EXCESSIVE CITY BUILDING REGS ARE NEEDLESSLY DRIVING UP HOUSING COSTS

Housing has been one of the two biggest problems in Austin in recent years. (Traffic, being the other . . . but you knew that.) Let’s talk about affordable housing.

I have been a residential and commercial REALTOR in Austin for over 40 years.  I am also a retired home builder and former general contractor.  During the 80’s Bust, I was the person who finished much or most of what Texas Commerce Bank repossessed in the Austin area. At different times, I was the Home builder Association’s liaison with the City Building Code Department and served on the Homeowners Warranty (HOW) inspector review committee where a small group of us tested, certified and oversaw the HOW building inspectors.  I guess I am saying that I am not a novice.

Admittedly, I have not remodeled a house in the past few years.  We are doing so now.  What a shock!!! I cannot believe the level of red tape and expense that the City has added in the last several years – all the while decrying the runaway cost of housing. At the risk of you zoning out, I would like to point out a few notable issues I have encountered:

  • The electrical.  We wanted to replace the old tan-colored plugs and switches and install GFIs.  The electricians swear to me that they cannot upgrade the switches and plugs without re-wiring for arc fault if they pull a permit.  With a permit, the City required a new meter box (they said it was NOW undersized), a new breaker box (they said the old breakers were unsafe), a new masthead (they said the old one was too low), and all new wiring (the old wiring was not on ARC Fault breakers).  It is a $10,000+ electrical contract AFTER we removed everything down to the studs so we could re-wire.
  • I wanted to replace the old atrium door. The city now requires a building permit to replace an exterior door, and the new energy code requirement means that instead of a good $400 door (which is in stock) we have to order a special door that takes 30 days and costs around $600-1300. Home Depot nor Lowes stocks anything like what the City code now requires.
  • Windows: this may fall under national code, but most of the bedroom windows were 2-0 x6-0s and are grandfathered unless replaced. If replaced, they have to be much larger.  It is a 100% brick house. This is a huge problem.  I have the same problem at my house. It is keeping me from installing better, more efficient windows. It seems like there should be a case made for grandfathering windows that once met code. (I have no problem with replacing the glass with safety plate, as required due to the close distance to the floor – that is not the hardship that tearing up brick walls and re-framing walls would be.
  • Termite treatment.  We had just treated for termites prior to finding out that we had to gut this house (two months ago). Now the city requires that we spray some kind of termite treatment on the bare studs before we sheetrock. Doing a pre-treatment is not a bad idea.  I used to do it for some buyers, but it is one more unnecessary cost that should be a free market buyer decision – like a cast iron tub vs. a cheap steel one. I use this as one example.
  • Trees- Reasonable tree regulation make sense.  We have gone past the point of reason. This house has an oak tree that the previous owner planted in the 70s. It covers the entire front yard and is protected as a heritage tree.  The plumber told me that if we replace the sewer line, we would have to take a tree permit and wait until the tree guy comes to look and tells us where we can trench.  OK.  I can live with that.  Then I find out that the trench could not be dug, but must be blown out with water or compressed air so that we do not harm the roots.  No word on how we were to fish the sewer pipe through the maze of roots. The sewer proved to be OK so I did not experience this, but others have.  I do not like the governor interfering in Austin codes, but on this I understand his point of view.  A little more moderation in enforcement seems due.

A while back we had a city code specialist speak at Stanberry & Associates.  I told him that I am of the opinion that excessive regulation is somewhat counterproductive. It is slowly driving more people to bootleg. People are flipping houses all over Austin.  Most are replacing the tan plugs and switches and exterior doors.  I guarantee you very few have done so with the require permits.  Those of us doing so legally are getting clobbered.

I have told this story to many people and they say that I should write a letter to the editor.  I think that would do little.  I know Austinites hear things like this every day, but the next time it comes up I hope you will re-tell some of this story.

I never dreamed that I would have to take a house down to the studs over the electric code  when the wiring was in no way hazardous fine and had been previously installed to code, or that it would cost over $1000 to replace an ordinary  sliding glass door.  And the city leaders bemoan the lack of affordable housing!

Jeff Stewart, CCIM        STANBERRY & ASSOCIATES                     jstewart@stanberry.com

JUNE AUSTIN MLS STATISTICS

Sales seem to have slowed as we hit the summer heat.  The statistics below indicate a slight softening in some aspects of the market, but it is important to not that these are lagging indicators.  These sales totals are for closings during the month of June, which means that they had actually gone under contract roughly 30 days or more before that.

