Keep Austin Real

The Gallant Group moves to Realty Austin

I am excited to announce that I have accepted an invitation to join Realty Austin, a unique and forward-thinking Austin real estate brokerage. While I have enjoyed my experience with Keller Williams, the switch to Realty Austin allows me to offer cutting edge technology, the highest quality marketing in the industry and a dedicated administrative support staff. Additionally, the invitation was truly an honor: only a select number of agents in the Austin area are asked to join Realty Austin.

Please know that for you and your referrals, this will mean no change in the level of service you receive. You will continue to receive the same personalized care and service that you have come to expect from myself and those who support me.

Please update your records with my new e-mail address, danny@realtyaustin.com. My KW address will no longer be operational.

Feel free to contact me if you have any questions regarding this change in brokerage. I will be sending an updated business card within the next 2-4 weeks.

Warm Regards,

Danny Gallant, Realtor

The Gallant Group

Realty Austin

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danny@realtyaustin.com

www.gallant-group.com

www.realtyaustin.com

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512-922-1273 mobile

512-532-6828 fax

It's Back to the Future for Austin Real Estate!

Another great article explaining why so many real estate markets across the country have been hit hard and how Austin compares.

- Danny Gallant

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It's Back to the Future for Austin Real Estate!

Inman News

The serious downturn in housing sales in many parts of the country is well known. This downturn was preceded by a strong escalation in home prices. In many areas, prices rose beyond levels that were supported by local salaries and income. The driving force that fueled the growth in home prices was the availability of money. The easy availability of home buying money allowed the demand side of the market to build.

When buyers could expect 10%-30% appreciation and get 6% interest rates, who would not be motivated to buy? It's a no-brainer, right? Right. But, high demand leads to higher prices. And, high demand leads to more inventory, as builders respond to the need for homes.

The sources of money for mortgages came from new and unregulated sources. Prior to this, government regulated entities, such as Fannie Mae, were the main buyers of mortgages from lenders. Then, new Wall Street investors entered the market for buying real estate loans.

Alternative loans, interest-only loans, 100% loans, creative ARM's, no-documentation, and other high risk products became commonplace. Some of these loans began with a low interest rate that the borrower barely qualified for, and then switched to a higher rate after a short time. In many cases, the borrowers did not understand the risk that they were taking.

For most of my experience in real estate, buyers were limited to 80-90% loans, with 28% of their income allowed for mortgage payment, and their income was fully documented. When we began to see 100% financing on contracts, we were concerned by the buyer's lack of personal investment, or skin in the game, as they say. Loans such as these have an underlying expectation that the value of the home will increase quickly, and the buyers will be covered, if they need to sell.

Sub-prime, alternative, or high risk loans are not limited to low income buyers, and are not always predatory. Often, very sophisticated buyers elected to keep their cash and leverage more. On a large scale, the easy availability of money, through higher risk loans, fueled the growth of home ownership and investment in rental real estate. The demand for homes raised prices, and then raised inventories, as builders supplied more homes. Then the cycle was broken.

What caused the break? Foreclosures began to show up. Investors who bought mortgage backed securities realized that they contained more risk than they expected, and stopped buying them. Lenders lost the market for selling many of their loans. When home buying money dried up, demand for homes slowed down, and prices began to fall in many parts of the country.

Of course, real estate markets are local. Many areas will survive this much better. Fortunately, Austin is one of those areas. To be sure, we are experiencing the effects of the reduction in demand for homes, but it is not devastating. Why?

First, the Austin market has not had double digit appreciation during the past few years. During the years from 2001 to 2004, after the Dot.com bust, the market inAustin was somewhat soft. The median price rose by about 3.5% per year, on average.

From 2005 through 2007 our market tightened up, and we began to see very low inventory and strong demand, especially in the central areas. Throughout Austin, especially in suburban areas, builders produced inventory to keep up with demand. Overall, appreciation in Austin has been steady, but reasonable. Home prices have not risen excessively, and are not falling precipitously. Austin home prices are still in line with local salaries.

Second, the real estate market always reflects the job market. Approximately 20,000 new jobs were added during the past year. Our unemployment level is about 3.5%, a level that some would consider full employment. Retail outlets are opening at a fast clip-a result of widespread employment. New jobs are being created as companies move here and Austin companies expand. Jobs bring in people, and people buy homes.

