Fredericksburg Texas Real Estate

Affordable Housing

2009-07-13T11:16:00.000-07:00

As the debate on the role the City of Fredericksburg should (or shouldn’t) play in facilitating the creation of affordable housing resurfaces, care should be taken not to accept the stereotypes typically associated with this important topic.

Having attended many meetings/forums, etc. on the topic (both here and in other markets) it is not uncommon to hear beneficiaries of these efforts referred to as “them”, “those people” or “that element”. We can debate the intended image those terms are meant to convey but, in the end, they are always unmasked as scare tactics employed by opponents who refuse to understand the critical nature of the debate and the importance to the community of the creation of housing stock for the full spectrum of the socio-economic ladder.

Similarly, opponents seize upon terms such as “subsidy”, “give-aways” and the like to blur the fact that public investment in private enterprise can (and demonstrably does) contribute financial payback of that investment with gains to the public that reap financial rewards for years to come.

This community has been wisely conservative its choices of activities to “subsidize”. We have chosen to invest in fireworks displays, Christmas decorations, horse racing, lawn clean-up, etc., etc. Each of these has a measurable payback to the community yet are not characterized as subsidies or give-aways.

Investing in housing that is “affordable” to a large percentage of our hard-working population will pay dividends over and above any cost to the public and well into the future. Let’s focus on the big picture and not on the convenient stereotypes. The folks who make this town work should be able to afford to live here.

2nd Quarter Real Estate Sales

2009-07-02T07:04:00.000-07:00

The information presented below is complied from data sourced via the Gillespie County Multiple Listing Service. The tracking historical sales data is grouped into categories that include: "Residential", "Rural Subdivision Lots/Tracts", Acreage, Farm/Ranch" and "City Lots". These categories are further defined by "area" (e.g. in town, out-of-town/county). 

While it can be difficult to portrait a true "apples to apples" picture of current real estate sales, the numbers speak for themselves as categorized. A lot can be read "between the lines" when discussing these figures, if you would like more detailed information on these summary comparisons, feel free to contact me at your convenience.

2nd Quarter-2009

Residential-City (Fredericksburg, TX) - The total number of homes sold in the 2nd quarter of 2009 declined 18.3% from sales reported in the 2nd quarter of 2008 (93 in '08 and 76 in '09). The average price of a sold property declined 25.4% ($280,518 in '08 vs. $209,263 in '09) and the average number of days-on-market (DOM) has increased an average of 24% (166 in 2nd qtr. 2008 vs. the current 206 days). The total dollar volume of homes sold declined 39.04%. Notably, the average list price to sale price ratio (LP/SP) has decreased from 94.09% in 2008 to the current 93.02%.

Year-to-date (vs. YTD, 2008), total units sold have decreased by 15.82%, the average price of sold units has decreased by 25%, the average DOM has increased by 12.43%, the total dollar volume sold has decreased by 43.1% and the average LP/SP ratio has remain statistically unchanged.

The number of units sold registered in the 1st quarter of 2009 has increased noticeably in the 2nd quarter (44 sold in the 1st qtr. And 76 sold in the 2nd).

Residential-County (Gillespie) - The total number of homes (w/acreage) sold in the 2nd quarter of 2009 declined 18.27% from the sales reported in the 2nd quarter of 2008 (93 in '08 vs. 76 in '09). The average price of a sold property declined 25.41% ($280,518 in '08 vs. $209,236 in '09) and the average number of DOM has increased 24.1% (166 in '08 to 206 in '09). The total dollar volume of homes sold has declined 39%. Notably, the average list price to sale price ratio (LP/SP) has decreased from 94.09% in 2008 to the current 93.02%.

Year-to-date (vs. YTD, 2008), total units sold have decreased by 24.5%, the average price of sold units has decreased by 25%, the average DOM has increased by 12.4%, the total dollar volume sold has decreased by 43% and the average LP/SP ratio has remain statistically unchanged.

The number of units sold registered in the 1st quarter of 2009 has increased noticeably in the 2nd quarter (44 sold in the 1st qtr. And 76 sold in the 2nd).

Lots-City (Fredericksburg, TX) - The total number of lots sold in the 2nd quarter of 2009 declined 47% from the sales reported in the 2nd quarter of 2008 (17 in '08 vs. 9 in '09). The average price of a sold lot declined 7.82% ($62,682 in '08 vs. $55,778 in '09) and the average DOM has increased 92.94% (241 in '08 vs. 465 in '09). The total dollar volume of lots sold has decreased 51.2%. Notably, the average LP/SP ratio has decreased by 7.57%.

