Austin Real Estate and General Economic Forecast Continues to Outpace Other Markets

Despite the many pessimistic reports coming out of the national press at this time the good news for Central Texas is that we appear to be bucking the current downward economic trend being felt in other US cities.

Here are a few examples of recent media announcements that pertain to Austin and Central Texas Real Estate as well as other general economic news.

- According to Forbes.com, Austin is the 3rd fastest growing city in the United States:

3. Austin, Texas
Population: 1.51 million
Growth since 2000: 21.1%
Median home price: $186,600

Part of what's driving the growth of Austin is the affordability of housing and the cost of living. A prime example is this single-story, three-bedroom, two-bathroom stone home, which is set back from the street by a large front lawn and boasts 1,879 square feet of interior space.

It is listed for $186,500 through Keller Williams Realty.

- The Austin Business Journal recently reported that the local unemployment rate is 3.3% which is a full point lower than the national average:

Central Texas reports job growth in October
Austin Business Journal
Friday, November 16, 2007

The Austin/Round Rock area added 2,600 new jobs in October, according to the latest figures from the Texas Workforce Commission.

Unemployment in the region stands at 3.3 percent, still below the statewide rate of 3.9 percent and the national rate of 4.4 percent.

The total number of nonagricultural jobs in the area hit 757,400 in October, up 3.1 percent from October 2006. The largest year-over-year gains were in other services (7.8 percent), leisure and hospitality (5.4 percent) and mining and construction (4.8 percent).

Employers added 24,200 jobs in October and about 206,400 in the last 12 months. The Texas job growth rate is holding steady at 2 percent.

- And the Austin American Statesman recently had this to say:
Austin housing market
Austin American Statesman
Wednesday, October 10, 2007,

A new release from the National Association of Realtors has some good news about Austin real estate, amid all the national gloom and doom.
The release follows:

Conditions in the mortgage market are improving for consumers, which should help to release some pent-up demand in early 2008, according to the latest forecast by the National Association of Realtors.

Lawrence Yun, NAR senior economist, notes that widening credit availability will help turn around home sales. "Conforming loans are abundantly available at historically favorable mortgage rates. Pricing has steadily improved on jumbo mortgages since the August credit crunch, and FHA loans are replacing subprime mortgages," he said.

Yun said it's important to place the current housing market in perspective, and that 2007 will be the fifth highest year on record for existing-home sales. "Although sales are off from an unsustainable peak in 2005, there is a historically high level of home sales taking place this year - a lot of people are, in fact, buying homes," he said. "One out of 16 American households is buying a home this year. The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains."

He emphasized all real estate is local with naturally large variations within a given area. "Markets like Austin, Salt Lake City and Raleigh have been outperforming recently and will continue to do well next year," Yun said. "Other areas like Denver and Wichita will likely move up in the price growth rankings due to very positive local economic developments."

Existing-home sales are expected to total 5.78 million in 2007 and then rise to 6.12 million next year, in contrast with 6.48 million in 2006. New-home sales are forecast at 804,000 this year and 752,000 in 2008, down from 1.05 million in 2006; a recovery for new homes will be delayed until next spring.

"A cutback in housing construction is a positive sign for the market because it will help lower inventory and firm up home prices," Yun said. Housing starts, including multifamily units, are likely to total 1.37 million in 2007 and 1.24 million next year, down from 1.80 million in 2006.

Relators President Pat V. Combs, from Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt, said, "Housing is still a good long-term investment, and we'll be seeing a broad, modest improvement in home prices in 2008. With widely varying conditions, the best advice for consumers is to consult a Realtor in their area to learn about local market conditions because supply and demand can change from one neighborhood to the next."

Existing-home prices will probably slip 1.3 percent to a median of $219,000 in 2007 before rising 1.3 percent next year to $221,800. The median new-home price should drop 2.1 percent to $241,400 this year, and then increase 1.0 percent in 2008 to $243,900.

