Real estate prices rise

Real estate prices rise

Written by Tiffany Young Monday, 24 March 2008

In Northwest Austin, the number of homes sold in January was down 17 from the previous year, a 15 percent decrease, while Austin had a 12 percent decrease and Texas had a 14 percent decrease.

While this means fewer sales for realtors, it could be a good thing for those looking to buy a house. However, just because numbers of sales are down does not necessarily mean that prices are going down.

Price is steady

“The market’s slowed down slightly this year,” Austin realtor Eric Bramlett said. “We haven’t seen the same activity [as in previous years], but we haven’t really seen a decrease in prices. We’ve seen a decrease in sales volume. I think that more than anything, it has to do with the mortgage market. There are less buyers able to purchase right now.”

One of the reasons there are fewer buyers in the market is because loans, especially for first-time buyers have become harder to get.

“We’ve had some major changes on the lending side that have had a huge impact on borrowers being able to get financing,” said Gray Buffington, president of Buffington Mortgage, a mortgage company in Northwest Austin. “Zero down loans, which are typically for first-time home buyers, are harder to obtain. They’re still able to get them, but the credit thresholds have been raised, and so borrowers that were buying in those areas with marginal credit now are unable to buy and are moving back into apartments.”

Buffington said that within Austin, he has not seen a difference in the real estate market, but that outlying areas of Cedar Park and Pflugerville, where there is still room for development, are seeing some slow down, because homes for resale are having to compete with new homes being built.

While it is more difficult for many first-time homebuyers to get loans, those that are doing well financially may have more bargaining power than in previous years with less competition for homes on the market.

Housing Predictor, which provides independent real estate market forecasts online for more than 250 cities in all 50 states, named Austin the tenth hottest buyer’s market in the U.S. for 2008.

“Our business has been very steady, but we’ve seen a little pressure on price,” said Northwest Austin realtor Jim Morelli of Re-Max Capitol City.

Affordability

The median family income has not increased substantially since 2001 according to HousingWorks Austin’s website. HousingWorks Austin is a nonprofit organization aiming to keep homes affordable for Austinites through research, education and public policy change.

Despite Austinites living roughly on the same income, Austin housing prices continue to rise.

A forecast by the National Association of Real Estate said the Texas market is still experiencing gains in home prices, with Austin having a price increase of 6 percent in the final quarter of 2007.

Despite most metropolitan areas’ housing being overvalued, Austinites might be surprised to find Austin housing, along with many Texas cities, was found to be undervalued by 9.1 percent in a recent report by Global Insight.

Permits

According to data from the Austin Chamber of Commerce, new privately-owned housing units authorized by building permits decreased in 2007 by 6,152 with the largest decrease in single family homes.

James Pratt, owner of Custom Electronics in North Austin, a business that works with homebuilders to engineer, design, and install electronic systems in residences and professional offices said that he hasn’t seen much of a decline in construction this past year except in lower-end homes.

“The biggest change we’ve seen is kind of in the lower-end market: $100,000 to $200,000 homes,” Pratt said. “We’ve seen that market kind of drop off. They’re not building as many houses. In the construction portion the market downturn hasn’t affected Austin as much as some of the other parts of the nation. The lower-priced house, I think it’s harder for people to get into those loans now, and I think that’s affected building.”

Incentives to buy

In January, U.S. Sen. John Cornyn co-sponsored a bill that, if passed, would give a $15,000 tax credit distributed over three years to homebuyers that buy a new, foreclosed or under pending foreclosure home. A similar incentive was used in the 1970s to boost the market when it was lagging.

“I think the national media are having a psychological effect on some of the buyers in the market,” Buffington said. “They don’t understand that the market here in Austin is still very strong. Really, with the exception of some tightening of some lending guidelines, the Austin market still remains very strong and we’re running counter to the rest of the nation. We have one of the strongest markets in the country.”

*Global Insight is the world’s leading company for economic and financial analysis and forecasting. The study, which uses household population density, mortgage interest rates, relative income levels and characteristics unique to the history of each metro area for its analysis warns that data should not be misinterpreted by reading too much into the analysis. The study has a standard deviation in house price valuations of plus or minus 15 percent, so any valuation between 15 percent overvalued and 15 percent undervalued should be considered statistically normal.

First-time homebuyers

A newly-wed couple discusses the trials of buying their first home in Northwest Austin.

Currently living in an apartment near the Arboretum, Matt and Andrea Otis put in a bid on their first home this month. While they have been renting since they got married in 2006, they are looking to buy a house now because they have some extra money from their two incomes and feel they can afford to have a place of their own without throwing money away on rent.

“We are not living paycheck to paycheck, so we have extra money that we could use towards a mortgage payment,” Andrea Otis said. “So, we just decided that we could actually be investing this money into something that is ours, and we could do whatever we want to it. Plus, we would have a yard for our dog, and it just seemed like the right time to do it financially. If we weren’t in the right place financially we wouldn’t even be looking.”

While the Otis’ feel they are in a good place to buy a house right now, they also feel that some of the mortgage brokers have encouraged them to take out a higher mortgage loan than they feel comfortable with for a larger home than they want.

“I think the biggest challenge for me [in finding a home] is the amount of money they expect you to afford for a house is not in line with the amount that you can actually afford once you take out taxes, car payments and all the things of normal life,” Matt Otis said. “It’s just really a matter of the market getting so inflated that they think the only payments you have in life should be for a home and, frankly, there’s more to life than being able to say you own the walls you sleep in.”

The couple also had problems getting a loan on a smaller fixer-upper house, but had no problem getting a loan for a more expensive bigger, newer house.

“There’s this part where you know that financially you’re fine, you can get approved for a loan and then there’s getting past the human side,” Andrea Otis said. “One mortgage broker we were working with didn’t like the house we were wanting to try to buy, so he wouldn’t approve us for that loan. So that was an unexpected curve ball. We thought, ‘we’d been counting on you, we put in an offer and now you’re telling us no?’ It was pretty shocking.”

While their first bid was not accepted, the couple plans to continue their search.

2003-2007 Northwest Austin average sales prices

While many parts of the U.S. are showing a drop in price, Austin home prices are still on the rise.

Average Sales price by MLS area

• 1A
  • 2003: $288,473
  • 2004: $289,923
  • 2005: $285,956
  • 2006: $327,950
  • 2007: $350,054
  • 5 Yr. Change: 21.35%
• N
  • 2003: $158,940
  • 2004: $157,574
  • 2005: $168,905
  • 2006: $179,644
  • 2007: $187,421
  • 5 Yr. Change: 17.92%
• 2N
  • 2003: $121,387
  • 2004: $117,496
  • 2005: $119,638
  • 2006: $136,031
  • 2007: $147,731
  • 5 Yr. Change: 21.70%
• NW
  • 2003: $215,942
  • 2004: $205,170
  • 2005: $217,178
  • 2006: $222,334
  • 2007: $237,172
  • 5 Yr. Change: 9.83%
• 1N
  • 2003: $240,571
  • 2004: $246.558
  • 2005: $254,610
  • 2006: $278,042
  • 2007: $287,345
  • 5 Yr. Change: 19.44%

Source: MLS Listings and Austin Board of Realtors

2007 Average sales prices by ZIP code

• 7875: Median Price - $450,000
• 78727: Median Price - $200,000
• 78758: Median Price - $160,000
• 78729: Median Price - $200,000
• 78759: Median Price - $350,000

According to MLS listings, Travis County homes were on the market just slightly longer than the year before with an average of two days longer in 2008 than 2007, showing that even while prices increase, people are still in the market for homes.

*estimated prices according to zillow.com