It is true that the "new" restrictions on obtaining a mortgage will have a slowing effect on the Austin market. For the next year, we will see a more balanced market than we experienced in 2006 and 2007. Sellers will have to consider the fundamentals to attract a buyer. They will need competitive pricing, excellent presentation, and top level marketing. Buyers will have to have a down payment, good credit, and proper income for their loan.

So, it's back to the future for the Austin real estate market.

Fannie Mae & Freddie Mac Takeover = Lower Rates + More Loan Application + More Pending Sales!

9/15/08

Rates Lower and Mortgage Applications Increase

by Kenneth R. Harney
Shockwaves from the federal takeover of mortgage giants Fannie Mae and Freddie Mac are still rumbling through the economy as a whole and the housing sector in particular.

But what's the government's move going to mean for the real estate market? Well, it hasn't taken long to get at least a preliminary answer: Mortgage rates dropped by four tenths of a percent almost immediately after the announcement - and there are signs that rates for home buyers could fall even further. 

Why? Because uncertainty over the financial stability of both companies had spooked the bond market for months, adding on higher costs for borrowings by Fannie and Freddie -- which got passed on to consumers. Plus, Fannie and Freddie both had recently doubled their upfront delivery fees for loans -- a half percentage point -- and now those could be lowered or eliminated by the new management. Beyond that, there's a good chance both companies' so-called "G-fees" -- what they charge private lenders to guarantee their mortgage pools -- will also drop, further lowering rates. 

In the Mortgage Bankers Association's latest national survey, 30-year fixed rates hovered around 6 percent and were trending lower, while 15 year fixed rate money was at five and three quarters percent. Even more impressive, applications for new mortgages shot up by 9 and a half percent in the week of the takeover. Applications for home purchase loans to be funded by Fannie or Freddie jumped by 14.4 percent! 

So, yes, there's been an immediate and very positive impact for real estate flowing from the resolution of the Fannie/Freddie saga. 

Also on the plus side this week, the latest monthly home price survey by Denver-based Integrated Asset Services found a zero point 9 percent (0.9) increase in average prices, although the survey also found prices off by 11.4 percent year over year through July. 

The lower mortgage rates came too late to have an impact on the latest pending home sales index from the National Association of Realtors. It took a 3.2 percent drop last month, but there are signs that could turn around. 

Realtors chief economist, Lawrence Yun, noted that pending sales were actually UP significantly in a number of hard-hit major markets in California, Florida, and the outer suburbs of Washington DC. 
And he said that the relatively recent reappearance of "multiple bids" on properties in those markets are "signaling a bottom" in prices -- the long-awaited flattening out of the cycle that should lead to a slow recovery in the months ahead. 

Published Realty Times: September 16, 2008

Where Homes Are Selling Fastest - Austin's in the top 3!

Interesting article. Very reflective of what I have been observing in the Austin market.

- Danny Gallant

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9/15/08

Where Homes Are Selling Fastest

But even real estate in the best Zip Codes are spending longer on the market than in 2007

by Prashant Gopal - Business Week

Houses in Sunnyvale, Calif., home to companies such as Juniper Network (JNPR), AMD (AMD), and Yahoo! (YHOO), are typically on the market for 66 days, making it the fastest-selling real estate market in the country. That’s the good news. The bad news is that listings a year ago in the affluent Silicon Valley suburb normally sold after just 31 days on the market.

Even in the fastest-selling Zip Codes in the country, that trend is repeated over and over again. Nothing is selling as fast as it once did as buyers hold off, waiting for prices to drop even more. In some areas the median days on the market have extended beyond weeks into several months. In fact, after searching the nation for communities where homes were selling the fastest, it became clear that not a single Zip Code has eluded the housing slump. But some places are doing better than others. A lot better.

After Sunnyvale, Austin, Tex., another high-tech center, comes in second at 68 days. The third-fastest-selling Zip is the Scripps Ranch neighborhood of San Diego, a wealthy inland market where listings were typically 70 days old, a span that would have been unthinkable during the real estate boom.