The 30-year fixed-rate mortgage is expected to average 6.4 percent for the next two quarters and then edge up to the 6.6 percent range in the second half 2008. Additional cuts expected in the Fed funds rate will help to keep mortgage interest rates historically favorable.

Growth in the U.S. gross domestic product (GDP) is estimated at 2.0 percent this year, below the 2.9 percent growth rate in 2006; GDP is likely to grow 2.7 percent next year. The unemployment rate is forecast to average 4.6 percent this year, unchanged from 2006. Inflation, as measured by the Consumer Price Index, is expected to be 2.8 percent in 2007, compared with 3.2 percent last year. Inflation-adjusted disposable personal income will probably increase 3.6 percent in 2007, up from 3.1 percent last year.

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All in all the economic health and growth conditions look favorable for Austin and the greater Central Texas region. We'll continue to monitor the media, statistics and publications of note and update the information posted here.

Please feel free to contact us with comments and questions. We look forward to your replies.

Tax Deduction Under Fire for 'McMansions'

The following article appeared recently in the Washington Post. Please read it and provide your feedback to us (and to Representative Dingell) as I think this is the type of legislation that warrants public input.

Our perspective here at The Sunshine Team is that this type of legislation, although seemingly targeted at those people who fall into higher income socio-economic demographic groupings, is not targeted at only the rich and those that purchase what Rep. Dingell calls “McMansions.” New home buyers can now purchase 3,000 square foot homes for well under $200,000.00 This opens up the ability to purchase these homes to a great number of Americans with growing families and the sincere need for space to move about. Additionally, a mortgage interest deduction is one of the few, real itemized tax deductions that many wage earners are able to claim. Thus causing further hardship on working class families.

Linda Goold, the National Association of Realtor's tax counsel, challenged the Dingell plan on operational grounds in the article below saying, "We strongly support increasing energy efficiency in houses, but basing [taxation] on square footage rather than actual energy usage doesn't make sense," she said.

We concur! If you want to tax consumption then tax it by urging people to conserve energy, adopt alternative forms of energy and provide subsidies on energy saving products and services.

The City of Austin does a great job of doing just that for home owners and commercial customers as well. For more information please visit them at http://www.austinenergy.com/.

Again, please feel free to comment and or contact us with feedback. We look forward to hearing from you.

Stephen
- The Sunshine Team -

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Tax Deduction Under Fire for 'McMansions'

Washington Post (Saturday, August 25, 2007)

To add to the mortgage meltdown miseries, the credit panic, the plunging home sales and the rising foreclosures, here's a new worry: a proposed cutoff of mortgage-interest tax deductions for houses with more than 3,000 square feet.

One of Capitol Hill's most experienced and most powerful legislators is drafting a "carbon tax" bill that would do precisely that. The chairman of the House Energy and Commerce Committee<, John D. Dingell (D-Mich.), expects to introduce comprehensive climate-change legislation when Congress returns next month.

Besides imposing hefty new federal taxes on gasoline, the forthcoming bill would, in Dingell's words, seek to "remove the mortgage interest deduction on McMansions -- homes over 3,000 square feet." Dingell said he recognizes that such a proposal will spark much criticism, but he also said it is essential to reducing carbon emissions by 60 percent to 80 percent by 2050.

"In order to address the issue of climate change, we must address the issue of consumption," Dingell said in talking points prepared for town-hall discussions of the legislation. "We do that by making consumption more expensive."

Houses, like autos, are contributors to greenhouse-gas emissions. This is through heating, cooling, electrical usage and building materials, plus the highways and roads needed to make far-flung subdivisions accessible to buyers. Home builders insist that they have "gone green" in recent years and that houses constructed within the past decade are the tightest, most energy-efficient in history.

