Best of the Rest

Once again, reports are coming out saying Austin is one of the healthiest cities in America in terms of its housing market. It doesn't mean we haven't been through a rough patch, but with continued population growth and low housing starts, our medium-term outlook is bright.

Here are some excerpts from Builder Magazine:

"Even though it took a step backward during the last six months, Austin happens to be the only market on our list that is genuinely close to healthy. Home prices, which rose in 2008, finally declined this year—they are down 4.6% through September—as this Texas metro ended a long run of employment growth and lost some jobs. But its population has expanded by 4.3% during the first half of 2009, which should add housing demand and help firm up home pricing.....Still, unemployment in this progressive city runs only about 7%, significantly below the national average.....Austin continues to draw population, especially retirees, with its low cost of living, inexpensive housing, and warm-weather climate. The city had the third highest household growth rate in percentage terms among the top 100 market."

More Money From Washington?

Well, it's beginning to look like Washington is going to extend its current tax credit for first-time home buyers...and expand it to those who have lived in their current home for five years and meet other income requirements. From U.S. News and World Report:

An extension of the $8,000 first-time home buyer tax credit appears all but certain after the Obama administration called on Congress to give house hunters more time to claim the popular tax perk.

If this goes through, expect the real estate market in Austin to continue its recovery--not that it was ever that bad compared to most of the country. In looking at the latest data from September for residential single-family home sales, it's clear that the market has been recovering since the summer, with the latest figures showing sales outstripping last year's figures and approaching 2007 levels. Neither of those year's was great in September, but the fact that the data is turning upward is a good sign.

My advice if you're looking to buy in Austin: Do it sooner rather than later. As the job market here continues to recover and people continue flocking to Austin, it will almost certainly help put upward pressure on home prices again--not at the rate we saw several years back, but positive nonetheless.

The Light is Coming (Slowly)

MSNBC and Moody's Economy.com just released some encouraging data showing that Austin is among the first U.S. cities to move from "recession" to "recovering." Moody's Adversity Index--aptly named!--uses employment, industrial production, housing starts, and home prices to calculate an index that shows the status of metro areas around the country. The next step from "recovering" will be "expanding." Several other Texas cities also made the list (none in California did!).

For more details and to see an interesting interactive chart, check out the story from MSNBC. Or if you want to dig a little deeper, check out the brief profile from Moody's showing how they're expecting Austin to recover more quickly than the rest of the country with a relatively strong showing over the next several years. As if we needed more reasons to love Austin!

What does this tell you about timing the housing market? Unfortunately, it probably tells you that you missed the "bottom"...but that it's still a great time to buy. Timing markets is tough in the best of circumstances. If you have a medium- to long-term horizon, Austin's prospects look very bright!

Austin Employment to Lead

A forecast by IHS Global Insights says Austin and San Antonio will lead the nation's employment recovery, with other Texas cities following suit.

Austin and San Antonio will bounce back to their pre-recession job levels sometime next year, according to the economic forecasting firm....

If this forecast proves accurate, it will bode well for Austin homes values given that the level of employment is one of the indicators affecting housing demand.

National Homes Prices Interactive Chart

This is a great interactive chart Realtor.org created showing changes in median home price and volume over time. If you look at the changes in price using the "trails" option, it shows that the West and Northeast were the hardest hit from this housing crisis in terms of price drops. The Midwest and South only saw moderate declines. Check it out here.

Understanding the Credit Crunch

This is probably the best explanatory video I've seen on the national credit crisis. Hopefully it will help you better understand why we're in the mess we're in and how everything is interconnected.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Numbers Don't Lie...

...the people who explain them do! Or sometimes they're simply misinformed.

The Media and Consumer Confidence

The media right now is very focused on any piece of negative news about the national housing market, often overlooking signs of light. I've been thinking about some of the housing measures, like Case-Shiller, that are often quoted in the media. If the Administration's efforts to stem foreclosures works, and fewer homes go into foreclosure, it seems to me that we could see a significant improvement in some of the home price measures, like Case-Shiller, that include foreclosed properties. It is really quite simple if you think about it. If you are taking an average of 3 numbers--let's say 2, 3, and 4--and you drop the 2, the average will increase from 3 to 3.5. Even if nothing changes to the "3" and "4" the average would go up and we'd have the impression that something changed. Keep that in mind the next time you are hearing media pundits talk about what the statistics means. 