Year-to-date (vs. YTD, 2008), total units sold have decreased by 64.7%, the average price of sold units has decreased by 34.71%, the average DOM has increased by 48%, the total dollar volume sold has decreased to the current 91.5%.

The number of units sold registered in the 1st quarter of 2009 has increased noticeably in the 2nd quarter (3 sold in the 1st qtr. And 9 sold in the 2nd).

Rural Subdivision Lots/Tracts - The total number of acreage lots sold in the 2nd quarter of 2009 declined 39.1% (23 in '08 vs. 14 in '09). The average price of a sold acreage lot declined 35.3% ($129,405 in '08 vs. $83,761 in '09) and the average DOM increased by 50%. The total dollar volume of acreage lots sold decreased 60.60%. Notably, the average LP/SP ratio has decreased by 3.05%.

Year-to-date (vs. YTD, 2008), total units sold have decreased by 56.86%, the average price of sold units has decreased by 34.83%, the average DOM has increased by 29%, the total dollar volume sold has decreased by 71.89.

Acreage, Farm/Ranch (All MLS Counties) - The total number of properties categorized as Farm/Ranch sold in the 2nd quarter of 2009 declined 30.95% (42 in '08 vs. 29 in '09). Average prices and DOM tend to be less significant in this category as the properties offered and sold vary tremendously. Most notably, total sales volume has decreased by 45.6% from 2nd quarter 2008 vs. 2nd quarter 2009.

Year-to-date (vs. YTD, 2008) the total number of units sold has decreased by 65.9% and the total volume sold has decreased by 62.76%

Seller Financing

2009-04-08T08:40:00.000-07:00

Offers of “seller financing” (a/k/a owner financing) have been popping up more and more in ads listing Fredericksburg, TX real estate for sale. What can this mean for a buyer or seller?

For a seller, it is a way to differentiate your offering to the buying public. While it can often be interpreted as a “hint” that you are “motivated” (not always a good card to play), in today’s challenging market, who cares! If you weren’t “motivated” your property wouldn’t be on the market in the first place.

Savvy seller’s have learned that an offer to finance a buyer’s purchase of your property can be a nice way to bank some cash (down payment), receive a pretty good return on your investment (the interest rate charged) and retain the possibility of regaining ownership of that property in the event a buyer defaults on the note. The keys, of course are the creditworthiness of the buyer and the negotiated down payment (generally 20% or more) and the interest rate (typically, slightly higher than published mortgage rates).

Of course, a creditworthy buyer will compare your terms to that they might receive from a financial institution. It is likely that (all things being equal) they will opt for bank financing. In the current lending environment, however, potential buyers with available cash and “decent” credit (i.e. not “sterling credit”) may not have the option of shopping around for financing.

The questions a seller must ask when considering this are: Do I need 100% of my cash now? What will I do with that cash if I get it all now? Do I have a mortgage to pay off? Will a buyer’s down-payment pay off my current mortgage? What kinds of competing returns can I receive on my funds?

The bottom line for seller’s is that the option to provide financing to a potential buyer sets you apart from the competition, expands your pool of potential buyers and allows you options on handling your sales proceeds.

A buyer considering negotiating for seller financing faces many questions. First and foremost is whether or not the financing offered is competitive with other, more traditional, lenders. Be sure to factor in fees, points and all the other miscellaneous fees lenders charge when comparing the bottom line. ( e.g. a seller typically won’t charge an “origination fee” so common to “traditional” lenders). The savings can be significant.

As noted, a buyer today with less than perfect credit often will not qualify for the low rates advertised (without paying substantial “buy-down” points, etc.) and seller financing may be a very legitimate (or only) option.

Flexibility and creativity are keys in selling (and buying) real estate in our current market. Fredericksburg, TX is no different. Be sure you work with an agent that is familiar with the ins and outs of all aspects of these important transactions.

