afternoon of ‘sweating it out’, we got the phone call that their offer had been accepted.  Just a few months later the word came out that Dell would be laying off employees and so began the past downturn in the Austin market. 

Six years later we are still here.  Jester actually did fairly well over the past few years and is a high demand area.  Austin made it through the down cycle and came back out and now we are at the beginning of our growth period.   And, at least for the next few years, the boom starts here.

.......................................

Here is an interesting report on the subject of market performance from First American if you would like to read more on real estate cycles of different market.

I get about 5-8 real estate magazines a month due to the various designations I have so keeping up with it all can be quite the task.  I was doing a little catch-up reading on Sunday, trying to move some of these magazines from my home office to the recycle bin, and ran across a little paragraph/text box in a December 2004 of Realtor magazine that brought out some thoughts I would share.

One of the issues you might face when you go to buy a home is the prospect of multiple offers.  Initially I was surprised at how often I even ran across this during the 'down' years in town.  The key fact , though, is that no matter what cycle a market may be in, a well priced (or even low-priced) property that just knocks your socks off has the potential to garner multiple offers.  If you are looking at the property in the first few days on market and you are 'wow'ed by it, there is a good chance that somebody else has been 'wow'ed, or will be 'wow'ed if you don't act fast enough.  (This is, of course, where knowing the neighborhood you want to buy really pays off because you can spot it as a great value for the area almost instantaneously and you can act without hesitation or remorse)

Sometimes a multiple offer situation becomes unavoidable if you really want to put an offer on a home.  In July of 2000, when the Austin market was last at its most frenzied, I actually had 7 different clients who made offers that month and were in a multiple offer situation.  None of them actually got the property.  That might not sound so great at first, but I just cannot, in good conscience, recommend that anyone overpay for a home just because of a market's irrational exuberance.  The fact was that the prices being paid for many of the homes at the time were not supported by any comparable sales.  Much of what was able to close at the time was due to loose lending requirements and large amounts of cash which minimize lender's risk.  I've always been of the opinion that it is my job to protect my clients and minimize their risk and the last thing I want is to receive a call from a past client a couple years after they've bought a home, saying they need to sell and then I find out they are upside down. 

But I digress! Ha!

Back to the point...

Sometimes a multiple offer situation is unavoidable.  However, sometimes the answer isn't just throwing more money at a situation.  Sometimes the way to move forward is by actually 'merchandising' you, the buyer. 

How can we do that?  These are all tactics I have used in the past:

• Tell your story - Think about it.  A contract is cold.  Negotiations can easily go hard-line.  However, when you write a letter about the seller's home and about you then the seller gets a greater understanding of who you are and becomes 'warmer' to you.  You could tell the seller what you really liked about their home.  You could tell the seller about how you can picture your family in the home or your own background.  It's no secret that most people would rather work with people they like, and the selling a home can be a very personal experience for a seller.  Knowing that the home is going to someone who will really appreciate the home can go a long way.
• Offer more earnest money - Instantly you are telling the seller, 'You can feel confident in me'.  The seller will feel better knowing that you have not only put in a strong offer, but that you weren't afraid to back it up with a large amount of earnest money.  This helps the seller feel you are a whole lot less likely to back out of the contract and, even if you did, the seller will stand to benefit from it.
• Offer something that is not monetary.  Do you have a service or skill that you could offer the seller that will only cost you your time, rather than money?  I actually have a great example of this.  Back in 2000 I had some clients that were involved in a multiple offer situation.  We really didn't want to go higher on our offer, but we suspected (and were right) that another offer was higher than ours.  One of the buyers was a relatively well know landscaper/gardening personality so he actually offered his landscape design service for the sellers at their new house.  The sellers took our offer.

There are other ways to strengthen any offer, regardless of whether it is a multiple offer situation or not.  These migth include:

• Limiting the Option Period (which is when most buyers in Texas have their inspections)
• Have your pre-approval in place so that you don't have any financing contingencies
• Reducing any other contingencies, such as the sale of an existing home
• Don't get stuck on any of the 'soft' terms, such as certain fixtures that may or may not convey

These thoughts might really begin to come in handy again here as the market slowly turns from a buyer's market back to a seller's market and we start seeing more and more multiple offer situations.    The more you can humanize and personalize a real estate offer and negotiations, the better it will work out.

