Update - Personal & Business Related

I apologize for not posting anything since August. I cannot believe how much time has passed since my last post. Moreover, I cannot believe the changes that have taken place since July, not only in my industry, but also in my personal life.

My wife and I have had our first child. She was born October 8th and her name is Mara Brandt. I am sure that anyone will understand, we are very proud parents and I am frankly shocked at how much love can be shared in our lives. In addition, I was pleasantly surprised to find out that I could love my wife even more than I had loved her previously. To say that I am a blessed man is an understatement.

With family life thriving and a new understanding of happiness in my personal life, I am back to work and excited about my business and the mortgage business in general. While the past few months have provided many challenges and changes, I have discovered that a few predictions that I made in the past are becoming reality. More specifically, the rise in foreclosure ratings across the country are largely due to defaults on sub prime mortgages that were given to borrowers with poor credit and adjusatble rate mortgages. Couple that with a decrease in property values, for some areas, that reinforces the fact that these buyers could not get out of the situation in which they put themselves in, most unknowingly. I do not wish to assert blame on the buyer solely or on lenders solely. I do wish to state that it is obviously a combination of the two.

The overall real estate market is slumping around the country and the effects are being felt everywhere. In Texas, sales are slower overall, prices remain strong, and in most metropolitan areas prices are still on the rise. Unemployment remains at all time lows with no immediate increase in sight. I think that the most relevant signs of what to expect for real estate to come can be seen from the lack of strength from the U.S. dollar coupled with rising prices, more specifically, "at the pump". These factors are looming very large over the entire economy and will remain a consistent nemesis for the housing market.

On the bright side, real estate in "on sale". You don't need to wait for the after-Christmas sales or New Years sales, in most markets sellers are discounting prices to get out of their homes quickly. Moreover, banks are looking to cut their losses now with hopes to regain profits in late 2008 or early 2009. Now are the times when savvy investors begin to scoop up valuable real estate.

Perhaps a more hidden effect of the "market crunch" is the ability for future homeowners to afford their homes. Lenders are strengthening their guidelines and in nearly all cases, buyers are required to have good credit scores along with some form of a down payment. While some potential homeowners will not qualify as easily as they may have a year ago, it will provide an overall strengthening for future housing markets. Let's face it, we do not want our neighbors to face foreclosure, it will diminish the price of our homes. We do not want neighbors who cannot afford to fix their roofs, or repaint their houses. We would all like neighbors that are responsible, thoughtful, and overall a low risk in all facets of their lives. This creates a sense of goodwill and stability and affords us all the best opportunities. The tightening of standards in my industry is long overdue and is desperately needed. With that being said, I want to thank to those sleazy sub prime lenders, it appears their efforts have paved the way for a better mortgage industry.

Mortgage Industry in Chaos

It has been a few months since my last entry and frankly, there has been more news about my business than I can keep up with. The subprime market has blown up and has all but disappeared, Fannie Mae has restricted its' credit guidelines on their loan offerings, and just today it was announced that Jumbo lenders have increased their base rate for Jumbo loans(those over $417,000) from around 6.875% to 8%. This will shrink up the high dollar home market for the time being, and worst yet, this will happen throughout the entire country, not isolated to those areas with higher foreclosure rates.

What does this mean for the typical buyer?

Not much, the one thing that will hamper the ability of most buyers is the tightening of credit standards by Fannie Mae. If you have border line credit or if you cannot meet normal income requirements, then it has become much more difficult to get a loan. Also, the loan that was created for self-employed individuals, referred to as a "stated income" loan, has practically disappeared. The only loans that have not seen any recent changes or adjustments are the very standard FHA and VA loans. Perhaps the government has proven smarter than most major lending institutions. FHA and VA loans have rarely made any changes to their loan guidelines and when changes do occur, they are typically minor and do not affect the overall credit worthiness of a borrower's qualifications.