AUSTIN-ROUND ROCK MSA STATS

Following are June 2017 single-family housing market statistics in the Austin-Round Rock MSA:

3,415 – Single-family homes sold, 4.0 percent more than June 2016.
$314,000 – Median price for single-family homes, 7.0 percent more than June 2016.
45 – Average days homes spent on the market, two days more than June 2016.
4,335 – New home listings on the market, 6.0 percent more than June 2016.
7,672 – Active home listings on the market, 19.0 percent more than June 2016.
3,148 – Pending sales for single-family homes, 9.0 percent more than June 2016.
3.1 – Months of inventory, 0.5 months more than June 2016.
$1,347,423,877 – Total sales dollar volume, 12.0 percent more than June 2016.

Jeff Stewart, CCIM, SRES   Stanberry & Associates

jstewart@stanberry.com      512-327-9310

 

HOW TO RESPOND TO LOW-BALL OFFERS

 Low-ball offers are rather uncommon in a hot market like we have had in the Austin area the past few years, but they are not unheard of.  So let’s take a look at how one might choose to respond in hopes of eventually getting to a price where we might make a deal.

First, it is critical to confirm that the buyer is actually qualified for more than the low offer.  If the buyer is qualified for enough to make a better offer, I suggest to sellers that they consider taking an approach that is a little different.  Many sellers choose to refuse to respond to low offers, and others often respond with slightly less than full price counteroffers.  Neither approach is likely to move toward a contract. I suggest a third option, which is to send back a response on a form that is referred to as “Seller’s Invitation to Buyer to Submit New Offer.” I have found that this form is a more “gentle” way to refuse an offer, but possibly keep the buyer interested.  The form is not a counteroffer, and clearly says so.  It allows the seller to send the buyer a message that the offer has been refused, but has a space to outline what terms would be more acceptable. It still allows the seller to accept other offers. It is a refusal, but a refusal with the possibility of a dialogue.

Some personalities (and cultures) absolutely believe the first offer has to be an extremely low one.  Their motto is, “Hey! Nothing ventured, nothing gained.”  Sometimes it takes a seller standing firm, but without attitude . . . which I admit is difficult when it seem so personal because it is the home you have loved for years.

PLEASE READ: Texas law requires all real estate licensees provide the Information About Brokerage Services (IABS) to prospective buyers, tenants, sellers and landlords. Please see the link above.

Jeff Stewart, CCIM, SRES

Stanberry & Associates, REALTORS

jstewart@stanberry.com     jeffstewart.stanberry.com

Understanding the Real Estate Cycle By Jeff Stewart, CCIM, SRES

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Today we have a pop quiz.  Please have a sharp #2 pencil ready.  I must say from the outset that the older generation will have a definite advantage when taking this quiz.  Extensive experience is a real plus in determining the answer to my one question quiz.

The graph at the top of this page is a well-known and widely accepted representation of normal real estate cycles. Real estate cycles are a fact of modern life. I admit, when I was in my twenties and thirties, I argued with my dad that the modern Texas economy was not subject to such trends.  People were moving here in droves and we were not “making any more land.” That was several recessions ago. Like the stock market, the overall trend is upwards; but we have had down times interspersed in there as well.

So your assignment today is to take your pencil and circle that point on the graph that best represents where you think we are today in the Austin real estate cycle.  Be honest.  The interesting part of this quiz is that we will not know what the correct answer is until we are well past the current stage, whatever that is. If you are expecting to sell or buy a property in the next year or so, this is more than just an academic exercise.

Having been through several lesser booms, but nothing as crazy as what we have experienced the last couple of years, it is my opinion that we are slightly past the “Euphoria” stage. In fact, I find it remarkable that the Austin economy has sustained the euphoric atmosphere for such a prolonged period. So what is the point of this discussion? Well, it may be helpful to discuss a few common sense strategies.

First, are you planning to sell a property in the next year or so? Depending on the stage you believe we are at  on the chart, now would surely be an ideal time to maximize the value while the market remains poised at the top of the business cycle.  But what about buying at the top of the market?  I get that question a lot now.  Good real estate deals can always be found at any point in the real estate cycle. The key is to fully understand the fundamental value of the property rather than relying on some pie-in-the-sky, hoped-for appreciation which may not come until the next business cycle.    When buying at the peak of the market, there is little room for error.  Incomes may be less than expected and hold times may be much longer.