And not in a good way!

According to Bankrate, Inc. and their 2006 National Closing Cost Survey, Texas ranked #2 for average closing fees.  The survey found that the average closing costs/fees for a $200,000 loan, 20% down, 30 year, fixed rate, for a buyer with good credit was approximately $3,578.  This is based on a single family home.  They arrived at their number by picking a zip code in some of the largest cities in each state and obtaining 8-10 good faith estimates (total) from the websites of online lenders in each state. 

More here...

I would be interested in seeing a larger representation than 8-10 good faith estimates total from just online lenders.  I'm not quite sure that the information will give you the most accurate picture of the situation.

That said, it's probably a good guide to use when estimating your costs.  Keep in mind, those costs will change if any of the variables change on the loan.  Additionally, checking with a couple lenders will usually help you reduce your costs slightly, as competition always brings out the best.  That said, after many years in real estate, I would never trade the quality of the lender to save a few hundred dollars at closing.  A bad lender can cost you quite a bit more in the end, and it pays to have a lender that takes a personal interest in you and your home purchase.

I've worked hard over the years to try to partner and recommend lenders of only the highest integrity.  It hasn't always been easy, and I've broken off allegiances when I felt a lender misled or mistreated a client, but I feel I finally have a few good ones at the ready.  If you would like any recommendations, please don't hesitate to email me at Brink@WestElmProperties.com or use the Contact screen in the website.

A couple of Statesman article links for you on this Sunday:

50 Year Mortgages - Aaack! - Count me among those who doesn't really see much good, but a whole lot of potential bad, about these types of loans.  In a perfect world, I would love for all of my clients to be able to put 20% down and have 15-20 year mortgages for their personal home.  Of course, it's not a perfect world so I think there are still plenty of benefits to home ownership with much lower amounts down, but I do think it is pretty important to stay within your means, and much of the time interest only loans, and, by extension, 50 year mortgages, are used to stretch the amount of home a buyer can afford.  Call me silly, but I'd much rather have a client who is able to comfortably make their mortgage payments and actually have a little money to enjoy their life than a client who has to use special financing to stretch themselves into a more expensive home and then be stressed out about having to make the payments every month.  Maybe its just me...

Here's a story regarding what Mark Dotzour, chief economist and director of research at the Texas A&M Real Estate Center, predicted for Austin and Central Texas real estate in 2007.  Good stuff.

Nothing my clients don't already know, but the story here covers the continuing strength of the Central Texas real estate market.  Beyond the overall monthly statistics, I found the jump in sales of high end houses to be particularly interesting, with sales of homes priced over $1,000,000 up nearly 50%.  The article also reference that Travis Heights experience a 27% jump in median prices.  I actually know that to be true as I had a past client who bought in the area email me with a couple real estate related question and then thank me profusely for helping find such a great deal in the Travis Heights area before it popped up again.

If you are looking at buying or selling a home in Travis Heights, or any other Austin neighborhood, I would welcome the opportunity to talk with you about it.  I think it wouldn't take long until you would realize why our past clients keep referring to us and why we say West Elm Properties - just better!

According to Mark Nash, real estate author of 1001 Tips for Buying and Selling a Home, the 10 best cities for real estate (both for investors and home buyers) are:

• Atlanta, Georgia
• Austin, Texas
• Boise, Idaho
• Dallas, Texas
• Houston, Texas
• Las Vegas, Nevada
• Phoenix, Nevada
• San Antonio, Texas
• Seattle, Washington
• Milwaukee, Wisconsin

If you would like to read more on it and his reasonings, you can find it here

I actually believe it seems like a fairly solid list based on what I've been reading as well.  I don't think it's any coincidence that the only city on a coast is Seattle.  That's not a knock on those coastal cities, it's just that after the run-up those cities have experienced over the past few years its only natural to expect a leveling off and cooling period. 

Also not surprising is that Texas landed 4 cities on that list and that Austin is one of those cities.  Being an expert in Austin real estate and the Austin real estate cycle, I did expect Austin to make the list.  While Austin's cycle does run independent from the rest of Texas, as has been shown over the past few years (and particularly evident during Austin's 'down' cycle from 2000-2004), there still is some degree of similarity across the state as to buyer demands. 

