Luxury Market Outperforms...

Early last week NAR released the national numbers for July sales. Overall sales saw a large drop 27% from June and 25% year-over-year from July 2009.

As you know by now, the national media jumped on this and pundits and talking heads have been yapping about the dismal housing market and the risks it may or may not pose to the broader economy ever since. But, hidden in that same data was a good news story about the luxury market that national media seems to have completely missed.

While the pundits debate whether the sharp drop in overall sales was a meaningful indicator of market activity or just a product of the expiration of the home-buyer tax credit and artificially time-shifted demand, they all seem to have missed the fact that while overall sales were sharply down, sales in the $1M+ price segment were UP in every region across the country and more than 6% nationally:

It is likely that the 0.7% increase in the national median sale price for July was largely function of this increase sales at the upper end as opposed to growing price strength in the lower-priced segments of the market.

Bottom line: The luxury segment is outperforming the market overall, and this is a good news story that needs to be told! We have seen an increase in inquiries in the luxury price ranges of both Austin, ranch properly and Texas coastal property. Current buyers have faith in the overall integrity of the market and its future prospects. Many of our clients are shifting positions out of the stock market or other liquid holdings to park in real estate for sound investment opportunity and as a hedge against uncertainty and inflation. Subsequently, the majority of the clients we have been working with are paying cash for their home/ranch investment. As the stock market continues to be volatile and economic uncertainly is prevalent we anticipate continued activity in the luxury market.

Thanks,

Marcus P. Cox
Co-Owner Avalar Texas
Realtor®, ABR, GREEN, GRI, TRLP
Austin Board of Realtors Board of Directors 2010-2012

Texas Cannot Afford A Real Estate Transfer Tax...

Good Morning,

So, I think it’s safe to say the economy has been slow. Many people and businesses across the country have experienced a drop in income or revenue and are subsequently tightening their belts. Not surprisingly, the State of Texas is anticipating a budget shortfall as high as $18 billion dollars this next session. The Texas Rainy Day Fund is roughly $10.5 billion dollars, so even if it is completely used the state is left with a major shortage. Most experts agree that rather than reduce spending the Legislature will look for creative ways to make up the difference in the form of taxes. There has been talk of a real estate transfer tax for years. In fact, this last session, more than 11 attempts were made to pass a real estate transfer tax. Thankfully all of these bills were defeated. It doesn’t take a lot of time to figure out why their defeat was such a good thing. Transfer taxes raise the cost of purchasing and selling homes, prices some buyers out of the market and reduces economic activity.

In a time where people are watching their budgets and unemployment is still alarmingly high it seems foolish and short-sided to impose a real estate transfer tax.

For years we have seen the heavy emphasis cities and states have placed on affordable housing campaigns, and rightfully so. Realtor organizations, property rights groups and affordable housing advocates have made substantial efforts to provide home-ownership opportunities for as many Americans as possible. It is unfortunate in a fiscally uneasy time governments would resort to damaging taxes that would not only discourage economic development but put an undue burden on first time home buyers, seniors/retirees and low income families. Simply put, at their core, real estate transfer taxes threaten affordability. Regardless of what the pundits say, fewer people will realize the dream of owning a home with a transfer tax.

It is easy to say a transfer tax would hurt property owners and potential buyers, but tangible numbers make a more meaningful impact. So what exactly is a transfer tax and what do the numbers look like?

A real estate transfer tax is a tax assessed when ownership of property is transferred from one party to another. Some states also assess such a tax on long-term leases. This type of tax typically comes in the form of a percentage of the value of the property. The National Association of REALTORS® commissioned a study to analyze the effects of a transfer tax on real estate. The report assumed a tax rate of 0.5% (one-half percent) and a $125,000 purchase price (fyi: Austin’s median homes price is roughly $194,000). Based on these assumptions, the cost of buying a home would increase by about $600, and home sales would decline by almost 3%. In addition, the Real Estate Center at Texas A&M University concluded that the creation of a transfer tax on real estate may create more problems than it solves. This type of tax could cost Texas $955.5 million in lost economic activity with an astonishing 11,575 jobs lost!