1st Quarter 2009 Real Estate Sales

2009-03-31T11:35:00.000-07:00

1st Quarter-2009

• Residential-City (Fredericksburg, TX) - The total number of homes sold in the 1st quarter of 2009 declined 32.3% from sales reported in the 1st quarter of 2008 (31 in '08 and 21 in '09). The average price of a sold property declined 22.26% ($254,144 in '08 vs. $197,562 in '09) and the average number of days-on-market (DOM) has increased an average of 16% (174 in 1st qtr. 2008 vs. the current 202 days). The total dollar volume of homes sold declined 47.34%. Notably, the average list price to sale price ratio (LP/SP) has remained statistically unchanged.

• Residential-County (Gillespie) - The total number of homes (w/acreage) sold in the 1st quarter of 2009 declined 68.75% from the sales reported in the 1st quarter of 2008 (16 in '08 vs. 5 in '09). The average price of a sold property declined 28.15% ($301,031 in '08 vs. $216,300 in '09) and the average number of DOM has increased 25.3% (229 in '08 to 287 in '09). The total dollar volume of homes sold has declined 77.55%. Notably, the average LP/SP ratio has remained statistically unchanged (93% vs. 93%).

• Lots-City (Fredericksburg, TX) - The total number of lots sold in the 1st quarter of 2009 declined 82.35% from the sales reported in the 1st quarter of 2008 (17 in '08 vs. 3 in '09). The average price of a sold lot declined 69.22% ($91,679 in '08 vs. $28,217 in '09) and the average DOM has decreased 70.6% (255 in '08 vs. 75 in '09). The total dollar volume of lots sold has decreased 94.6%. Notably, the average LP/SP ratio has decreased by 4.3%. 

Note: these figures can be slightly misleading as the volume sold so far in 2009 is statistically insignificant and not readily comparable to 2008 volume.

• Rural Subdivision Lots/Tracts - The total number of acreage lots sold in the 1st quarter of 2009 declined 71.4% (28 in '08 vs. 8 in '09). The average price of a sold acreage lot declined 26% ($171,702 in '08 vs. $126,925 in '09) and the average DOM was statistically unchanged. The total dollar volume of acreage lots sold declined 78.87%. Notably, the average LP/SP ratio has decreased by 3.37%.

• Acreage, Farm/Ranch (All MLS Counties) - The total number of properties categorized as Farm/Ranch sold in the 1st quarter of 2009 declined 58.82% (34 in '08 vs. 14 in '09). Average prices and DOM tend to be less significant in this category as the properties offered and sold vary tremendously. Most notably, total sales volume has decreased by 61.41% from 1st quarter 2008 vs. 1st quarter 2009.

Selling Season?

2009-03-17T07:56:00.000-07:00

Amid the primarily bleak news continuing to pour forth about the state of our economy, we are beginning to see glimpses of ‘good” news that could herald the stirrings of a recovery. Oops, hold on. Scratch that.

News reports today are that the recession is catching up with Texas and that more “pain” is forecast. Economists are predicting that unemployment could rise to as high as 8% statewide. Gillespie County is reporting record high unemployment (a relatively respectable 4.3%) and all sales indicators for Fredericksburg TX real estate continue to give heartburn to people like me.

Of course, these are the same economists that utterly failed to “predict” the current mess we find ourselves in so I tend to take all their current predictions with a grain of salt. These folks are about as reliable as weather forecasters in my opinion. I have learned to go with what I see first-hand.

I’ll spare you the frightful statistics on sales, price reductions, etc. and simply say that it is a terrible time to be a seller of real estate but a pretty good time to be a buyer. Financing is available, tax incentives are huge (for 1st time buyers, anyway), sellers are “motivated” and inventory is plentiful.

Be forewarned; however, that agents all over town are psyching their sellers up for the “selling season”, that “traditional” time it is believed that the market is strongest (March to mid-summer). I predict that the pace of price reductions will slow noticeably as false hopes are re-infused into the Fredericksburg market and sellers are encouraged to “hold tight”.

Being the contrarian, I would opine that now is the best time to put your best price forward, to jump ahead of all the other competing properties. Arguably, “the season” does bring out more buyers and today’s buyers are incentivized in ways they haven’t been before (e.g. low interest rates, fear of other investment vehicles, tax credits, etc.) so why not take advantage of that as a seller?

Buyers in this market are all about “deals”, perceived or otherwise. If you truly want to sell, you have to stand out. Standing out today is all about price, price and price. The buyers are there, you just have to get them off the fence.

Buyers, you will be lured off that fence in various ways so be patient, but be ready.