In conclusion, keep an ear open and stay focused on the broader economy as these changes will certainly have an impact and will create a ripple affect to the overall economy. If nothing else, these changes will change the overall consumer confidence level. Look for rates to rise across the board and keep an eye out for the Fed's next move. Although they have done nothing to curb the housing woes of late, it just might be the right time now.

What Mayor Winn Knows

The Mayor produced some interesting tidbits about Austin that I thought I would share with you. These are in no particular order.

1. Austin now has 715,000 people and is the 16th largest city in the US.
2. Currently our population is 50% bigger than Atlanta which is the 43rd biggest city.
3. Austin is the youngest big city in the US per capita with 90,000 total college and university students. Over 50,000 at The University of Texas, 33,000 at Austin Community College and the rest spread among the remaining institutions of higher learning.
4. Austin land mass comprises 280 square miles.
5. Austin ranks as the safest big city in the US. In 2006 we had 19 murders. By comparison in 2006 Seattle had 125 murders. In the 1970s when Austin was one third the population it now has we averaged 50 murders a year.
6. 70% of the city's $600 million dollar budget is spent on police, fire and emergency services.
7. Austin is the fastest growing big city in the US. In 1990 were ranked 27th largest city. In 2006 we are ranked 16th.
8. For the past eleven decades --- since 1895 --- Austin has grown EACH year by 3.5% population.
9. That means every 20 years Austin has doubled in population.
10. Mayor Winn sees that as the forecast for our future. A steady 3.5% population growth and that we will once again double in size over the next 20 years.
11. In 2006 we added over 25,000 new jobs.
12. In 2006 the sales tax revenue was up 12% and hotel occupancy was up 25%.
13. Every day 85 new residents are added to Austin. This includes new people moving to town ---- and births / deaths.
14. That equates to 70 more cars on the road each day.
15. Texas is the fastest growing State in the US. Texas adds 500,000 people to the State each year. Austin is the fastest growing city in the fastest growing State in the US. Austin is a very economically attractive location and environment.

16. To manage this growth the Mayor says we need to better manage three things:
A. existing road ways
B. mass transit
C. land use patterns

He sites the new Domain and Mueller Airport projects as the way to better use land patterns. In these projects people will be able to LIVE, WORK, SHOP and EAT ---- without driving. The Mayor believes we will see more projects like this in other areas of the city. In the next few years he sees the same thing happening to the 8,000 acre Robinson Ranch. The Robinson Ranch has been purchased for development. It is the land that surrounds Abbot Labs off of the Loop 1 Toll way. By creating mixed use high density developments that allow people to LIVE, WORK, SHOP, EAT and PLAY close to home ---- he feels the congestion on our roadways will be greatly helped.

Subprime Market Implodes

Are you curious about all of the press that the sub prime mortgage industry has received lately? Well if you are not, you should be. There are changes coming that will impact nearly everyone at some point.

Most of us in the real estate industry have been expecting this debacle, but there are not too many insiders who know what to expect next. The results may become easily predictable if we take a look at similar scenarios in the past. We can expect to see the mortgage industry face the same sort of legislation and government control as the banking industry experienced after the Savings & Loan bust just a few short years ago. That's right, the government will regulate our industry a little more and those companies performing well will feel pressure to tighten guidelines and further make it difficult for people to qualify for mortgages.

Most would say that this constriction is good and well deserved. I would agree for the most part, but I also feel that this will negatively affect some borrowers unintentionally. There will be borrowers who will not qualify for homes under the new restrictions when their current credit profile is stronger than thousands who bought homes within the last ten years. There will far fewer financing options available for self-employed borrowers, and for those hoping for an easier loan process with less paperwork, forget about it.

The winds of change are blowing strong, let's hope they don't blow down the entire real estate market.