Worst-Hit Housing Market
Yet these seem positively alacritous in comparison with Miami, one of the nation’s worst-hit housing markets, where typical listings are close to a sluggish six months, according to Altos Research, the Mountain View (Calif.) firm that helped us come up with our list of the fastest-selling markets in the U.S. “It was remarkable that it was so difficult to find markets moving very quickly at all,” said Altos Research CEO Michael Simonsen said. “These are, in general, some of the healthier markets in their area. At least, there is some consistent demand. Although, in historical terms, it’s still light.”

Even the best areas are a long way from the peak of the real estate market in 2005, when buyers had to act fast because homes were typically snatched up in four weeks, according to the National Association of Realtors. Listings in the fastest-selling markets are also taking much longer to sell than they did a year ago when the credit market was just beginning to tighten. In Sunnyvale, for example, the days on the market for a typical listing increased by 47% during the past 12 months. “Lenders have gotten more conservative after years of loose lending,” said Irvine (Calif.) real estate consultant John Burns. “This shouldn’t be surprising—every single market in the country has been negatively impacted.”

Hurting Neighborhoods
Middle-income neighborhoods are suffering the most, said Ken Gold, director of the Ohio State University Fisher College of Business Center for Real Estate Education & Research. Sellers of expensive homes can find buyers because the wealthy aren’t affected as much by the credit squeeze. And first-time home buyers are finding bargains as home prices slide.

Gold said the places where homes are selling the fastest are established, affluent communities close to jobs, restaurants, stores, and services. These days, buyers don’t want to live far from job centers, especially in an uncertain economy, he said. “Mature areas, which have higher incomes and higher-priced homes are as good as gold,” he said.

Gold might have a point. The communities on our list were relatively wealthy and close to jobs—neighborhoods such as the Circle C master-planned community in southwest Austin; Scripps Ranch in San Diego, 77094, one of Houston’s wealthiest Zips on the city’s western edge; and Venice, Calif., where the median asking price for a home is $1.399 million.

Robust Texas Zips
The communities were also in areas with relatively strong economies. With the Texas economy is booming thanks to high energy prices, three Texas Zips made the list: Houston, Austin, and Plano. Other cities with relatively strong economies also ranked high, including Portland, Ore., Seattle, and Salt Lake City.

An exception is San Diego, which has seen job losses increase and the economy weaken largely because of the housing crisis. That has damaged housing-related businesses and consumer spending. Kevin Wunderly, a Realtor with Avalar San Diego, said he isn’t surprised the Scripps Ranch Zip made the list. Sales have slowed in the past year because of tight credit. But the number of homes on the market isn’t large and hasn’t grown much. Homeowners in the affluent neighborhood don’t feel as much pressure to sell as homeowners in poorer, foreclosure-heavy neighborhoods because they have the means to ride out the downturn, he said. “A lot of people are waiting on the sidelines.”

Jay Carter, a Realtor, said the 78749 Zip Code in southwest Austin is one of the hottest he has seen. It’s a high-end neighborhood surrounded by scenic hills, but it’s just a 5- or 10-minute drive to downtown. “Sellers are not having nearly the heartburn that you’re seeing in a lot of areas of the country,” Carter said. “They consider themselves very fortunate.”

Does Location Really Matter?

Location, Location, Location...

Although very much a real estate cliché, it's one that holds true. When you think about some of the things that affect desirability in a piece of property, location is almost always at the top of the list. There are a lot of things that you can change to make a house into your dream home. You can remodel, change colors, flooring, decorate, etc. You can't do a thing about location, however. It's one of the elements of a property that no one has control over, yet often determines how much that property will command in the open market.

When consulting with buyers, I always make it a point that we pay careful attention to location, not only within the city, but within the neighborhood(s) in question. Homes on quieter streets, away from main thoroughfares, typically command more money in any market. When narrowing down your list of potential properties, it's a good exercise to list out any negative contributors to each one's surroundings. You can take it one step further by assigning a certain weight to each negative factor. More than likely, if you deem something as a possible negative, it will be one for your future audience of potential buyers as well.

The take away : While there is no 100% perfect property for most people, you can put the best odds in your favor in terms of resale-ability and appreciation by considering as many aspects of a property's location as possible.

- Danny Gallant

Your Homestead as an Investment

When most people think of real estate investors, they picture someone who remodels homes and resells them for a living or owns multiple rental properties, or both.