Quick points: Transfer tax
-A real estate transfer tax is a tax assessed on real estate when ownership of a property is sold or transferred from one party to another. It is essentially a new sales tax on real estate.
-Real estate transfer taxes are highly regressive, meaning higher burdens for low-income people.
-Growing families, first time homes buyers, seniors/retirees, and transferred employees and military would also be heavily affected.

Real estate transfer taxes increase the closing costs of buying or selling a property. This kind of taxation is damaging and, as we have seen in other states, opens Pandora ’s Box. Voters in other states have often been promised that a ½ or a 1 percent transfer tax is all that’s needed. But, once a transfer tax is established it is often increased (often repeatedly) as a quick fix for irresponsible budgets. Any real estate transfer tax would be extremely damaging to low-income or first time buyers, retirees and the real estate market in general. The legislature is going to be looking at a transfer tax this spring in the 82nd legislature. Be sure to voice your concerns to your state office holders as often as you can, our economy can’t afford a real estate transfer tax.

Best,

Marcus P. Cox
Co-Owner Avalar Austin
Realtor®, ABR, GREEN, GRI, TRLP
Austin Board of Realtors Board of Directors 2010-2012
512.921.3111

Are Americans showing preference for smaller homes?

Here is a very interesting blog entry I received from The Institute for Luxury Home Marketing regarding a trend towards smaller homes among Americans.

The results from a July survey conducted by Trulia and Harris Interactive suggest that after a long trend toward wanting larger homes, American tastes may be moving in the opposite direction.

Trulia Blog Article:
"Americans are veering away from the “McMansions” that had grown popular before the recession. Those American adults for whom home ownership is part of the American Dream displayed a preference for smaller homes, with only 9 percent saying their ideal home size is more than 3,200 square feet– the same number of who said they’d like their home to be between 800 and 1,400 square feet. Fifty-five percent of Americans would prefer a home between 1,401 and 2,600 square feet."

I think this certainly could be true. We have seen a trend for smaller homes in our day to day business. From empty-nesters to vacation home buyers, we have seen buyers looking for high quality smaller homes with well thought out designs and efficient floor-plans.

Much of the activity can be seen in central Austin with an increased use of in-fill homes and small condo projects that tend to be greener than the average home. Currently in West Austin there are several projects where people are going for a smaller home in a great area. Tarrytown, Highland Park West, Balcones Dr. and Cat Mountain areas have seen this type of activity.

Traps to avoid when selling your home...

The market in the Austin area is still doing very well and we continue to rank in the top 5 real estate markets in the US. Furthermore, we have not seen drastic reduction in sale prices and some areas have seen appreciation over the last year. What we have seen are higher inventory levels. Since buyers are not able to negotiate as much on price we have seen them become much more picky when looking for homes. Avoid these potential pitfalls when selling your home and you'll be sure to find a buyer in no time!

Overpricing the home – Objectivity can be difficult when deciding on a sales price. You’ve acquired so many memories while living in your home, and human nature tempts us to apply dollars to those memories. You should refrain from being emotional about pricing your house. Try to see it from a buyer’s point of view.

A related mistake is automatically hiring an agent just because she is willing to list the house at a higher price. Remember that the market, not the listing price, determines the sales price.

Getting blindsided – Since most homebuyers are going to get an inspection before their purchase, you should consider getting one first. A licensed real estate inspector will give you a report detailing what repairs will be needed to sell the house for top dollar. You’ll want to fix what the inspector finds or fully disclose what you know about the property and adjust the price accordingly.

Too much stuff – Find a different place for all your stuff. Closets and other areas in your house that are dedicated to storage can be big selling points, but not if they’re bursting with all your coats, clothing, boxes, and other things we all throw into closets. Keep these areas extra neat and uncluttered, even if you have to put some boxes of Halloween decorations and a lot of clothing in the trunk of your car.

Clean that house – Enough said? Don’t let a prospective homebuyer walk into a stage-four disaster area. It gives the impression that you don’t care, nor have you ever cared, about the condition of the house. Picture that you are seeing your home for the first time, what needs to change, be spruced up?

