January 17, 2012

Influenced By Artificial Demand

The San Antonio Express News reports from Texas. “Home builders are expected to start at least 10 percent more homes in 2012 than they did last year — the first double-digit bump for the industry since the 2006 market peak and subsequent downturn. It’s welcome news for builders, who hit a high of more than 19,000 home starts in 2006, then faced a painful five-year contraction and bottoming.”

“One issue facing the housing industry: a lack of available lots in popular areas. In the neighborhoods where builders are starting at least three homes a month, there’s just a 16.8-month supply of lots. Meanwhile, in the 176 least active neighborhoods, where builders are starting an average of one home or less a month, there’s a 201-month supply of lots.”

“But it’s a matter of perspective, and several speakers noted that San Antonio’s problems haven’t really been problems at all. ‘We all lived through the end of the ’80s and that was miserable,’ said developer Marty Wender.”

D Magazine. “North Texas homebuilders ended 2011 on a positive note, starting 13,927 homes for the year, according to statistics from Dallas-based Residential Strategies Inc. It’s the second consecutive quarter that the market has trended positive, after bottoming in 2Q11 at 13,484 units. Although the 2011 pace is 7.3 percent below that of year-end 2010, the preceding year’s construction activity was influenced by artificial demand due to the homebuyer tax credit, said Ted Wilson, principal of Residential Strategies.”

“‘Builders today are focused on the stabilization of the housing market,’ he said. ‘At year‐end there were only 3,328 finished vacant houses representing a balanced 2.8 month supply of inventory.’”

“Lot development is ticking up in some key submarkets. Builders and developers delivered 6,503 new lots in 2011, nearly twice the level of 3,338 in 2010. But it’s coming at a price, Wilson said. ‘Development financing for new lots remains restrictive and requires much greater amounts of equity than in the past,’ he said. ‘With higher finance costs, in combination with stout land and hard costs, builders are having to absorb higher lot prices in the next generation of lots.’”

“Plenty of lots remain available for development—64,272, representing at 55.4-month supply. The challenge remains in those markets that were most severely impacted by tougher credit requirements and those areas in the outer-fringe suburban markets, he said. Market-wide, DFW crested at nearly 100,000 lots in 2008. At year-end 2010, there were 72,076 vacant developed lots.”

From KYTX. “Home sales in Longview were down the first half of 2011, but local realtors say they saw an up-tick in sales by the end of the year. They say that partly because people are pricing their houses more realistically. Mortgage lenders say interest rates were low and expect those rates to stay low for the next several months.”

“‘Mortgage rates, we’ve seen them as low as 3.5%, the average person is getting in the low 4’s,’ mortgage lender Tim Barnett said. Barnett says it’s a good time to buy because of the financing options available, especially for first time buyers in certain areas. ‘Outside the big cities, that being Tyler, Jacksonville, Longview, anything that would be those suburbs usually qualifies for a USDA market area. USDA still has 100% financing available,’ Barnett said. Mortgage lenders say 100% financing is also still available for veterans.”

“‘Right now we’re in a perfect storm - you have low housing prices and you also have very low, record low rates,’ Barnett said.”

From KBTX. “One of the first steps was taken today by the city of Bryan to go forward with a multi million dollar construction project. Traditions, the private golf club and residential community in Bryan, plans to build 38 condos that will be 2 to 3 bedrooms. The condos will cost from $200,000 to $300,000 each. Traditions has been getting several phone calls from people interested in buying a spot.”

“‘We have a lot of people coming from markets like Dallas and San Antonio where they are involved in life, and they may have grandkids in ballet or what have you. They really don’t want to move to Traditions, but they are tired of fighting the rat race with the hotels,’ said Spencer Clements with Traditions.”

The Houston Chronicle. “By all accounts, the Candlelight Trails condominium complex in northwest Houston resembled a disaster area in 2007 when the last remaining inhabitants of the 240-unit property were ordered to leave because of city building code violations. City inspectors had found ‘exposed wires, broken windows and faulty sprinkler systems,’ the Chronicle reported. Most units were abandoned, though ’squatters’ had moved in and were harassing and burglarizing the last legal residents.”