Aides to Dingell said that because the legislative language on large houses and other tax proposals is still being drafted, neither they nor the congressman could elaborate on the details of the plan or why the cutoff point of 3,000 square feet was chosen. The Natural Resources Defense Council>, one of the most outspoken environmental lobbies in the climate-change debate, had no immediate comment on Dingell's proposal.

But real estate and building groups were quick to offer critiques. Lawrence Yun, senior economist for the National Association of Realtors>, produced preliminary estimates that ending mortgage-interest tax deductions for all single-family dwellings larger than 3,000 square feet would result in a national median-house-price decline of 4 percent on all homes, not just large houses. Yun said there are at least 10.4 million single-family houses with interior areas of 3,000 square feet or more, about 15 percent of the nation's owner-occupied housing stock.

Dingell's plan could also push up foreclosures because every 1 percent decline in median price leads to an additional 70,000 foreclosures, Yun said, citing industry research. A price decrease of 4 percent in a national market already swamped with foreclosures could add 280,000 to the total.

Linda Goold, the NAR's tax counsel, challenged the Dingell plan on operational grounds. "We strongly support increasing energy efficiency in houses, but basing [taxation] on square footage rather than actual energy usage doesn't make sense," she said.

Goold also questioned the enforceability of a federal tax increase tied to the dimensions of structures. "Who is going to do the measurements?" she said. "Different people measuring square footage can come up with different numbers. That's why MLS [multiple listing service] listings usually say the square footage is approximate."

Bill Killmer, policy advocate for the National Association of Home Builders, called the Dingell plan "wrongheaded" in its focus on house size.

"We believe a much better approach would be to look at consumer behavior -- how efficient are the appliances they've installed, how energy-efficient are the windows, insulation, heating and air conditioning" and other systems, he said.

The interest deduction is one of the biggest tax benefits in the federal budget, according to the congressional Joint Committee on Taxation. From fiscal 2006 to 2010, according to a committee study, federal revenue losses attributable to the mortgage interest deductions are expected to total $402.7 billion. Other federal studies have documented that the benefits of the write-off are heavily skewed toward higher-income taxpayers who have larger-than-average mortgages.

Over the past two decades, occasional proposals have been made in Congress to rein in the deduction -- say, by limiting it to mortgage amounts of less than $300,000. But the write-off has never been seriously endangered because it is so popular with taxpayers and has fierce support in the banking, real estate and construction industries.

Nonetheless, Killmer said his trade group takes "any proposal from Chairman Dingell very seriously because of his impressive record of legislative accomplishments." .

"The [environmental] problem he is trying to solve is important -- nobody questions that," Killmer said. "We just don't think this is the right way to go about it."

>>View article on Washington Post website

The Sunshine Report:Greater Austin Real Estate Market Update

Strong home sales in Austin have continued at a steady pace this year and just finally slowed ever so slightly as evidenced by June’s statistics. From our perspective, 2007 will continue strong throughout the summer months and into the fall. And despite the slight downtick for June in units sold, ABOR chairman, Charles Porter, said,

"Austin has experienced record-breaking growth in home sales for the past four years. This year, we may see a slight decline in year end residential sales. Overall, the Central Texas housing market has been resilient and continues to be one of the best investments money can buy."

We here at The Sunshine Report agree wholeheartedly.

Mortgage consultant Mark Dunkley, Milestone Mortgage, added:
"Even though mortgage interest rates have increased this year, strong job growth, historically low unemployment and 80,000-100,000 new people moving to Austin this year continue to add to the strong residential home market . Additionally, the ability to refinance ARM's in the appreciating Central Texas residential market has also helped reduce the number of foreclosures that other areas of the country are experiencing."