Real estate has always been a great hedge against inflation and other economic woes. While real estate may have led us into the current mess, it is also what will lead us out of it. Values in Gillespie County/Fredericksburg, TX/the Hill Country have held up very well (thank you very much) and should be seen as a sign of the inherent and unchanging desirability of our little corner of the world.

"REDUCED"!

2009-02-20T13:27:00.000-08:00

With year-to-date Fredericksburg, TX real estate sales falling so far below the same figures from this time last year, it is interesting to note the “buzz” being proclaimed about the number and pace of price reductions on listed properties.

I continually hear from clients, etc. that prices must finally be falling as so many listings are being touted as “REDUCED”. Is a price reduction truly relevant if the property was, a) overpriced to begin with, and b) still over-priced?

While many agents were quick to begin suggesting more realistic pricing for their clients, a lot of sellers have resisted the advice and insisted on prices that do not accurately account for current market conditions.

Less informed (or less scrupulous) agents will happily accept a listing at an unrealistic price just to “have the business”. Hidden is their assumption (hope) that they can subsequently have the seller lower the price over the term of the listing.

When an agent suggesting realistic prices competes for a listing with an agent suggesting less realistic pricing the “realistic agent” must fight the urge to “get the business” and tell a client what they want to hear to do so. If, against their better judgment, they give-in and secure an unrealistically priced listing, everyone loses.

The agents lose because they then face the cost of advertising a property that won’t sell (as priced) and the sellers..well, you know. Taking it further, an agent will logically focus their best efforts on listing that will actually sell and the natural tendency is to “forget about” the overpriced one. The disservice this provides a seller is truly unethical.

So, back to the price reductions. We’ve seen over 200 so far this year (compared to about 35 or so this time last year). Does a drop in “price” equate to a drop in “value”? Remember folks, it’s all relative.

Let’s say, for example that I feel my home is worth $1,000,000 and I list it at that price. The property tax folks may have it valued at $600,000 and my neighbor just sold a house very comparable to mine for $700,000. If I “REDUCE” my price to $950,000 is that really relevant to “market value”? Hardly.

While a $50,000 price reduction may sound awfully good, if the home was over-priced to begin with, it’s really not that big of a deal. Always remember, “market value” is defined as:

“The most probable price which a property should bring a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated: (2) both parties are well informed advised, and each acting in what he considers his own best interest: (3) a reasonable time is allowed for exposure in the open market: (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property unaffected by special or creative financing or sales concessions* by anyone associated with the sale.”-National Residential Appraisal Institute

In other words, a property is worth what some is willing to pay for it AND what someone is willing to sell it for.

I’ve posted before on pricing in a down market (e.g get ahead of falling prices and you’ll be noticed first by the most buyers) and, let’s face it, the Fredericksburg, TX real estate market, while (relatively) healthy is in a “correction”. Sellers shouldn’t be fooled in to pricing that ignores that reality.

Real Estate "Stimulus"

2009-02-19T08:50:00.000-08:00

Here are six things that buyers of Fredericksburg TX real estate need to know about the freshly enacted $8,000 first-time home-buyer tax credit that is a part of the $787 billion stimulus bill that President Obama signed into law Tuesday, 2/17/09:

1. Eight grand, new buyers: The tax credit included in the economic stimulus legislation is much narrower than the $15,000 credit previously proposed. The approved credit is equivalent to 10 percent of the purchase price of the home--although it's capped at $8,000--and applies only to first-time homebuyers and principal residences. But unlike an earlier $7,500 homebuyer tax credit, this one does not have to be repaid.

2. First time buyers defined: For the purpose of this legislation, a "first-time home buyer" is someone who hasn't owned a principal residence for three years before buying a house. (The date of purchase is considered the day that the title is transferred.) That means if you've owned a vacation home--but not a principal residence--within the past three years, you would still qualify for the credit.

3. 2009 buyers only: Only those who purchase a home on or after January 1 and before December 1, 2009 are eligible for the credit. Anyone who bought a home last year won't be able to take advantage of it.

4. Income limits: The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit, that's $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits.

5. Refundable: Because the tax credit is "refundable," qualified buyers can take advantage of it even if they don't have much tax liability.

6. Recapture: Buyers have to own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government. (Exceptions will be made in certain cases, such as death or divorce.)