Hope this helps!

For more information on selling your house click here.

Market Update North 1B Luxury Comps – Colorado Foothills, Balcones, Highland Park & Mt. Bonnell...

(Area defined by: North of 35th St., Lake Austin, 2222 & MO-Pac)

- It has been an interesting summer in this part of Austin. There have been some massive sales in an otherwise slow market. Since this spring luxury sales have risen and the activity level is up significantly as well. Notably, Mack Brown’s home on Balcones for more then $3.9 million cash and another property sold on Balcones for over $2.7. Two other million + homes are currently under contract. Other than this big shift most of the activity is still under the $650k price range, with no sales between $900k and under $2 Million.

(I had a great statistical chart that display these comps, but I could not post it in this blog. Email me if you would like to see it.)

There are currently 33 luxury homes available in this area with others currently under contract. In the last 3 months 13 luxury properties have sold. At this rate of absorption there is 7.615 months worth of inventory. The 8 pending homes show a nice upswing in activity, which is very positive.

We are seeing fewer homes hit the market as the summer winds to a close. As homes are absorbed faster than they are hitting the market the inventory levels in this area are starting to drop. This is a welcome trend, because over the last 9 months high inventory levels have troubled this part of West Austin.

Final Thoughts: The activity below $750k has been solid and accounts for the majority of the sales. However, we are seeing strong signs in the ultra market as two properties sold for more than $2.7 million this summer. We are encouraged to see two other ultra luxury properties currently under contact as well. All in all things look solid for this part of Austin as we approach Fall. The summer has been touch and go and we anticipate unseasonably high buyer activity levels this fall (not necessarily like a summer season, but certainly higher than a typical Fall.)

Thanks,

Marcus Cox

Co-Owner Avalar Texas

Realtor, ABR, GREEN, GRI, TRLP

512.921.3111

Village Walk Casitas Now Available...

Great Port Aransas Investment

Six, three-bedroom, two and one half bath, fully-furnished rental units to be built at Village Walk Condominiums, Port Aransas, Texas. These units will be located on six adjoining lots (Units 1-6), and have been specially designed to combine optimal rental income potential, low maintenance, and long-term investment value. Each unit will contain 1,062 square feet of A/C space.

Village Walk Condominiums is one of the premier single-family residential developments in Port Aransas, with its in-town location less than a two-minute drive to the beach, and close proximity to all of the shopping and restaurants in town. The first homes in Phase I (56 Units) of Village Walk were completed in late Summer of 2007, and by the end of 2008 a total of 40 Units had been built and sold. Based on this strong market demand it was decided to proceed with the construction of Phase II (42 Units), which was completed in January 2009. We all know what happened shortly thereafter in the financial markets, and while this economic slowdown has has adramatic negative effect on the Nation in general, Village Walk has managed to sell another 9 Units since the beginning of 2009. This continued success has given us the confidence to proceed with the development of the Casitas today.

The concept for the Casitas at Village Walk was actually born during the initial planning stages of the overall development. These six smaller lots were programmed to be built as smaller versions of the larger Units typical of Village Walk houses in order to provide a more affordable alternative for groups just too large to rent a single house in Village Walk. The extra guests can rent one of the Casitas for less than a second larger Unit, and still be “part of the party”. After consulting with the owner of one of the Island’s leading rental agencies, we were encouraged that our proposed design (by Nick Lorette - Port Aransas Coastal Homes) would be very well received by the rental market.

In general, the rental of Units at Village Walk for the past two years has be nothing short of phenomenal. The dozen or so Units that are available for rent have stayed full for virtually the entire summer season, and at premium rates of $440 to $550 per night. With the Casitas filling in the market for a Unit that can be rented for $350 or less per night, a much larger market will be able to enjoy Village Walk.

The Casitas land is presently owned by Village Walk Development Corp., the developer of Village Walk, and the design of the Casitas was done by Nick Lorette, a highly respected Port Aransas builder, who is responsible for constructing most of the Units in Village Walk today. We estimate that the Casitas can be completed in eight months, which means that they can participate enjoy all of next year’s rental market if this transaction can be closed by October 1, 2010.