When near the top of the market, it may be time to take a profit or at least diversify to reduce the rick of a soft real estate market. It was a real shock to me in the late 80s to discover that a diversified real estate portfolio was NOT different colored duplexes in South Austin.  Who knew?  I regularly have investors tell me that they like to keep their properties clumped in one neighborhood. That is certainly one strategy, but it comes with some risks.

In summary, it is time to make a careful judgment regarding our local economy and the real estate market.  It might be time to put a plan into motion rather than reacting after the fact.

Time’s up.  You may put down your pencils now.

 

Jeff Stewart, CCIM    Stanberry & Associates   jstewart@stanberry.com

 

Austin Residential Market Report

Home sales dip in Austin, increase across Central Texas in September 2016

Austin Board of REALTORS® releases September 2016 Central Texas Housing Market Report

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AUSTIN, Texas – Oct. 18, 2016 – Single-family home sales increased across the Austin-Round Rock Metropolitan Statistical Area (MSA), but declined throughout the City of Austin in September, according to the September 2016 Central Texas Housing Market Report released today by the Austin Board of REALTORS®.

Aaron Farmer, 2016 President of the Austin Board of REALTORS­® said, “Housing is at the center of all economic development. Nowhere is this more evident than at the intersection of housing affordability and mobility. As more and more homebuyers look outside of Austin’s city limits to find an affordable home, our region’s infrastructure is increasingly strained and the overall costs of homeownership rise because of the increased cost to commute.”

In September, less than one in three homes sold in the Austin-Round Rock MSA and less than one in five homes sold in the Central Texas region were sold within Austin’s city limits. City of Austin single-family home sales declined 4.5 percent year-over-year in September 2016 to 746 home sales, while home sales across the Austin-Round Rock MSA increased 1.3 percent year-over-year to 2,576 home sales. Across the Central Texas region, single-family home sales were up 6.1 percent from September 2015.

During the same time frame, the median price for City of Austin homes increased 10.6 percent year-over-year to $345,000. Across the five-county MSA, the median price for single-family homes was $275,250, an increase of 7.5 percent from September 2015.

In June, the Austin Board of REALTORS® announced its support for the City of Austin’s $720M mobility bond proposition, applauding the proposed investment in major corridor improvements, plans for regional roadways  that will bring immediate congestion relief and implementing pedestrian pathways that enable safe routes to schools for all school-age Austinites.

“Austin’s traffic congestion worsens every day. Our city cannot afford to keep putting off much-needed infrastructure improvements while waiting for the ‘perfect plan’ to come along,” commented Mayor Adler. “As mobility throughout our region is impacted, so is the quality of life for all Austinites and our reputation as a place to live, work and do business. The time to act is now.”

“Both Austin’s current housing stock and infrastructure are not sustainable for our region’s projected population growth, which is expected to double by 2040,” added Farmer.

In September, housing inventory throughout the Austin-Round Rock MSA increased 0.1 months year-over-year to 2.7 months of inventory, far below the Real Estate Center at Texas A&M University’s estimation of 6.5 months in which the supply and demand for homes are balanced. Due to increasing housing demand outside of Austin, housing inventory levels in Williamson County are now equivalent to inventory levels in the City of Austin. In September, the housing inventory for both Williamson County and the City of Austin was 2.4 months.

Single-family homes in surrounding markets also continued to spend less time on the market in September 2016. In Williamson County, homes spent three less days on the market, or an average of 44 days. In Hays County, homes spent an average of 48 days on the market, one day less than September 2015.

“Austin has the opportunity next month to vote for meaningful, much-needed transportation funding that can finally bring congestion relief to our region,” concluded Farmer. “Solutions for Austin’s transportation challenges cannot be delayed any longer. The Austin Board of REALTORS® urges Austin residents to vote “yes” for the $720M Mobility Bond on Nov. 8.”

For more information on the 2016 Mobility Bond, please visit www.MoveAustinForward.org. For additional housing market statistics and infographics for the Central Texas region; Austin-Round Rock MSA; Hays, Travis and Williamson counties; and the City of Austin, please visitABoR.com/StatsSep16.

The Austin Board of REALTORS® (ABoR) builds connections through the use of technology, education and advocacy to strengthen the careers of its 11,000 members and improve the lives of Central Texas families. We empower Austin REALTORS® to connect their clients to the region’s most complete, accurate, and up-to-date listings data. For more, contact the ABoR Department of Public Affairs at marketing@abor.com or 512-454-7636. For the latest local housing market listings, visit AustinHomeSearch.com.