More “stimulus” for the real estate market is being outlined daily. Apparently, on March 4, we will have more details on what types of mortgage, bankruptcy and foreclosure relief is planned with the goal of jump-starting the economy.

Really?

2009-01-29T07:40:00.000-08:00

After just over a year of finally arriving into the 1980’s and instituting a key lockbox system for use by Fredericksburg, TX realtors, this grand experiment appears on the verge of failure. Readers may be surprise, shocked, humored or indifferent to learn that real estate practitioners in our fine community stubbornly adhere to an antiquated, inefficient and (borderline) reckless method of storing and distributing the keys necessary to facilitate the showing of real property listed for sale in Fredericksburg, TX.

To avoid the potential liability of revealing too much on how keys of listed property are stored, logged, tagged, distributed and/or collected, suffice to say that the stubborn reluctance to recognize the liability inherent with the various haphazard systems of key management employed by local offices would send any risk manager worth his salt into a major tailspin.

Having failed to make any progress with the “liability argument” much has been debated about the “efficiency argument” that holds in wonder a group of professionals who fail to place a value on the time it takes them to wander from office to office picking up and dropping off keys (not to mention the cost of the gas to do so), looking for keys that someone failed to turn in, etc. Isn’t your time, effort and frustration worth anything to you? What is this saying to your clients?

Failure on the liability and efficiency fronts turns us to the “leadership argument”. Agents dropping the system cite spotty usage as one reason they are opting out of efficiency (in favor, as it were, of liability and inefficiency). Our Board of Directors and Officers have within their power the ability to mandate usage of this system. They apparently prefer to build “consensus” and play politics rather than actually lead and make decisions that will protect the entire membership (despite themselves).

The failure to recognize liability, efficiency and/or leadership leaves us nothing left to play except, perhaps, for the “cost argument”. Agents opting out of the system cite “cost” as a concern (along with the aforementioned lack of universal implementation). We’re talking about $180/year per agent. That works out to about $0.50 per day per agent. Are they really saying they can’t see the wisdom in spending $0.50 per day to make themselves more efficient and to protect themselves and their loved ones from unspeakable liability? Really?

When times are tough, people have a tendency to cut back on what they may deem to be “luxuries”. Is a system that boosts efficiency and reduces liability a luxury? Hardly. Is $180/year going to break your bank? Do the math folks. Add up your time and the cost of your gas and multiply it by the number of times you show property in Fredericksburg, TX. $0.50 per day…really??!!

Spawning Newbies

2009-01-26T13:32:00.000-08:00

Be on the lookout for a curious phenomenon to occur as 2009 progresses in Fredericksburg, TX. As the economy stalls and leaders in Washington (and elsewhere) look for ways to stimulate both the housing markets and the overall economy, jobs will continue to be shed in the industries we’ve been hearing so much about. What will become of the workers unfortunate enough to have been put out on the street as a result of these difficult times?

If history is any guide (and it usually is) a significant number of these folks will opt in try their hand at real estate. The scandalously low barriers to entry in our profession make it all too easy for those scrambling to make ends meet (or those simply looking for a change) pick real estate as a target. After all, how hard can it be?

Everyone knows a realtor (or 20) and most are easily seduced by the seemingly easy way we are all perceived to make the big bucks. My hope is that those considering following this “easy money” will do a little homework before they get into a business that is a lot harder than it looks. They will be surprised and will perhaps have missed an opportunity to pursue something that may have been more to their liking.

The lure of being “self-employed” has its obvious temptations but it also carries the sobering reality of complete and total self-reliance. Not everyone’s personality and family/financial situation can bear the strains of no steady paycheck, no employer funded retirement, no paid vacations or sick days, etc.

For a myriad of reasons, folks seem to think that if all else fails, they’ll try real estate. Again, how hard can it be? I would ask any buyer or seller of property, however, if that is the attitude they want representing their (likely) most valuable asset.

Do you call the plumber fresh out of plumbers school out to diagnose and fix your pipes? Do you want to be your surgeons very first quadruple bypass? People look to experience in all things and should logically do so with real estate, but do they? In many, many case the answer is (illogically) no.

The recent “boom” years in Fredericksburg, TX real estate saw the membership roles of our local board of realtors swell to a number that was roughly equal to having one realtor in membership for every one deal that was consummated. With those numbers, who is getting rich? Granted, as in most businesses, the top 20% of agents did 80% of the deals but how do you, the consumer, the buyer or the seller, identify the experienced and qualified agents?