“According to this paper’s story, ‘paint peeled from the outside of the three-story building. Lobby glass doors had been pulled from their hinges and shattered. Unlit hallways smelled of urine and the walls were spray-painted with graffiti. Light fixtures dangled from ceilings and broken glass and beer cans littered the floors. Black stains spread across the carpet.’”

“But because 150 individuals owned the condos, it took three years, countless trips to court and outside legal help before the city could raze the building. And what did it get for its trouble? An empty lot that was ‘just as much of a magnet for criminal activity as the vacant building itself,’ City Attorney David Feldman told a legislative committee.”

“This year, in partnership with the Houston Contractor’s Association, the city will demolish some 400 structures that are in such disrepair they pose a threat to public safety. But government efforts to stem the contagion have been hamstrung by legal impediments when the derelict property in question is a condominium complex. With multiple owners, it’s been nearly impossible for a city like Houston to notify everyone with a financial stake in a complex before razing a building.”

“That changed on Sept. 1, when a new law took effect allowing the city to use its eminent domain authority to take over condo complexes that have been abandoned for a full year and raze them to reduce urban blight. ‘No private developer could possibly come in and obtain clear title,’ noted Feldman. ‘I have been struggling for months now to secure title from the various owners. There are some we cannot even find.’”

From KXAN. “Novare Group Investments LLC of Atlanta continues to make more of a mark on the skyline of Downtown Austin. NGI, along with Andrews Urban LLC, plan to construct a property on Rainey Street similar to its building 360 having both retail and residential space. NGI spokesman Jim Borders said the unit costs will rent at ‘current market rates’ and that the company expects to open the building in late spring or early summer. It will have 320 units and be 23 stories high.”

“On an already busy street, some say it will make things more crowded. Others say it will actually improve the quality of life for those who already live there. Jude Galligan a broker for Remax and member of the Rainey Neighbors’ Association says the project would benefit many who already live and work in the area. ‘That’s a lot of window frontage a lot of retail window frontage on Rainey which is super exciting. We all need that. We’re looking for more than just bars, Galligan said.”

The Austinist. “For years, Austin has been the subject of magazine polls where dubious statistics are paraded out to prove that our city is the best place for you-name-it: young professionals to date, young non-professionals to nurse a hangover with an artisanal bacon doughnut, a pampered pet to land a job in the tech industry, etc. While the ‘Austin rocks!’ chorus continues, it’s now underscored by a section of boos, or at least sarcastic chortles.”

“The latest outlet to get in on the wane of Austin’s musical heyday is National Public Radio. John Burnett’s piece points out that 170 new arrivals hit the streets of Austin every day, and explains that ‘[t]he music scene is one of the biggest reasons why people are flocking to Austin, and all those new people are crowding out the musicians who make the music.’”

“As a rejoinder to the shabby-chic living done at the Wilson Street Cottages, Burnett interviews realtor Michelle Ward, who perhaps unwittingly pitches her property at Barton Place, what with its saltwater pools and travertine flooring and ‘virtual concierge’ at prices from ‘the $350,000s to the $590,000s.’”

‘The demarcation between a condo for five hundred grand and rent at 450 a month is made numbingly clear, but as we all should know by now, pining for Austin’s supposedly majestic past doesn’t help, and it may very well hurt. And if the whole Austin scene really still sticks in your craw, know that the days of cheap beer, cheap rent, and live music aren’t over everywhere. Maybe make that move now so you can say how cool Abilene was in the 2010’s before all the condos moved out the Firehouse.”

The Abilene Reporter. “More Abilene houses are available for rent, even as rental rates seem to be rising. ‘There’s more property on the rental market right now simply because there are more people who haven’t been able to sell their home, so they’re converting them to rental properties,’ said Mike Powell, owner and broker for Gerard Real Estate.”

“He said that while Abilene has not had a turbulent housing market, problems elsewhere can have influence on potential buyers. ‘They may be tied up in a real estate market somewhere else that’s preventing them from purchasing here,’ Powell said.”

Bits Bucket for January 17, 2012

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