Current inventory numbers remain extremely low with approximately 80 days of homes on the market, thus translating into a strong seller’s market for much of the Austin area. "We continue to experience a robust sales climate," said Melissa Squyres, Keller Williams Northwest Market Center – Assistant Team Leader, "and all indicators point to a great second half of 2007."
Statistics According to the Austin Board of Realtors:

• January 2007—Single-family Homes


• 1,452 was the number of single-family homes sold
• $175,000 was the median price for single-family homes, up 5 percent from last January and a record for the month
• $352,426,536 was the total dollar volume of properties sold, a 1 percent increase from a year ago



• February 2007—Single-family Homes
  
  
  • 1,714 homes sold, a 1 percent increase from 2006
  • $176,000 was the median price, up 4 percent from last February
  • $400,330,410 was the total dollar volume of properties sold, a 5 percent increase from a year ago
  
  
• March 2007—Single-family Homes


• 2,343 was the number of single-family homes sold
• $177,080 was the median price for single-family homes, up 6 percent from last March
• $569,848,059 was the total dollar volume of properties sold, a 6 percent increase from a year ago


• April 2007—Single-family Homes


• 2,313 homes sold, up six percent from last April
• $185,000 was the median price, a six percent increase from 2006
• $578,846,754 was the total dollar volume of properties sold, a 14 percent increase from a year ago


• May 2007 – Single Family Homes
  
  
  
  • 2,679 was the number of homes sold in May, up two percent from one year ago and a May record
  • $183,160 was the median price for homes, up five percent from the previous year and a record for the month
  • $671,716,386 was the total dollar volume single family home sales contributed to the local economy, up eight percent from 2006


• June 2007-Single Family Homes
  
  
  
  • 2,800 homes sold, a 6 percent decrease from one year ago and the second highest home sales recorded for the month of June
  • $191,050 was the median price, a 7 percent increase from one year ago
  • $727,843,200 was the total dollar volume of properties sold, a one percent increase from 2006
    
  
  

The Sunshine Report:Experts See Healthy Market for Austin in 2007

Looking Back
Although the national real estate market experienced a downturn in 2006, single family home sales here, in Central Texas, remained strong. According to the Austin Board of Realtors (ABOR)," More homes were sold in the Austin-area during the first two quarters of 2006 than in the first six months of any other year. Between January and June, 13 percent more single-family homes were sold than in the first half of 2005." Additionally," The Real Estate Center at Texas A&M University reported that in the second quarter of 2006, national home sales fell by 7 percent, while Texas home sales increased by 11 percent."

A vibrant market during the second half of the year insured that the record breaking year continued. Home sales ended up 10 percent from the previous year. According to ABOR, "Also notable in 2006 was the fact that homes sat on the market for the shortest amount of time in four years." 2007 looks set to continue that trend.

The Year Ahead
All signs point to another great year for Central Texas and Austin. Overall, home prices remain affordable and the forecasts for both job and population growth are extremely favorable.
The Real Estate Center also noted that Texas is home to three of the top-ten most populated U.S. metropolitan areas, as well as four of the fastest-growing cities in the nation. This provides Central Texas and Austin with a great recipe for growth, rising property values and strong home sales into 2007.

Gary Solka, Mortgage Consultant at Milestone Mortgage said, "Unlike the other major real estate markets in the country, Austin is doing very well. Already 2007 has seen a lot of activity and many of my clients that are purchasing are finding themselves in multiple offer situations for a given property. In addition, prices are increasing or holding steady in most parts of the Austin area."

With all the growth many home owners here may find themselves at a loss as to how to properly value their home prior to listing it on the market. Emmy Sunshine, Principal, of The Sunshine Team at Keller Williams, says, "This is where we, as Realtors®, can be of invaluable assistance. We are constantly watching and assessing the market conditions neighborhood by neighborhood and providing our clients with the knowledge they need to effectively price, market and sell their home. At the end of the day, it is our job to help them sell their home at the highest price, in the shortest amount of time and the least hassle."

These strong economic factors, combined with forecasts for continued stability, as well as, brisk recent home sales here in Austin and the surrounding area, indicate that Central Texas should expect a healthy real estate market for the remainder of this year.