Home buyers in Austin are expected to stay in control of the market even as another wave of foreclosures swamps many other markets in the country. About 70% of $189 billion in adjustable rate mortgages (ARMs) will reset by 2011*, meaning the rates will probably rise.

Higher rates will likely trigger more foreclosures, again depressing the US housing market, even though ARMs only make up a small percentage of outstanding mortgages.

Still, Austin will escape much of the damage. A brief survey of 4-5 mortgage officers and brokers that I know and trust revealed they don’t think the next foreclosure wave will have a dramatic affect here. My lender associates say they just didn’t put many borrowers in truly exotic vehicles such as interest only.

As you can see in this chart, mortgage rates are at historic lows.

Average Rate for 30-Year, Fixed-Rate Mortgages

We expect a continued buyers market with good inventories through 2010.

My lender associates do admit selling some 5 year ARMs, but they feel that homeowners refinancing will have a two-fold chance to maintain or only slightly raise their rate. (1) Mortgage rates have held steady for the last six months and should rise only slightly in the first half of 2010 and (2) market values have only declined moderately (10-20%) on a city wide basis.

Outside of Texas many of these ARMs will only be renewed at substantially higher rates because their (1) home values have declined coupled with (2) higher unemployment means banks will remain tightfisted with their bailout reserves. Many will be impossible to refinance and will be subject to foreclosure.

What this means for Austin is a continued buyers market with good inventories through 2010. But the later part of 2010 may bring higher rates and signal the end to the both low mortgage rates and lower home prices.

* Washington Post, Dina ElBoghdady, September 09,2009

Chart A

A mortgage may be the best long-term investment you can make in the next year or two – for 3 reasons.

3) A low interest- rate mortgage will be a big plus as inflation rises.

The Federal Reserve has greatly expanded the money supply in the last year via huge borrowings. Political rhetoric claimed these massive assumptions of debt were made to increase the potential of banks and other financial institutions to lend money. Good theory but banks have remained cautious about new loans and reserves have increased – thereby enlarging the money supply.

2) Inflation is likely to accelerate as the global economy recovers.

Chart B

The world economy will drive the next stage of recovery – not the US. Developing economies have pushed the demand for crude higher this year, despite a worldwide business slump. As you can see in Chart A, oil has jumped this year.

Likewise, gold prices have rebounded despite the recession and specter of deflation, as you can see in Chart B.

1)  Mortgage rates are poised to rise

Mortgage rates have been trending down, depressed high unemployment and resulting deflationary pressures. As you can see in the graph below (Chart C), mortgage rates have fallen, even as crude and gold prices have risen.

Chart C

The consumer price index, a measurement of inflation, is closely tied to energy prices. The CPI is likely to catch up with oil as economies rebound.

In short…how long can mortgage rates stay low with growing debt, rising inflation, and competition from abroad? Regardless of when the Great Recession ends or things return to normal, a conventional loan or FHA a mortgage may be your wisest investment.

Hard to say, but one thing is for sure…mortgage rates won’t be lower than they are today.

SAN ANTONIO (San Antonio Express-News) – The San Antonio economy has outperformed all of the nation’s largest cities through first quarter 2009, according to a Brookings Institution report.

The city has become accustomed to being labeled a top economy. It recently ranked fifth on Forbes.com’s list of cities most likely to bounce back quickly from the recession.

San Antonio’s economy — driven by sectors such as health care and insurance — has benefited greatly from military expansions and relatively stable housing prices.

The Brookings Institution report measured changes in employment totals, unemployment rates, housing prices, the values of goods and services produced by cities, and other factors.

Other Texas cities listed as top-performing metro areas include:

• Austin (third),
• Houston (fourth),
• Dallas (fifth),
• McAllen (sixth) and
• El Paso (11th).

The above-mentioned report is from the Real Estate Center at Texas A&M.

Return Home

The 19 remaining condos at Brazos Place will be auctioned on May 17, the first auction of a downtown property that I have seen in Austin. It should be an interesting, educational and – I would guess – very well attended event.

Is this auction of properties located at Brazos St. and 8th St. a death knell for the downtown condo market? Or merely an innovative way to move properties in a slow market?

Success or failure depends on attracting bidders, according to research on auctions. The newspaper advertisement announcing the auction said prices would start at $80,000 – far below anything reported in the MLS system lately.