There is no doubt that this type of aggressive, full time work in real estate investment is how many investors have made their living - some reaping massive rewards from it. It isn't, however, the only way to look at real estate investing. More and more homeowners use their property as an investment vehicle. With the current structure of capital gains taxation on one's homestead, it is feasible to buy & sell your primary residence as often as every 2 years without being imposed on gains of up to $250,000 for a single individual and $500,000 for a married couple.

In recent years, during appreciating market conditions, many homeowners have walked away from selling their property with substantial profits, after only a few short years. Some with very little work done to the properties, while others specifically seek out homes that they can remodel over time in order to increase value through their work as well as take advantage of appreciation. They simply repeat the process every few years.

Viewing your homestead as an investment is wise in any market. Many things need to be considered, however. If you are planning to improve the property with the goal of selling it in a few years, be sure to pay close attention to what is common in the neighborhood. Go to open houses, keep an eye on what's on the market through your favorite real estate site. This is important in helping you to scale your project. Over-investing in the home is a sure way to shrink your future profits.

- Danny Gallant

Austin Will Recover Faster Than the Rest of the Country

I realize that I probably sound like a broken record by now, but since Austin has not experienced the drastic economic & housing drops that many other cities have over the last 12-16 months, it only makes sense to expect that we will see a quicker recovery than most...

- Danny Gallant

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Monday, August 18, 2008

Economist: Austin will recover faster than the rest of the U.S.

Austin Business Journal - by Jean Kwon ABJ Staff

In the coming year Austin will outperform the rest of the country in job growth and in the health of its housing market, according to Mark Dotzour, chief economist at Texas A&M University's Real Estate Center.

Austin will add 8,500 new jobs between now and August 2009, despite a negative job growth across the country, he says. The local housing market will turn around faster than the rest of the country by next summer, Dotzour predicts.

In the meantime there will be a marked drop in new construction next year as a result of tightened debt and equity markets, Dotzour says. Still, the credit crunch is starting to thaw, and the pressure on national banks is beginning to move to regional banks including those in Texas. Those banks are tightening the terms on outstanding loans and demanding additional collateral or partial paydowns based on reappraisals. Loans for single family developments will bottom out between now and next summer and some builders will leave the market involuntarily, says Dotzour. By next fall he predicts a turnaround in the market and a renewed uptick in homebuilding.

The local demand for apartments is at an all-time low, says Dotzour. There will be demand for about 2,500 units next year, a fraction of the 9,000 to 11,000 units that will come online. He anticipates occupancy will be 90.4 percent and rents will fall to an average of 94 cents-a-foot.

The office market will see very little new construction in 2009 and 2010 as a result of the recent credit crunch. But that means when the economy picks up in mid-2009 the region will see the next wave of rent growth, says Dotzour.

About 350,000 square feet of office space is likely to be absorbed next year, and 700,000 square feet will come online. Occupancy will be 84.7 percent.

Industrial development is seeing the biggest wave of construction in the history of Austin despite a 25 percent increase in construction costs last year, says Dotzour. He predicts ownership will begin to change hands as rents stagnate.

Dotzour predicts 250,000 square feet of flex/R&D space will be absorbed and that 400,000 square feet will be completed next year. The warehouse and distribution market will see 2 million square feet come online, and 376,000 square feet of that will be absorbed. Occupancy rate will be 82.4 percent and rents will be down 7 percent.

Local downtown retailers like REI, Whole Foods and Anthropologie have fared well but retailers will likely struggle in the coming year. Investor demand in retail is low and institutional investors have broken off deals as a result of being over-allocated in real estate, says Dotzour. The International Council of Shopping Centers predicts store closings in 2008 could reach 5,770 nationwide, the highest number since 2004. Unless gasoline prices return to under $3 a gallon, discretionary consumer spending will languish, Dotzour says.

If demand slows for local commercial real estate there could be a decline in construction material costs in the coming months, he adds.

"If this hypothesis doesn't hold water, and oil is still 125 bucks a gallon and steel costs what it does now, then we're in an entirely new era for living in the U.S. where things cost a whole lot more than they used to," says Dotzour.

recenter.tamu.edu

What About all these Downtown Austin Condos?

Very interesting article about the condo market in Austin, TX.