Available For:$1,368,000 or $228,000 each.
$60,000 Lot
$168,000 Construction and Furnishings

www.gotexascoast.com

www.vacationinporta.com

Half-Finished Condo Tower Bankrupt...

The development partnership behind the La Vista on Lavaca condos, also known as The Fondren Building, has filed for bankruptcy and wants to sell what’s left of the project it’s been unable to finish for a decade.

LaVista Partner LP has tried to sell the project for $10.3 million since at least May, and it’s still being marketed.

The nine-story building was supposed to be a spot where movers and shakers could be near the Texas Capitol, smoke cigars and make deals. Instead, it’s a concrete skeleton on the corner of Lavaca and 17th streets, standing like a monument to the recession and reminiscent of the ill-fated Intel shell downtown.

Project mastermind Mary Guerrero-McDonald of Guerreo-McDonald and Associates couldn’t be reached for comment. The phone number listed on her firm’s website is disconnected.
The building skeleton is designed for a restaurant, rooftop entertainment area, luxury residential condos and office condos, plus about 100 underground parking spaces, according to marketing material.

LaVista partnership manager Mac Pike said the Chapter 11 bankruptcy filing is meant to “flush out the real buyers” for the 89,800-square-foot shell.

Pike, a partner in the Sutton Co., blamed the project’s failure on circumstances in the market and within the partnership, but declined to elaborate. He said he does not know Guerrero-McDonald’s status. Pike said the project’s failure has nothing to do with its location or the concept, and he is excited to talk to anyone with an offer.

“We have always been transparent. It is a very good project. We know it will be successful,” he said. “We have an extension on the site plan and also on the construction. We are in good shape.”
The initial bankruptcy filing, which is incomplete, estimates there are more than 50 creditors. It states the partnership has less than $10 million in estimated assets against more than $10 million in estimated liabilities.

More than $4.1 million in claims from five of the top 20 creditors are disputed, according to court records. About $3.7 million is claimed by Dallas-based Precept Builders Inc. and an affiliate.
The Web address and phone number for Precept were not working on July 13. A former executive could not be reached.

Guerrero-McDonald, one of the original partners in the project, sold portions of the project to Pike, Austin real estate developer Jimmy Nassour and a third undisclosed partner, she said in 2008.

Guerrero-McDonald had previously partnered with Gene Fondren, a lobbyist for the Texas Automobile Association who suffered a stroke a few years ago.
The Fondren family is still owed $200,000, according to court records. The family is not descendants of Walter Fondren Sr., founder of Humble Oil, which merged with John Rockefeller’s Standard Oil Co. and later became Exxon Corp, the family lawyer said.
Guerrero-McDonald is still a committee chairwoman at the Austin Building Owners and Managers Association, but the committee co-chair and BOMA’s executive vice president said they do not have a contact number and did not know her firm’s status.

In 2000, she told the Austin Business Journal she planned to build the condos for $15 million and sell units for $252,000 to $637,500. In mid-2006, the project had not started, but Guerrero-McDonald said the tower would break ground that year; meanwhile, the project cost grew to $25 million.

The project had also received a 10-year tax exemption through the city’s Smart Growth program, she said at the time.

After two more years of inaction, the project’s cost estimate rose to $30 million and Guerrero-McDonald told the Austin Business Journal the project was moving forward with a new investment team that included Pike and Nassour. Nassour was traveling and could not be reached.

After completing the concrete skeleton, developers decided to cease construction in September, Pike said. A website lavistaonlavaca.com still boasts of high living. A 1,600-square-foot condo is listed for more than $1.1 million, and prices go up to $2 million.

The original architect for the building, Ponciano Morales, of Morales and Associates said Pike told him Guerrero-McDonald lost control of the project in 2008, although she was still a partner.
“Somewhere along the line the funding dried up [and] everybody stopped us from working,” said Morales, who has a $32,500 claim for work on the project, which the partnership is disputing.


Read more: Half-finished downtown Austin condo tower bankrupt - Austin Business Journal