It's a Low, Low, Low-Rate World

Any wonder why long-term interest rates have not risen in light of all the interest rate hikes from the Federal Reserve and the improving stabilization of our economy? I have thought about it and never really came up with an answer that would hold up to debate. After reading an article in Business Week, the answer came to light. Money is still cheap because information is much more readily available in today's economic world. Basically, we can gain more knowledge faster than we could have in years past. Technical data is easier to analyze and risks are easier to assess in today's technology driven world. With this increase in efficiency for markets, investors have learned to anaylze their risks much fater and have seemed to notice that there is less risk than once thought in most areas of investing. This means that money has become relatively cheap for borrowers. Thus, we are able to borrower more at lower rates than in years past when long term ineterst rates had similar adjustments.

It also appears that the U.S. is not the only country experiencing this phenomenon. Euro bonds have realized a simliar path in recent years. Despite a fatser growing economy in the Euro regions, real rates have not risen much above the levels seen in 2003.

What does this all mean? Interest rates will not likely rise as fast as they have in the past. Even if there remains pressure for long term rates to rise, the likelihood of any sudden or large rise is unlikely. The only sign of an abrupt change would be dramatic changes in energy costs and the ever dreaded impact of China's huge population as China becomes more industrialized. Energy is somewhat predictable and we have seen resiliency through past abrupt energy changes. However, the toll that China places on the global economy is much harder tp predict and likely to lead to more volatility.

To read this great article and learn more about the future of rates, check out this link to the story: http://www.businessweek.com/magazine/content/07_08/b4022001.htm

Who Bought, Who Sold?

Texasrealtors.com released housing data which was reported in the latest addition of RECON from Texas A&M University's Real Estate Center. The data shows inetersting numbers regarding the ever chaging demographics of home owners in Texas. Here's how they shake out.

Last year, first-time homebuyers, with a median age of 33, accounted for 35 percent of existing homes purchased statewide, according to the National Association of Realtors' (NAR) 2006 Profile of Home Buyers and Sellers, Texas Report.

The median income for first-timers was $62,700, about 7 percent higher than the national average. All first-time homebuyers financed their purchases compared to 98 percent of repeat buyers. Almost half of all buyers believe their home purchases are better investments than stocks.

Most homebuyers were married couples (68 percent), with single females purchasing a whopping 20 percent compared to single males (5 percent). Detached single-family homes accounted for 86 percent of homes sold. The typical buyer planned to live in the home an average of eight years. Most buyers bought their homes about 18 miles from their previous residences.

About 87 percent of buyers searched for their homes with the help of real estate professionals, with 79 percent purchasing through real estate agents. Of those purchasing through an agent, 79 percent reported they were “very satisfied” with the honesty and integrity of their agents.

The seller’s median age was 46 years with an average household income of $89,500. Married home sellers accounted for 73 percent of sales, and 49 percent had no children younger than 18 living at home. Eighty-six percent used agents or brokers to sell their homes, with 67 percent very satisfied with the selling process. Average days on market was six weeks, with more than half of sellers receiving their asking prices.

Austin Home Sales Up Unemployment Down

The numbers are out for 2006 and they read very well. There was a 10 percent increase in full-year sales volume over 2005. According to the MLS, a total of 26,958 homes were sold last year. Meanwhile the median home price rose six percent to $174,500. That same median price rose to $177,500 in the month of December 2006. Also, single-family property sales contributed $6.3 billion to the local economy in 2006, this was a 20 percent increase over 2005. In addition, there was a drop in the average time it took a home to sell in 2006. Homes sat on the market on average 63 days during the year. This represents the lowest time span over the past four years. The data also points out that sales were particularly strong in areas that border Hays & Williamson counties. Experts claim that these strong numbers once again show that Austin's competitive costs as well as high quality of living are the keys to our sustained growth pattern. Look for 2007 to keep pace with 2006 while the national market continues to slow.

As far as unemployment, Texas' unemployment rate is down almost 1 percent from 2005. The current unemployment rate is the lowest in 5 years and matches the U.S. seasonally adjusted unemployment rate of 4.5 percent. Texas added 15,600 new jobs in December of 2006. That accounts for 213,200 new jobs for all of 2006 with a growth rate of 2.2 percent.