PLEASE READ: Texas law requires all real estate licensees provide the following Information About Brokerage Services (IABS) to prospective buyers, tenants, sellers and landlords. To review document click on this link: IABS

 JEFF STEWART, CCIM  

STANBERRY & ASSOCIATES, REALTORS

jstewart@stanberry.com

 

BUILDERS DESERVE A CLOSE LOOK        By Jeff Stewart, CCIM

Name almoBlue Pin, 3/5/02, 5:49 PM,  8C, 1122x1416 (1806+134), 100%, bent 5 stops, 1/100 s, R72.2, G66.2, B79.7st any list for the hottest market and Austin is near the top, if not number one. Just like during the early 1980s, this attracts home builders and contractors from all over the country.  Some will no doubt have staying power, but many will not.  So what does that mean for the consumer?

When considering builders, I urge clients to consider two important factors before committing.  First, how good is the builder’s product?

New housing is in the pipeline in many areas surrounding Austin.  As during the early 1980s, we have and will continue to see an influx of new or out-of-town builders.  Having seen the results of such a trend back in the 80s, I caution buyers to do their homework when choosing a home builder.  in particular, I urge clients to focus on two primary areas of concern.  First, it is vital to understand the quality of the builder’s product.  A model home may not remotely reflect the workmanship or materials used in the builder’s other homes.  When I used to evaluate builder applicants for a local warranty company, I wanted to see some of the builders’ homes while in various stages of progress so that I could determine the following:

  • Quality of materials and workmanship
  • Degree of on-site supervision
  • Is the jobsite neat and organized?
  • Is work was being done in the correct sequence?

A stalled job is often a sign of financial problems, as is a clear drop off in the quality of subcontractors.

The second area of concern is the one most ignored during good economic times . . .  how is their service after the sale?  Today’s younger buyers have not experienced a severe economic downturn and few have given much thought to the longevity of their chosen home builder.  Some of today’s buyers are going to be shocked in a few years when they cannot find a trace of the firm that built their home.  Once a builder is under serious consideration, buyers would be wise to contact a reasonable number of their past customers to find out if they have been satisfied with the builder’s efforts before and after the sale.

Typically, the builder is responsible for all materials and workmanship the first year.  The second year the builder is responsible for “systems” and structural.  Finally, the builder is responsible for major structural defects for years three through ten.  The final eight years is where I have seen the most disputes.  What the homeowner may believe to be a structural defect, seldom rises to the accepted level of a “major” structural problem.

While far from the perfect solution, I suggest buyers attempt to obtain from the builder a written ten-year warranty from a strong national home warranty company. Hopefully the warranty company will still be in business even if the builder goes away.

Jeff Stewart, CCIM

PLEASE READ: Texas law requires all real estate licensees provide the following Information About Brokerage Services (IABS) to prospective buyers, tenants, sellers and landlords. To review document click on this link: IABS

Stanberry & Associates, REALTORS

jstewart@stanberry.com

 

EXTRA SELLER PROTECTION By Jeff Stewart, CCIM, SRES

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SELLER PROTECTION             By Jeff Stewart, CCIM

A local Austin legal firm has come up with an interesting idea for added protection for home sellers. We had a presentation today from attorney Boone Almanza on the particulars of the new product they have named Sellers ShieldSellers Shield, which costs $240.00, is designed to provide sellers with legal support after the sale in the event of a lawsuit or demand letter from the subsequent buyers.  The agreement states that the coverage begins after closing, is for a two year period, and is limited by some conditions and exclusions.

Boone represents a number of real estate firms in Austin and is very tuned in to the types of disputes that unfortunately end up in court.  He stated that the vast majority are related to the state-required seller’s disclosure.  In fact, the first exhibit filed in court, according to Boone, is usually the seller’s disclosure.  Few Sellers realize how critical it is that they give in-depth details in their written disclosure.  Several of my attorney friends have told me that if a client asks if something should be disclosed, then the answer is yes . . . period.

In his explanation today, Boone stressed that ANY known problem should be disclosed.  This included the problems that were believed to have been solved years ago and even any problems that might have predated the current seller.  The old adage in real estate was location, location, location.  The new one may be disclose, disclose, disclose!

All of this reemphasizes the need to sell with a good home warranty.  Years ago, a national real estate firm conducted a study.  They learned that 80% of the lawsuits that they or their clients had been involved in might have been avoided with a simple one year warranty.  Indeed, Boone told us that most of the lawsuits he has seen over single family residences have been settled for less than $6000.

None of us wants to look over our shoulder after a sale.  These two important products can provide some peace of mind for sellers for less than a combined cost of $750. Considering how expensive Austin real estate is, that does not sound too bad.