I have been advising clients for some time now that the supply of new condos in Central Austin might pose a demand issue in the near future. At the core of any new development plan, be it condo, townhouse or single family neighborhood is the expectation to pre-sell a certain percentage of their planned units. In the case of Austin's young condo market, however, so many projects were planned to come online at very close intervals that I've always had my doubt if demand would truly be there.

Granted, overall economic conditions have a lot to do with the current condo market, I firmly believe that we experienced an over-supply of product, first and foremost.

- Danny Gallant, Realtor

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THE CONDOMINIUM CONUNDRUM

Author: Austin Business Journal

At least 700 condominiums -- almost a dozen buildings -- slated to be built in Central Austin are either on hold indefinitely or scrapped altogether, according to an analysis by the Austin Business Journal. 

With the national economy in a slump, credit markets running dry and more than 3,000 new condos either online already or soon to hit the Central Austin market, many developers say they've had no choice but to alter their plans. 

This month, for example, the developer of the Hotel Van Zandt, San Diego-based JMI Realty, said that the 55 condos planned to go on top of the boutique hotel would not be built, reducing the building's height by nearly half to 16 stories. The hotel, at Red River and Davis streets, is expected to finish by September 2010. The developer of Aquaterra, Crescent Resources LLC, confirmed it has put on hold indefinitely the 163-unit, 20-story project planned for Barton Springs Road between Congress Avenue and South First Street. And last month, developers of the Metropolitan, a luxury eight-story mixed-use project planned near the Capitol, filed for Chapter 11 bankruptcy. 

Some developers have found financing more difficult to come by, which means it's taking them longer to turn dirt. 

The 7 Rio Grande, a planned 34-story condo tower, was supposed to break ground this fall and now is expected to do so in 2010. Anne Ickes, a development associate at CLB Partners, which is developing the project, says the tower will go up but not anytime soon. Ovation, the 37-story condo tower by Novare Group and Andrews Urban, the partners behind the recently finished 360 condo project, was expected to break ground this summer; it will now do so in the fall, says Andrews Urban President Taylor Andrews. The project has also been redesigned. The downtown post office that exists on the site was going to move into the ground floor of Ovation; it will now move to 9th and Red River streets. The number of units has shrunk from 433 to 400 units and office and retail space has increased from 35,000 to 40,000 square feet. 

Simmons Vedder & Co. had plans to start construction this year on 230 condos at the Triangle mixed-use complex at the intersection of North Lamar and Guadalupe streets. The nine-story building is still in its design stage. "We're basically on hold at this point," says John Burnham, a development partner with Simmons Vedder, attributing market conditions and robust competition in the condo market sector. Burnham says the company is not looking at a groundbreaking until August 2009. 

And at least a dozen more projects announced in the last few years have been indefinitely shelved as developers here weather the storm. 

Atlanta-based Gameday Centers, which had planned roughly 200 luxury condos and "tailgate suites" near the University of Texas, was expected to break ground in spring 2007 and be ready in fall 2008. Duane Doblar, a spokesman for Gameday, says the project never got past its preliminary site review and marketing stages and that no project is currently being pursued. "The real estate market is pretty soft right now and there's nothing we would consider in the next 12 months," says Doblar. "That's not Austin in particular, that's just nationally." 

Others are sitting, waiting and mulling offers to sell their sites. Matt Mathias, co-founder of Austin-based Interurban Development, which planned an ultra-luxury condo project in East Austin featuring a 14,000-square-foot "skydeck," panoramic views of downtown, an open-air amphitheater, and a saltwater pool and spa, says that the company has its site development permit in hand but is waiting out the market, adding that he would consider offers on the site. "Everything is for sale at a price. We believe in the Austin market, [which is] clearly one of the strongest markets in the nation right now. But right now there's a tendency of residents to lease rather than buy." 

Stephen Soward, principal at development firm StrateGEM, is marketing a 28,160-square-foot lot at 1705 Guadalupe, where it had planned a 173-unit mixed-use project. "If someone out there that is a little braver than we are wants the property, they are welcome to talk to us about it," says Soward. 

Despite some sobering of its condo boom, downtown Austin--and Austin in general-- remains one of the country's top markets, far outpacing Houston and Dallas, says Mark Sprague, Austin partner of Residential Strategies Inc. Downtown sales -- new and resale -- averaged 850 units annually in the last two years, and prices have stabilized, not gone down, Sprague says. "No one is discounting the value of these parcels yet," he says. A local slowdown doesn't reflect Austin's viability as troubled markets like Miami and Atlanta precipitate investor pullout across the board, Sprague says. 

