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.”




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23 Comments »

Comment by Montana
2012-01-16 09:26:52

Tyler, Longview big cities now? I’ve been gone too long.

Comment by Steve J
2012-01-16 10:32:33

I laughed at that as well!

 
Comment by Steamroller Sam
2012-01-16 17:08:57

Why, certainly Tyler and Longview are big cities.

When you compare them to Reklaw and Ben Wheeler, anyway.

Comment by Montana
2012-01-17 09:16:12

I’ll bet Seagoville and Mabank have really gone to town.

Comment by Steamroller Sam
2012-01-17 15:13:03

Seagoville is now southeast Dallas. Mabank is doing OK, but it’s not “booming” like its lakeside neighbor, Gun Barrel City. Gun Barrel is the place to be. ;-)

(Comments wont nest below this level)
 
 
 
 
Comment by The_Overdog
2012-01-16 09:53:46

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.”

———————-
You could change just a few words, and this would be appropriate for purchasing a hemoroids remedy. And I think identifying housing as utility vs self-actualization might be a good thing. On the other hand, $100 a night for a good hotel vs $2000 a month for Traditions doesn’t really pencil out, unless you are travelling to Traditions for 20 days a month. But whatever.

Comment by Ben Jones
2012-01-16 10:00:21

Plus it’s Bryan. You should get a ranch for that price.

‘Dallas and San Antonio where they are involved in life, and they may have grandkids in ballet’…

He’ll probably wonder why they don’t sell.

Comment by Steve J
2012-01-16 10:35:24

I bet they sell to wealthy A&M grads that have season tickets.

I know one couple getting tired of driving the monster RV to home games.

 
 
 
Comment by Bub Diddley
2012-01-16 09:54:33

Some friends in Austin just put in an offer on a house. They didn’t get it. The husband was then bitching about how all realtors are scumbags. I wanted to refer them to this blog, but they’ve already made up their mind to buy come hell or high water. So, I have been keeping my mouth shut.

Austin median household income: household $42,689/family $54,091

(they are probably on the low end of this - they got some $ from family for the downpayment)

Austin average listing price: $430,024
Austin median sale price: $153,443

I think that median has been brought down by a lot of foreclosures. 17% of the houses on the market right now are foreclosures. I definitely see way more houses in the 400k range than in the 150k or less range. House my friends put in an offer for was listed around 175k.

I don’t foresee some huge crash, but things are, well, at least slightly askew here in Austin.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-16 10:49:04

“I don’t foresee some huge crash, but things are, well, at least slightly askew here in Austin.

Austin average listing price: $430,024
Austin median sale price: $153,443″

($153,443/$430,024-1)*100% = -64.3%, suggesting that Austin home sellers trying to realize their wishing prices don’t foresee some huge crash, either.

 
Comment by DaveBro in SonomaCo
2012-01-16 14:43:47

Maybe it comes down to the fundamental difference between “average” and “median”? A more useful comparison would be listing median vs. sale price median.

 
Comment by The_Overdog
2012-01-16 15:12:40

Like DaveBro, I don’t think those 2 numbers are really useful. You really need two medians or two averages to make any comparisions. On the other hand, I just did a search, and found 300+ homes around Austin from $125-$175k. I don’t know Austin well enough to say if any of those are in decent neighborhoods or not, but I’m guessing at least a few are.

My personal opinion is that the area is slighly more desirable than the DFW or the Houston area, and that UofT and government funds will hold it steady for the next few years. In my opinion, Perry’s disastrous presidential run might hurt TX goverment/lobbying growth, but I have nothing to back that up.

 
Comment by Dave of the North
2012-01-17 11:27:28

I thought I would have an Austin data point by this time …my wife’s nephew and his wife and son moved to Austin this past fall - they rented a place while they looked for a house, then she got a contract in Pennsylvania so they are now for the next year year or so.
They want to make their home base in Austin when their son goes to school, but he’ll do kindergarten in PA. Nephew’s been a stay at home Dad but now has his green card (after 2.5 years of being barred from the US). They used to live in Houston until he wasn’t allowed back to the US after a visit to his parents in Canada.
She’s in some sort of software consulting and gets contracts all over the place. (England, Russia, Vancouver, various places in the US etc)
Maybe they should stick with the renting…

 
 
Comment by Realtors Are Liars®
2012-01-16 10:40:30

“‘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.”
———————————————————————————

There it folks….. buy a house today before all those people with grandkids in ballet price you out of the market.

Serious? Fawkin’ SERIOUS?

The Housing Crime Syndicate comes up with doozies but this one is a real beaut.

Comment by Montana
2012-01-17 10:27:07

But you don’t understand…they’re involved in life.

Is it clearer now?

 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-16 10:45:45

“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.”

So the plan now is to recreate that experience for the Texas housing market?

Why!?

 
Comment by Bub Diddley
2012-01-16 14:04:49

Damn, I was hoping for more posts on this thread today. I am really curious how the Austin market will fare, and would welcome some speculation from others on the ol’ HBB.

 
Comment by Dave
2012-01-16 17:16:40

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.”

This is the manipulation we’ve been waiting for after they revised the starts and sales down for the previous years? So it’s still dropping like a rock….or am I reading that wrong.

Comment by Ben Jones
2012-01-16 18:24:54

Let’s look at this:

’starting 13,927 homes for the year after bottoming in 2Q11 at 13,484 units. Builders and developers delivered 6,503 new lots in 2011, nearly twice the level of 3,338 in 2010. Plenty of lots remain available for development—64,272, representing at 55.4-month supply.’

So they started 14000 houses, but added 6500 lots on top of the 64000 they have sitting. In addition, these guys have an unlimited amount of land to build on. Let’s just say they are oversupplied.

‘At year‐end there were only 3,328 finished vacant houses’

Call me crazy, but IMO this is a lot of empty new houses.

Comment by Blue Skye
2012-01-16 21:16:09

“DFW crested at nearly 100,000 lots in 2008. At year-end 2010, there were 72,076 vacant developed lots”

They kept developing lots at bubble pace for at least two years after the demand cooled. Now they are burning through 14,000 lots per year while bringing on 6,500 new per year.

“At year-end 2010, there were 72,076 vacant developed lots.”

That looks to me like a 10 year trajectory to work out the excess, and the article implies less than 5.

Oh sure, the surplus “bottomed” in 2011. There is no data for 2012 yet.

 
 
 
Comment by BlueStar
2012-01-17 14:38:33

I record C-SPAN every morning on my PC and just noticed a segment that should interest everyone. The guest was Clifford Rossi, a former Freddie/Fannie guy who is now a finance professor at U of Maryland. Good overview of where things are. Expects over 1 million foreclosures next year, currently 12 mil. underwater, 8.9 mil. are current on payments. Home equity/disposable income @ 55% is lowest since 1950. Translation, consumers have no money. By the end of the show his best guess was we hit bottom in 2014, but no rebound. Another 5-6 years before any real recovery.
If it’s on their website it starts at about 2 1/2 hours into the Washington Journal at the 9:20am ET mark.

Comment by Montana
2012-01-17 15:05:51

1 million foreclosures in 2013? what about this year?

 
Comment by goon squad
2012-01-17 15:49:00

Washington Journal is the best show on TeeVee

 
 
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