Texas employers have added new jobs for 27 consecutive months, according to the state.

This information is evidence of why the housing market for Texas has remained steady compared to the recent declines nationally. If employers continue to display confidence by adding jobs, then look for the 2007 housing market to remain strong and continue a steady growth pattern.

Real Estate Market Forecast for 2007

It's that time of year again...time to start looking forward to high expectations and continued growth in the real estate business for 2007. More importantly, the Central Texas real estate market. While the rest of nations economy slowed down in 2006, Texas as a whole continued a moderate, but strong rate of growth. This was due in large part to the declining unemployment rate and improved growth of the commercial real estate markets throughout Texas.

Commercial construction helped to increase employment and also provided income to business in and around Texas. The rate of commercial construction does not appear to be slowing for 2007. In fact, current projections show that more commercial construction is slated for 2007. The main focus will be a rise in construction costs over the next year. If costs continue to rise in line with the rest of the nation, then there is a likelihood construction will slow. Until then, it's "full steam ahead".

Jobs played an important role, as usual, in the overall real estate market for 2006. Because there were more Texans working, there were more Texans buying homes. For 2007 the job market will look to remain strong and continue driving the economy as a whole. If costs can remain low for businesses, and if profits can remain healthy, then the job market will continue its' modest pace and thus the housing market will remain fluid and robust.

Finally, 2006 saw a pause in interest rate hikes by The Federal Reserve Board. This was great news for mortgage interests rates. Mortgage rates fluctuated quite a bit in 2006, but they never proved to be an issue for new home buyers. For 2007, look for interest to stabelize even more. The consensus right now is that the Federal Reserve will not make any moves for the first quarter of 2007. The Fed is closely watching inflation and right now it appears that the nations unemployment rate in 2007 will tick slightly higher as the economy as a whole cools. Barring any unexpected rises in prices due to energy costs or other variables, the rate of inflation should gradually lower to The Fed's comfort level of between 1 and 2%.

Overall, the signs point to a moderate but sustainable growth in the Central Texas real estate makret. We are in a unique position in that Texas is not feeling the "pinch" economically that the rest of the nation has and will continue to experience in 2007. Better yet, we benefit greatly from that "pinch". The national economic outlook effects interest rates and thus gives Texas homebuyers a premium when it comes to purchasing a new home. We can continue to afford homes as long as our economy continues to produce new jobs and interest rates remain low. Once again, 2007 should provide Texans a continued opportunity for home affordabilty.

Stay Strong & Best of Luck in 2007 !

Austin Invests in its Local Businesses!

Article by: Neil Takemot posted Dec. 28th on Cool Town Studios Website

A local institution on Congress Avenue in Austin, Texas, Las Manitas, a Mexican restaurant and crowd favorites, must say goodbye after 25 years. It's lease was up, and the building owner already signed a new one with Marriott. However, Austin's city government isn't your typical city government, and its leaders proposed to do something about it.

They're proposing the Congress Avenue Retail Retention and Enhancement Fund to invest in the kinds of businesses they feel reflect the local culture and character of Austin. This is no obligatory facade improvement or forgivable loan program totaling a few hundred thousand, the equivalent of a needle in a haystack. Based on development fees, three pending projects alone on Congress, including the hotel complex, could generate $1 million or more in fees.
In other words, the City of Austin is proposing to significantly invest in its local businesses, something completely supported by residents, but rarely executed. That's the wow factor. Can you think of any City contributing such amounts to preserve and attract indie businesses? Hopefully the answer is yes, and please do tell.

As far as Las Manitas, which inspired the Fund, the program's leaders are looking at helping the owners open its doors down the same street in a historic building. The restauranteurs own the building, but the City is looking to assist with the hundreds of thousands required to renovate it.