If the indices improve (even if only superficially as shown above), and the media start talking about it, consumer confidence could stabilize. In my opinion, right now the market is being largely held back by confidence, which is keeping prospective buyers on the sidelines. Once the media starts saying we've hit the bottom, I wouldn't be surprise if we see things turns around quicker than some anticipate. Remember, moods can change very quickly! How quickly do your moods change?

Austin's Looming Housing Shortage?

With all of the doom and gloom in the national media, it's easy to forget what's happening in our own housing market. I was reading an article the other day in the Community Impact about the local housing market. One of our local economists, Angelos Angelou, argues that the housing supply in Austin isn't keeping up with the growth in population and that we are likely to see a housing shortage in the coming years. Going back to economics 101, we remember that when demand is greater than supply there is a tendency for prices to go up. Time will tell whether Angelou is right, but I do tend to agree with his basic tenant: If you're a buyer, now is an ideal time to buy.

Low interest rates combined with the $8,000 first-time home buyer tax credit would certainly get me off the fence if I were looking to stay in Austin for the next few years.

First-time Home Buyer Tax Credit

Love or hate the new stimulus bill that just passed Congress (debating its merits is not the intent of this blog), if you are a very recent first-time home owner (or soon to be first-time home owner), it looks like you scored in the bill (at least better than the rest of us non-first time home buyers!). 

According to the Wall Street Journal, the "tax credit for first-time home buyers increases from $7,500 to $8,000 and will not have to be repaid" (like it was in the previous plan to help housing that passed last year). A Wall Street Journal blog is reporting that the new credit is retroactive to December 31, 2008 and that first-time buyers who used the tax credit in 2008 will still have to pay it back over a 15-year (interest free) grace period. I bet some of the new buyers who jumped into the market late last year are feeling like that got the short end of that stick!

Fortunately for those of us living in Austin, the median price of a home is still low compared to many parts of the country, so the $8,000 should mean more to first-time buyers here. Anecdotal signs are that things have picked up slightly from the end of last year, but we'll just have to wait and see where the data comes in. 

On the national level, if rates stay low, and foreclosures are reduced (through the administration's new initiative), we could definitely see a bottoming in national home prices sooner rather than later. The big wild card right now is unemployment...but if you have the staying power, it seems to me that now is a pretty great time to buy low...

Austin's market appears to be firming

Recent data quoted in the Statesman suggest the Austin market might be stabilizing after considerable weakness late last year. We are fortunate to live in Austin where the housing market has held up better than most of the country. Unfortunately, when credit markets began to tighten in 2007, the housing market here felt the impact (after all, most people can't buy a house without a loan!). Since then, the deteriorating national and global economic situation has had an impact as well, as fewer jobs were created in Austin than we would have expected in healthier economic times. Current extremely low interest rates should help to motivate some of the home buyers who are sitting on the sidelines to take advantage of this rare interest rate environment and help to counterbalance the rising unemployment that is likely to occur over the near term.

To Sellers

• If you are a seller, note the comment in the Statesman article about how houses priced competitively (5-10% below last years highs) are selling. If you really want to sell your home, you need to price it to sell. Too many people make the classic blunder of over pricing their properties only to lower them gradually after they realize they are over priced and no one is biting. If you are serious about selling your property, why not price it right in the first place and eliminate all of those needless headaches?

To Buyers

• If you are considering buying and you are reasonably secure in terms of where your income is going to be coming from and you aren't planning to move within the next few years, now is a great time to buy a house. Remember Warren Buffet's mantra: you want to buy when everyone else is fearful and sell when everyone else is greedy. Take a good hard look at your situation and make sure buying makes sense (a financial professional can help you decide what you can really "afford"). If it does, now is the time to make your money. Remember, you make your money on the buy side--not the sell side (i.e. you might get lucky and sell your house for more than it's worth, but I wouldn't plan on it). If you're smart, you'll buy something now while you can negotiate a better deal, rather than wait until most of the sweet deals have passed you by.
  

One more thing!

• Remember that ups and downs are a normal part of the business cycle. This one is scarier than most, but it too shall end! If you've got time to buy and hold, now looks to be a good time to get in the game!

A few things to remember about mortgages

This is a video produced by some of my favorite explainers--Common Craft. The company recently moved away from Web 2.0 focused videos and branched into topics like finance and politics. 

If you've never gotten a loan or are thinking of buying a home for the first time, this is a great primer for how loans work. I especially liked the video's point about asking questions about prepayment and other penalties--something many people forget. Never be afraid to ask questions if you don't understand what your mortgage or real estate professional is telling you. Better to feel stupid than to lose money because you didn't ask!