Given that the growth in the heady times could have resulted from the lure of “easy money”, could my prediction of the growth in the number of rookie agents swarming to town in the “tough times” make any sense? If you believe the media that economic recovery will have to begin with the housing markets and that any “stimulus packages” will be throwing vast amounts of money in that direction and for that result, then you can see why those looking for “change” may opt to find it in real estate. So, do you go with the rookie or with the pro?

YE 2008 Sales Data

2009-01-02T09:28:00.000-08:00

Despite the plethora of bad economic news, 2008 saw real estate in Fredericksburg TX hold its own pretty well, proof that real estate markets are “local”. This means that “national economic trends” “U.S. Housing Statistics”, the “Case/Schiller Index”, etc. are composites of what may be happening in other parts of the country but they do not account for the specifics of actual activity in our little corner of the world.

That said, the following is a recap of the Fredericksburg Texas and Gillespie County Texas real estate market as evidenced by sales and listing data provided by the Gillespie County Board of Realtors Multiple Listing Service for the year ending December 31, 2008 as compared to the same period for 2007:

• Residential-City - The total number of units sold in 2008 declined by 16.88% from 2007 and the total dollars sold declined by 18.72% ($37,211,150 in 2007 vs. $30,243,391 in 2008). The average days on market increased from 146 in 2007 to 163 in 2008 (+11.64%) and the average sold price declined from $232,570 in 2007 to $227,394 in 2008 (-2.22%). Hardest hit were sales in the range of $250-$500,000 where the number of units sold decreased by nearly 19%.

• Residential-County- The total number of units sold in 2008 declined by 9.47% from 2007 and the total dollars sold declined by 4.32% ($35,583,104 in 2007 vs. $34,046,128 in 2008). The average days on market increased from 181 in 2007 to 199 in 2008 (+9.94%) but the average sold price actually increased from $374,560 in 2007 to $395,885 in 2008 (+5.41%). This increased average can be attributed to a small spike in sales in the $750,000 to $3,000,00 ranges.

• Residential-All- Combining the figures above to view the state of the residential market for all of Gillespie County (including figures for Fredericksburg) and the total number of units sold in 2008 declined by 14.83% from 2007 and the total dollars sold declined by 16.16% ($90,715,107 in 2007 vs. $76,052,419 in 2008). The average days on market increased from 162 in 2007 to 183 in 2008 (+12.96%) and the average sold price declined from $263,707 in 2007 to $259,565 in 2008 (-1.57%).

• Lots-City- Mirroring last years’ sales, 38 units were sold. The average priced increased from $67,639 to $73,745 but the average days on market more than doubled from 164 in 2007 to 335 in 2008. This is an accurate reflection of the fact that builders dramatically reduced their “spec” building efforts throughout 2008.

• Land & Farm-All- Total unit volume decreased by 19.35% from 155 units sold in 2007 to 125 units sold in 2008 but the total dollars sold in this wide-ranging category only decreased by 3.40% (from $48,398,974 in 2007 to $46,754,249 in 2008).

All-in-all, not too bad! My belief is that efforts made by the new administration in Washington combined with historically low interest rates will work to further insulate the Texas Hill Country (in general) and Fredericksburg Texas (in particular) from the woes being experienced in other troubled markets.

Opportunity is Knocking

2008-12-31T10:05:00.000-08:00

The perfect storm of buying opportunity is upon us here in Fredericksburg, TX.

Ignoring (for a moment) the fact that prices in our area have not fallen as might reasonably be expected, total sales volume for YE 2008 is off a whopping 18.7% from the same time last year (dollar volume of single family homes w/in the City of Fredericksburg), the spread between list price and sales price has widened and inventories are at their highest level in many, many years it is easy to make the case that “now” is the time to buy real estate in Fredericksburg and/or the Texas Hill Country. Couple this trend with historically low interest rates and you have an attractive formula for successful investing.
Back briefly to prices not falling substantially. Those conditioned by either experience or the media may reasonably expect that the real estate market disasters currently befalling most of the country are sure to happen here as well. While I can attest that the local market is “correcting” it is doing so very slowly and fully reflective of the fact that local sellers simply do not “have to” sell. Very few folks here are in trouble as evidenced by the near total lack of foreclosures and short sales. As we are primarily a “discretionary market” buyers feel no pressure to buy in the Fredericksburg area. Sellers who don’t have to sell and buyers who don’t have to buy equals the current market stalemate.

