Tag Archives: Austin housing

Accessory Dwelling Units (ADUs) By Jeff Stewart, CCIM

Accessory Dwelling Units

Looking for an Austin real estate investment with solid returns? What about something that has the capability to generate enough cash flow that it might be possible to recoup the initial investment in less than ten years?  Perhaps less?  This opportunity might be as close as your back yard . . . literally.

ADUs, or Accessory Dwelling Units, have become the rage during the COVID pandemic.  Formerly known by the less than flattering handle of a “Granny Flat,” ADUs are now designed more for the Airbnb crowd.  Short-term rentals are regulated differently in almost every community, but where allowed, they provide a real opportunity to generate a surprising amount of revenue. Not long ago, I sold a home for friends and clients that had a great secondary unit in the back.  The rental unit was a well-furnished, attractive, single bedroom with a small bath. Patrons had easy access down a sidewalk beside the main house.  I was stunned to learn that they had been earning $20,000 or more each year.

Mindful of permits and city regulations, a number of firms specialize in everything from site-built units to prefab structures. Some look like they jumped off the page of Architectural Digest, yet are actually quite practical in their simplicity ands design.

In the past, this type of set up was usually most common as a garage apartment near campus and occupied by college students.  The advent of social media and an abundance of short-term rental websites has changed all that.  As Austin continues to grow as a vacation destination with SXSW, UT games, ACL & F1, the demand for short-term rentals has soared.

Again, most communities have strict policies regarding ADUs and most homes are not a fit; but for the right situation, this might be an opportunity for a small but rewarding investment.



Stanberry REALTORS


Austin Housing Bubble?       By Jeff Stewart, CCIM, SRES

Jeff-Headshot-cropped      By now, half of America has heard that Trulia.com has named Austin as the most over-priced housing market in the U.S.  Ouch. I would find that extremely alarming if I thought it were true. Let’s take a closer look.

     Trulia conducted its own research and has produced a report that states seven of the largest 100 metro areas in the country are over-priced, by their estimation. Of the seven markets that were deemed to be over-priced, Austin topped the list.  Trulia found that the Austin residential market was priced 19% above what market fundamentals should support. Further down the list were #4 San Francisco at 12%, #6 Honolulu at 10%, and #8 Houston at 8%.  It is worth noting that of the seven markets listed as over-priced, only Austin and Houston were seen as not grossly over-priced in 2006 by Trulia’s criteria.

See http://www.trulia.com/trends/2014/06/bubble-watch-q2-2014/

     It is true that the MLS reported the median priced home in Austin had jumped 11% in August 2014 compared to the year before.  Is that the definition of over-heated. Perhaps, but RealtyTrac offers us a different perspective.  According to RealtyTrac, the median-income worker has to spend 31.3% of his or her income in order to afford the median-priced home in Austin.  This is a little higher than the historical ratio of 26.7%, but is that enough to warrant Trulia’s headlines?  By comparison, San Francisco housing costs 85% and Jackson Hole costs 84%!  Which location would seem to have the biggest potential downside?  I do not think it would be Austin.

    But home ownership is only part of the equation.   According to PolitiFact.com, most Austintes rent.  So how do they fare? The Austin Letter reported that Nerdwallet.com took a look at the expense of renting in various cities. They found that Austin workers in science, technology, engineering, and math sectors (or STEM as they called it) make an average income of around $79,433.  Unfortunately, the average rent is about $978 a month. Compare that to the same ratio of $81,215/$877 in Dallas or $94,766/$873 in Houston.  Obviously, our rising housing costs are a growing concern . . . especially for the young and for retirees.

     We can agree that housing is relatively more expensive in Austin than other parts of the state.  It has been for quite some time, and will likely remain that way as long as job hunters can vote with their feet.  Jobs are driving the market.  It is clearly a free market situation, driven by outstripped demand and what seems to be minimal speculation.  Are we high?  Yes.  Are we leading the nation in a bubble market?  I do not think so.