Still, tightened credit markets mean there will be a slimmer margin of error for poorly conceived projects. And about 35 to 50 percent of local buyers will be lost due to credit issues, Sprague says. 

"The bottom line is virtually no one wants to make any loans for real estate development right now," says Mark Dotzour, chief economist for the Real Estate Center at Texas A&M University. 

National banks remain under distress and regional banks, historically the main source for development funds, are struggling as well, Dotzour says. And on the equity side, investment is dormant. Political uncertainty is also tapering any significant investment activity. 

Despite widespread woes, attrition of projects is a sign of a healthy market, says Larry Warshaw, principal at Constructive Ventures, which is developing Spring, Barton Place and several other condo projects. The market is sifting through all the proposals to find the viable ones, he says. 

"The right projects with the right location at the right price, [and those] demonstrating strong presales with experienced teams are moving forward and getting built," he says. 

Haven't Owned a House in the Last 3 Years? Get a Tax Credit of up to $7,500 if Buying, but Time is of the Essence!

Thanks to a newly enacted legislation, homebuyers who have not owned a house in the last 3 years can now benefit from a substantial tax credit if they purchase a home between April 9th 2008 and July 1st 2009.

The tax credit is capped at $7,500 (or 10% of the purchase price of the property, whichever is lower) and is refundable. There are various scenarios pertaining to the refund schedule.

This legislation's aim is to stimulate the housing market and certainly helps anyone who qualifies!

Read more at this site   -     www.federalhousingtaxcredit.com

 - Danny Gallant

Should I pay a full commission or hire a discount agent to sell my house?

This a question many prospective home sellers ask themselves these days. There are many agents out there offering a reduced commission as a way to entice sellers to choose them to list their property.

There are many reasons why agents choose this business model. The main reason is to increase their odds of gathering up as many listings as possible in their market. The more listings an agent has, the more prospective buyer contacts they receive. Their goal is then to convert those inquires into buyer-side business (usually not for the property they have listed). In other words, they use their discount commission listings as bait to pick up new buyer clients, at full commission. Not really what most sellers have in mind when hiring an agent to sell their property.

During the process of selecting the right agent to list their property, I suggest that prospective sellers ask themselves a few questions in making that decision...

Most notably:

- If an agent is so quick to give up a third of their own money, will they be equipped and motivated to protect your equity when it's time to negotiate an offer (especially if it's a low offer such as many sellers are seeing in today's market)? If that agent lacks the skills to secure business at the rates others charge in the same market on a daily basis, do you really want that person representing you & one of your biggest assets? Statistically, discount agents typically net less money for their sellers than full commission agents do.

- Does an agent offering less than a full commission really devote the same amount of time and resources to you? It stands to reason that if an agent offers to take a listing for a reduced fee that they have to make up the difference by taking on more business, and the business offering full commission usually takes priority on their schedule. Most agents have a commission split with their brokers. Commonly, that split can be anywhere between 25% and 50%. Let's assume conservatively at 30%. In a typical transaction, an agent's broker gets about a third of the commission, another third goes to income tax, marketing, gas & other expenses. That leaves the agent with the remaining third. Discount agents aren't left with much when it's all said and done; hence the assumption that their higher paying transactions will get the bulk of their attention.

- If less than a full buyer's agent commission is being offered to cooperating agents, how many potential buyers will never get to see the house because their agents are only showing them full commission listings? Many agents will rule out properties offering less than their full commission, since they have already discussed with their buyers that the commission is paid by the seller. Not every discount agent offers less than the usual rate for buyer agents, but many of them do and may not be telling their clients, putting them at a real disadvantage in the marketplace.

Discount agents are often seen by other agents as being unmotivated or unskilled when it comes to negotiating offers, often leaving most of the work up to the sellers themselves. These properties are ripe for skilled agents to get great deals for their buyers, since there's typically no much resistance on the other side of the table.

In the end, I believe it is much more important to focus and what an agent stands to put in your pocket with the sale of your property (what can you net from the sale), as opposed to what they charge. A skilled agent with market knowledge will always outperform one who's primary value proposition is charging less than everyone else.

- Danny Gallant