Though credit markets have reportedly seized up, that is not the case in Texas (in general) or the Hill Country (in particular). Every lender I have dealt with states that they have plenty to lend. Of course there are caveats such as tighter appraisal reviews and higher down-payment requirements…always a catch! At present, a lot of the available funds are being sought by those choosing to re-finance that these ridiculous rates.

Buyers who chose to wait until prices come down more are (unwittingly) gambling that interest rates will hold steady (or drop further) as well. While one never knows these days, it’s hard to imagine rates dropping any further. What is not widely understood is the impact interest rates can have on the real monthly cost of homeownership. Even 10% drop in home prices is immediately nullified by a mere one percentage point increase in interest rates on a 30-year note.

Fortunes have been made and lost by those attempting to “time” the peaks and valleys of real estate markets. Don’t let this historic combination of low rates, weak market demand and near record supply fool you in to thinking you should wait a little longer. While I’ve predicted that prices may fall a wee bit more into the first half of 2009, interest rates are highly volatile and tend to rise a lot faster than they fall. Don’t miss the boat!

Time to Refinance Fredericksbrug, TX Property?

2008-12-10T09:31:00.000-08:00

The Federal Reserve's decision to buy up mortgaged-backed securities caused mortgage rates to fall and created new opportunities. Should you refinance your mortgage now? Before you rush to refi, take a few minutes to determine if it's the right move for you.

When does it make sense to refinance my Fredericksburg, TX Property? 

Refinancing involves starting over and applying for a new loan. Whether homeowners deal with the original lender or a new one, the new loan will pay off the old loan and the borrower then makes payments according to new loan terms.

Good reasons to refinance include getting a lower interest rate, shortening the term of the mortgage to build equity faster, lowering monthly payments or switching from an adjustable rate to a fixed-rate mortgage.

Even if you just secured a new mortgage recently, it might make sense to refinance. Homeowners should consider refinancing if, in the long run, it will save them money.
First you have to find out the cost of getting the new loan. Refinancing can cost around 2 percent to 3 percent of the total loan amount.

To determine if it will save you money, calculate your break-even point. You can calculate it by dividing the mortgage fees by the monthly savings. The answer you get tells you how many months it will take for you to break even.

If you plan on retiring in the house, strongly consider refinancing. If you plan to sell within two and a half years, it may be unwise to refinance as the payback of the cost to refinance may not be recovered.

How do you figure your monthly savings?

You'll have to get an estimate of the rate for which you'll qualify. A mortgage broker or loan officer can tell you that. Ask your Fredericksburg loan officer, or consult a mortgage calculator to determine what your principal and interest payment would be with the new loan. Don't compare that with your current mortgage payment, which likely includes a pro rata share of your property tax and insurance payments. Your payment coupon should show an itemization of your current monthly principal and interest payments. Now you can figure out how much you would save every month.

Find out if your current loan has a prepayment penalty. If it does, determine what the penalty would be if you refinance, and add that amount to your closing costs to determine your new break-even point. It might make sense to hold off on refinancing until you're clear of the prepayment penalty period.

What if you owe more than your house is worth? 

For homeowners upside down on their mortgages, refinancing probably won't be in the cards. Try to look at it from the lender's viewpoint.

Let's say you bought your home for $300,000 at the market top, but recent sales indicate your home is worth just $225,000. A neutral third-party appraiser confirms this. You owe $280,000. How can you expect the lender to give you a loan for $280,000 at more favorable terms?

The fact is, you'll likely have to pony up the difference between what you owe and what the refinancing bank is willing to lend you. If you have the cash and you expect to stay in the home for many years, then it may be worth taking this step. Eventually, Fredericksburg, TX property values will rise again, but it will take time.

The worst thing you can do is walk away from the home altogether. If you're considering foreclosure, consult an attorney. Try to avoid foreclosure if at all possible.

What if you're not “ordinary”? 

If you're self-employed, the process is a bit trickier. Fewer lenders want to deal with unconventional financial situations, but if you have a high credit score and a large down payment plus proof of your income, it's possible to find a deal.

Homeowners who have second mortgages may also run into some difficulties. Before you can refinance the first mortgage, the holder of the second mortgage must agree to subordinate the second mortgage to the new first mortgage. If that lender refuses, the homeowner must then qualify for a new first mortgage that will pay off the second.