If enough good bidders show up, then higher prices may result than from the normal market mechanism. If the auction brings together many who are interested in newly remodeled downtown condos, and effectively pits buyer against buyer – then maybe this is really an effective marketing campaign.

Since my office at RE/MAX Downtown Austin is one block away you can bet I’ll attend!

Return to home page.

In response to failing housing markets and increased foreclosures over the year, the federal government has introduced new tax credits for first-time homeowners who purchased homes in 2008 and 2009.

The good news is that first-time homebuyers who purchase a home between April 9, 2009 and December 1, 2009 can receive a tax credit of 10% of the home’s purchase price with stipulations of course.

I recommend researching this further, but below I’ll try my best to summarize the main points.

For homes purchased in the 2009 specified dates above, the credit amount cannot exceed $8,000 and the buyer must live in the home for at least 3 years. Otherwise, you must pay the amount of the credit back in full.

For homes purchased in 2008, the credit cannot exceed $7,500 and it must be paid back. To learn more details about the 2008 tax credit visit the IRS website here.

FYI: If you haven’t filed your 2008 federal tax return yet, the form you must file with it is Form 5405.

Bottom line: If you’re looking to buy your first home soon and plan on living in it for awhile make sure you purchase it between April 9 and December 1 of this year.

I found this information on IRS.gov and this Austin American-Statesman article from last month- both good sources for more detailed information and information on other tax credits available.

Home Page

While the mortgage market continues to generate a lot of chatter in both the media and in Washington, interest rates are currently near or at all-time lows. Lately there has been talk about the 4.5% 30-year fixed rate mortgage. Will it become a reality though? Right now, no one really knows.

The bottom line is the Fed announced recently that they are going to buy up to $600 billion in mortgage-backed securities. This has already driven rates to historical lows. In January, the SEC is meeting and information may be released that could have a significant bearing on rates, potentially for the worse.

We are already seeing lender backlog due to low interest rates. With a first time home buyer tax credit of up to $7,500 and low or no money down programs available for many people today, now is a great time to buy a home.

The Austin American-Statesman says on its front page (11/26/2008) that the real estate slowdown has even hit condos in downtown Austin. While this event has been anticipated for more than a few months, the admission – or revelation – may seem shocking to many.

From a real estate buyer’s angle, nothing could be better. If you are considering a condo downtown or near downtown there is a holiday sale going on – deep discounts are available.

Baron Rothschild (1871) is credited with the saying “the time to buy property is when there is blood in the streets”. Panic and uncertainty create opportunity.

There may be blood in Austin’s downtown streets today.

Home Page

Check out the new page “Buying Central Austin Real Estate in the New Economy” in the Buyer’s section. It’s all about buying in the new economy and buying in central Austin. Now new maybe a misnomer, new means a change from the last 2-3 years. Before the era of easy money this was the norm for homebuying and qualifying for a loan.

Residential downtown Austin is an exciting and newly developing area. The land area has not changed much from the original plat in 1838. It is bounded by the Capitol on the north,and the lake on the south. Much of the arts, entertainment and dining experiences in Austin are located in and around this grid. New high-rise condos are currently under construction BUT there is an existing condo called the 5 fifty five. This condo, while of recent construction (2004), has several close out units on the 29th/30th floors below $500 psf. This is for condos with great views of the lake, downtown and the Capitol. With the new construction like the Austonian, the W, etc being offering at an average of $700 psf for these larger condos located on higher floors and offering great views. For those in the market you should check them out.

Recently a customer who was looking to buy a student condo in Austin told me that due to the election results she didn’t want to go ahead with a purchase. Now we all know that buyers have many reasons for not wanting to purchase but I had to laugh at the notion of not buying because of an election.

Economic cycles …yes, job status….yes, moving to another city…yes, those are good reasons. However not purchasing property because of an election means you don’t understand the intrinsic value of real estate. Real estate outlasts political terms in this country. In fact it outlasts governments. Remember that Texas and Austin, in particular, was owned by Mexico, the Republic of Texas, the Confederacy and now the United States.

Throughout all those years Austin has grown and prospered albeit with some ups and downs. This is one of those down times. Make it work for you. Look to the long term and I know you will realize that today’s market represents a buying opportunity.