PLEASE READ: Texas law requires all real estate licensees provide the following Information About Brokerage Services (IABS) to prospective buyers, tenants, sellers and landlords. To review document click on this link: IABS

Jeff Stewart, CCIM

Stanberry & Associates

jstewart@stanberry.com

Were December Sales Really Up? By Jeff Stewart, CCIM

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DECEMBER SALES SHOW UPTURN ?   BY JEFF STEWART, CCIM

In my January newsletter, I wrote to clients that the steep slide in home sales for the month of November would likely continue in December . . . unless it didn’t.  Well, the slide did not continue as the chart shown here shows.  Can that be?  Virtually any agent in town will attest to the fact that December sales were as weak as November or worse. So to what can one attribute this sharp, largely unseen, increase in sales?  The answer was clear to me almost immediately.

In this case, the numbers are both accurate and inaccurate depending upon the time period.  December sales were decidedly flat.  A quick search of the MLS reveals that a disproportional amount of the December sales were builder homes. Not all builders are the best at changing their listing information in the MLS in a timely manner.  It would appear that a good number of the December sales were actually closed earlier, but only reported at year end.  Therefore, the annual sales numbers are correct, but the monthly numbers are probably a little inaccurate . . . especially December.

Statistics never lie . . . it is just that sometimes we do not ask the right questions.

Jeff Stewart, CCIM

Information About Brokerage Services Jeff Stewart

Stanberry & Associates

jstewart@stanberry.com

Residential Sales By Jeff Stewart, CCIM

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So how has residential real estate in 2015 compared to 2014?  In short, more of the same.  Assuming that our current December sales track the earlier years as we expect them to, we will see few changes.  The limiting factor is not demand or interest rates.  The overwhelming constraint on home sales is the lack of inventory.  As of this writing, the residential inventory is only a 2.6 months supply. For comparison, the Texas A&M Real Estate Center considers a balanced housing market to have a housing inventory of roughly 6.5 months.  We have become so accustomed to almost no inventory that six months of inventory would feel like a glut of unsold homes!

Chart

The dip of the red line on the chart (2015) is indicative of what we have seen the past several months.  November was very quiet.  The historical chart shows a sharp increase in sales in the past three Decembers.  I question if we will see that same rise when we finally have the sales figures for December 2015.  It is too soon to know for certain, but I get the feeling that most sellers are biding their time and are hoping to time the market and hit the spring feeding frenzy that we have seen the last few years.

ODDS & ENDS

¨ Timing.  Take another look at the chart above.  It tells me two things: a) right now is the perfect time to look for a house, and b) wait until late February or March before putting a home on the market.  Yes, the inventory is down during the holidays . . . but if buyers can find that perfect property, they should have better odds of making a deal.  On the other hand, it clearly makes sense to wait to list a house in early spring when sales are surging.

¨ Section 8.  I failed to mention in my last letter that the state legislature passed legislation that overrode the Austin ordinance that effectively required Austin landlords to accept Section 8 renters.  The Austin ordinance had been written such that it was illegal to discriminate against rental applicants on the basis of where they received their income. It was a rather backdoor effort and the legislature decided it was out of line.

“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.”

                                                      Bill Gates

¨ Public records.  Property taxes are public record . . . well, mostly.  The recent attack on Judge Kocurek serves as a horrible reminder of why certain parties should have confidential tax records. While it is possible to search the Travis Central Appraisal District (TCAD) data base for property records, Tax Code Section 25.02 allows certain parties to request that the tax office restrict any information about the party’s name and address.  This is typically the case for law enforcement officers, judges, and a number of other public servants who might be at risk.    Property Tax Form 50-284 spells out who is eligible for such confidentiality and contains the required application.

¨More flood stuff.  We keep learning more and more with each flood. If a property is debt-free and the owner decides to buy FEMA flood insurance or if a buyer is purchasing a property with cash, the new flood policy does not go into effect for 30 days.   Also, few owners realize that the policies only cover flood events that flood two or more houses or more than two acres if it is entirely on the insured’s property.  In other words, in a limited flood event, it is wise to take photos that demonstrate the extent of the flooding in case of a filed claim.

¨ Blue Santa. My sincere thanks to those of you who chipped in with help for Blue Santa.  I always love volunteering on delivery day.  If you joined us on that Saturday, you probably got to meet the “real” Blue Santa and his helper Debbie Stone   Debbie is a Stanberry agent and the 2015 president of Blue Santa.