Unlike national trend, local real estate strong

Unlike national trend, local real estate strong

Written by Kara Vaught Friday, 07 September 2007

A Florida company recently backed out of a $4 billion mixed-use development in Leander, citing the downturn in the national housing market as the reason why it could not rely on big homebuilders to join the project.

But Central Texas is not off the company’s radar, said Joseph Macau, Avalon Park Group’s chief financial officer. “We are still in the Austin market, and we feel, as recent studies have shown, that Austin is still one of the best markets in the United States for housing.”

Housing frenzy

With the national media coverage of sub-prime loans and the resulting housing slump, locals could get the impression that Central Texas homes are also built on shaky financial ground. “Yes, it may be tough to be a homeowner in many markets around the country,” wrote Kiersty Lombar, team leader of Central Texas Elite Homes, Keller Williams, on her real estate blog, “but our area is among one-third of the top 100 markets in the U.S. that is appreciating. It infuriates me that often the local media will just run with whatever scripts are provided by the national news source and not customize it for the local market.”

While not insulated from the national market, the Austin area housing market remains stable because it did not follow a boom trend two years ago. “California had annual appreciation of 38 percent and Nevada 27 percent. In Texas, it was less than 4 percent,” said Mark Sprague, a partner with Residential Strategies, which tracks and forecasts the real estate market. “Local people [were worried], but I said, ‘No, this is a good thing. We have no place to fall from this creative financing.’”

Sub prime goes south

The hot real estate market in other areas of the country was spurred by bad lending practices, namely sub-prime loans, said John Rosshirt of Stanberry and Associates Realtors in Cedar Park. “They had just unbelievable double-digits appreciation, but the market readjusts itself when it gets too far over. The pendulum swings back,” Rosshirt said. “Our pendulum of [increasing home values] was going up slowly, so we’re less vulnerable to the dangers of the sub primes.”

Another reason for this area’s relative stability is its lower cost of living. “The sheer volume of sub-prime loans taken out by consumers in the Austin area is well below what you see in, for example, San Diego and Florida,” said Stuart Sutton of Prudential Texas Realty in Round Rock. “That’s just because entry-level homes in San Diego are $450,000 to $500,000, and you have to take out a stated income or sub-prime loan to do that. It’s just a different scenario here.”

Sutton said sub-prime loans will still have an effect locally — no area is immune to the national market trends — but that effect will be far less severe here than in other parts of the county.

Availability of loans

Carolyn Nelson, owner of Synterra Property Group in Cedar Park, said that only qualified buyers will receive financing in the post sub-prime world. “Lenders are just getting stricter. They are going to tighten their belts and not give loans as easily.” Buyers who deserve loans, meaning those with good credit and money in reserve, will not have a problem, she said.

Rosshirt said he recently received a call from a lender eager to get the word out that plenty of loans are still available. “Certain types of loans aren’t being made anymore, and that is decreasing the availability of the supply of buyers,” he said. “But for the good, well-qualified buyers, we have lots of loans.”

Life’s good

Other factors keeping Central Texas attractive in the housing market are job creation and quality of life. “We’ve had 28,000 or 29,000 jobs created in the last 12 months. That’s good, but more important than that is that we’ve seen only 4,000 announced jobs, which is a major corporation announcing that they are going to have jobs,” Sprague said. “The rest of those 26,000 plus jobs have been created by people just moving here and trading their equity from other markets.”

Recent developments have primed the area for more growth. “Leander and Cedar Park are in a particularly good place because of the transit-oriented development and FM 1431,” Sprague said. “There’s nothing left on the south side of the lake for people to buy, so the north side of the lake that used to be considered geographically undesirable because it was so far from town is now much closer to town.”

Crystal Falls landowner sees property as an upscale, multi-use city center

The Lookout Group, owner of the property that Avalon Park Group passed up for development, is proceeding with plans for the next phase of an estate lot program in Grand Mesa and The Fairways at Crystal Falls subdivisions.

Lookout owns approximately 4,000 acres surrounding the west end of Crystal Falls Parkway, 1,000 of which are developed. “What we did take from this planning exercise with Avalon is the need for some destination focus on FM 1431 — a city center site with commercial and recreational options and upscale, yet neighborhood-scaled retail,” said Lookout president Bill Hinckley. “We are pondering this now and time will tell. We are also casually looking at building another golf course.”

Hinckley said serious growth in Leander is coming quickly. “Home sales are great, relocation business and net migration is healthy, and the job market locally is strong. Plus, a large amount of Texas baby boomers want to retire around Austin. I feel Austin is going to defy all the national trends, and Leander has the available land and can-do attitude from the city to capture a large percentage of this growth.”