Jeff Stewart, CCIM, SRES   Stanberry & Associates, Realtors

jstewart@stanberry.com   512-327-9310

Blog: SpeakingOfAustinRealEstate.com


Has HGTV Helped or Hurt the Housing Market? By Jeff Stewart, CCIM

logo     logoThe advlogoent of reality TV, and especially HGTV (Home and Garden TV), has created some interesting trends in residential real estate.  Granted, one would be excused for suspecting that little redeeming value might come from reality shows, but I see evidence of both good and bad.  Perhaps the most visible result of all the reality shows has been the increase in people seeking to “flip” houses.  Ten years ago, this was a phenomenon that we associated mostly with California or Florida.  Indeed, the flipping crazy helped exacerbate the housing crash.

Now flipping is a major part of the Austin residential market.  It is not necessarily all bad.  I have often wondered what we would eventually do with all the thousands of poorly built tract homes from the 70s and 80s.  You know the ones, the Masonite Monsters.  Many, if not most, of these homes had three sides Masonite siding . . . as well as a similar product for interior doors.  As we now know, none of these products held up very well and almost all need replacement.

The good news is that more people than ever are entering the market with a desire to refurbish these aging homes.  Yes, most are looking to flip the houses in a quick sale; but as long as the work is done correctly and the homes are worth the sales price, do we care?  Having redone many, many homes myself, I am not surprised that many flippers discover that it is very easy to remodel a home . . . making a profit from all that work is another thing entirely. Yet, enough people have been successful at the remodel/flip game that it remains a large part of the market.

If there is a downside, I would have to say that it is that many of the homes I have seen have only been cosmetically improved.  The kitchens and bathrooms look like they jumped of the pages of a recent magazine, but a peek in the HVAC closet or electric panel might be very alarming.

For the past month, I have been working with a client looking for houses north of the Mueller neighborhood . . . some of the most expansive soil in the entire city.  Probably half of the remodeled homes had recent slab repairs.  This is both good and problematic.  A good contractor can almost completely hide all signs of earlier slab movement.  Without before and after photos, how is a buyer to know exactly how bad the movement really was?  I have been involved with the slab business for many years and I have never been convinced that a slab is fully stabilized over the black Taylor clay.  Yet, that is only one part of town. Overall I would say that HGTV has created interest and that is a good thing as long as people are making a good faith effort to fix up old homes correctly.

Jeff Stewart, CCIM  Broker Associate

Stanberry & Associates, REALTORS


Tight Housing Market Spurs Changes in Negotiations by Jeff Stewart, CCIM

Executive shot wilIt has been occasionally interesting, and infuriating at other times. Whenever a housing market gets as overheated as ours has been, people begin to take extreme approaches to get what they want.  Some of these extreme measures push the limits on what has been accepted, ethical practice in the past.  Unfortunately, one such extreme may become the normal practice.


Due to the overwhelming demand for new listings, it is becoming common practice to wait until Thursday or Friday to put a new listing in the MLS.  The second part of that equation is that the seller will not review any offers until the following Monday. One can imagine the outrage of a buyer who has written a cash, full-priced offer with no contingencies.  If the buyer has met all of the seller’s requirements, why not sign it and get on with the transaction? The answer is simply that the listing agent and their client are hoping for multiple offers to bid the sales price up. This becomes a slippery slope to be sure.

No law requires the seller to respond in a certain amount of time once a written offer has been made.  In the past, an ethical sense of fair play and common courtesy usually required a response by the next day.  With today’s digital advances, it is now possible to present offers and have them signed digitally even if the buyers or sellers are overseas.  Yet instead of responses getting faster, many are dragging on for days.  While arguably beneficial for a seller, longer response times foster hard feelings and concerns that the listing agent might be “shopping” the early offers. Truly shopping an offer would mean that the seller or listing agent gives hints or indications of how a subsequent party could out-bid a party with an earlier bid.  I have seen this quite a bit recently to varying degrees. 


 Listing agents have a fiduciary relationship to the seller, therefore they are supposed to do their very utmost to get the best deal possible for the seller . . . within certain legal and ethical restraints.  It can leave a listing agent walking a very fine line.  It is easy in the rush of a market like ours for a listing agent to cross that line without ever realizing it.


 The question that this issue brings to my mind is, “Is this the way we will conduct business even after the market returns to balance?”  The market cycle will swing at some point and it will be interesting to see if sellers return to quick responses or if the waiting game will continue.


Jeff Stewart, CCIM  Broker/Associate


Stanberry & Associates, Realtors