Of course, if I had to choose a city in Texas, I think Austin wins hands down, both for quality of life and appreciation potential.  Austin stands unique from those cities and although growth has changed some of the city's characteristics, the desire to keep austin weird still prevails.  Additionally, while the national 50 year growth trend line for real estate averages an 4.8% annual appreciation, Austin's average appreciation over the past 30 years is approximately two percent higher than that.

I fully expect for the next few years to see lists similar to this one, with the majority of the cities resting in the middle parts of the country.  Eventually attention will turn away and back to the coasts, but that is the nature of any cycle, almost like a wave that runs across the country.  For those ready to catch the wave, surf's up in Austin.

This is the first in a 3 part blog on the real estate cycle in Austin, Texas.  Many people behave as if a certain economic situation will continue into perpetuity.  Many times this is played out all so evidently when a bubble bursts on a particular market, whether it be the stocks in the early 2000s or the real estate bubble that is occurring on the coasts, especially notable in Miami and California.  Operating from the standpoint that because something appreciated 'x' amount last year, it will do so this year, is not only foolhardy, it's just bad business.  It seems so common sense to even say it, but yet time and again I see people repeat the mistakes over and over, giving into greed and trying to make a quick buck, so it bears repeating - and understanding. 

It is with that goal that I undertake these writings, so that the information is out there for all who want it.  For a while there I thought this was really something I could show to my clients - a unique understanding of the Austin market, where it's been, where it is now and where it is heading - and something to hold on to.  In other words, something I could provide to my clients as an incentive for working with me that I feel few other agents understand.

However I've decided that particular line of thought is not the right place to be and is not where I feel good.  I don't want anybody making a decision without this information if at all possible, even if they aren't working with me.  I think it's important information to have for anyone who wants it and so, by writing it here, I hope it finds its way into the hands of the people who are searching for this knowledge and it allows them to make good financial decisions.

I cannot speak in depth on the cycles of the stock market, or even the real estate cycles of California, but I can offer some fairly detailed, yet pretty concise, information regarding the persistent real estate cycle of Austin, Texas.  It's been my home for over 30 years and it's a place that I love and love to understand.  I hope the information I share with you in this series brings you the knowledge you seek.

....................................................................................

In 1994 I was fresh out of college with my BBA in Real Estate/Finance and working for the broker, Doug Gurkin, at Keller Williams Commercial - Shopoff & Gurkin.  I mostly handled much of his real estate sales/listings for many of the small multifamily properties (duplex-fourplex) that his past clients, almost all of which were investors, were 1031ing out of their inventory while he worked diligently on another company he was involved with - Asset Recovery Fund.  On the side from that I did some work for the local CCIM chapter and, in particular, helped in putting together the book that was handed out to all who attended the CCIM's broker forecast. 

It was while working on the CCIM's broker forecast that I ran across an article from Dr. Stephen Pyhrr entitled Austin's Persistent Real Estate cycle.  If there was a more formative moment in my real estate career I'm not aware of it.  I believe I have referenced the article, and the findings of his research, to almost every client I have worked with since that time.

The article was written in the early 90s and it discussed the cycles within the Austin real estate market through the ups and downs of a couple of cycles.  Dr. Pyhrr then graphed out the cycle through the date of the article.  What he found was that Austin has a historical "up" period of 8-10 years and a historical "down" period of 3-5 years.  He then projected how the Austin market would behave through 1999 (at which time he put ???s). 

How did it all turn out?  I'll cover that, as well as more detail on the cycle, in Part 2.

If you would like a PDF of the article, feel free to email me at Brink@WestElmProperties.com and I would be happy to forward it on to you. 

Of note, average home sale price is up to $245,655 for June 2006, up 12% from $219,196 for June 2005.

Current Market Summary
June 2006

All Single Family Sales

2006 2005

2,980 2,462

+ 21%

All Active Single Family Listings

2006 2005

8,477 8,637

-  2%

Single Family Median Price

2006 2005

$182,000 $168,500

+  8%

Single Family Pending Sales

2006 2005

3,286 2,506

+ 31%