In these cases, it's best to go to a mortgage broker rather than directly to a bank, because a broker has access to a variety of lenders that offer different loan products.

What steps do you need to take? 

The fact is, you need two stellar assets these days before you can refinance: an excellent credit score and enough equity in your home. If you have at least 10 percent equity in your home -- ideally 20 percent or more -- or some spare cash to fill in the difference between the amount owed and the amount you can borrow, start the process by checking your current mortgage note to be sure there's no prepayment penalty.

Next, get a copy of your credit report and check your credit. These days most lenders are requiring good credit scores, though some programs exist to help out borrowers with mediocre scores. The problem is that those borrowers likely will have to pay a surcharge or higher interest rates. Under these circumstances, you need to decide if it makes sense to refinance.

Besides abundant equity and a good credit score, lenders will also want you to be able to document your employment, income and assets. Lenders have abandoned the practice of offering loans without verifying this information. If you meet all of those requirements, it's time to start shopping for a loan. You can chose to either work with your current lender or find a new one.

Be aware that sticking with the original lender may be easier and less expensive. The lender may not need a new property appraisal, a title search or other items that would normally be required on a new loan. That lender should also be willing to offer a better price because it's easier and more cost-effective to keep a good customer than it is to spend marketing dollars finding a new one.

That said, it never hurts to check out the competition. Start shopping by comparing the rates of local Fredericksburg, TX lenders.

If you do decide to shop around, make sure that you do all your shopping within a 30-day time frame so as not to ding your credit score with too many inquiries.

Thanks to the plan from the Federal Reserve to buy up mortgage-backed securities, rates are lower and the refinance business is booming again. For Fredericksburg homeowners who qualify, now may be the time to trade in that old mortgage for a better one.

Buying Investment Property

2008-12-10T06:55:00.000-08:00

When the stock market is zooming up and down like a theme-park ride, the solidity and tangibility of Fredericksbrug, TX real estate as an investment is increasingly appealing to many people.

If you are considering becoming the new owner of an investment property, some things about today's economy are in your favor. More people are renting, because it's harder to qualify for a mortgage and because some people are genuinely scared to buy a home they might believe is still overpriced. So there is a large pool of potential tenants. And there are many houses (and a scattering of duplexes) to choose from because so many properties are on the market.

This is not an investment for the faint of heart. Being a landlord requires a good deal of time and money, possibly over many years. You need to be willing to make repairs or hire someone to do so. You have to be responsible for collecting rent, dealing with unruly tenants and finding new tenants when vacancies occur.

For Lloyd Lindsay, 25 years of owning investment properties has had more positives than negatives. "I bought this house for retirement income," Lindsay said. "For 25 years it's been a good investment."

If you're thinking of taking the plunge, here are some tips to consider:

1. Sell your house, buy a duplex, rent out one half of the duplex and live in the other half. This is a great way to start out as an investor/manager. Learn how to manage property, collect rent and take care of needed repairs in the first few years. Also, just by moving from your house to a duplex, you immediately have someone else paying a portion of the mortgage. Fredericksburg is chronically short of duplexes for sale, so in this option will require some patience.

2. Buy a single-family home and rent it out. Experiment with one nice single-family home that is close to where you live. You will have to be at the property frequently to collect rent or to make repairs, and it is easier and simpler if it is close by. In a market like Fredericksburg, remember that location is key. Better-located properties rent for more and rent more quickly (they also typically cost more to buy). The closer-in properties historically hold their value better and are less prone to the normal market cycles.

3. As a general rule in the Fredericksburg area, expect to pay $160,000 for a starter rental house and about $185,000 for a duplex. Duplexes in more expensive neighborhoods can cost $300,000 or more.

4. Do your homework. The most important part of the homework is figuring out what you can collect for rent and whether this will cover your expenses as a property owner. You can only get for rent what the neighborhood will bear. A good agent can help you figure out what a reasonable rent would be in your neighborhood. You can also drive around and call the numbers on signs advertising "duplex for rent" or "home for lease" to help you get a feel for what rents are like. Also, check the Fredericksburg Standard real estate section weekly.

5. Calculate your expenses as a property owner. These will be your mortgage payment, property taxes, insurance, any possible homeowners association fees, maintenance, repairs, any utilities you decide to cover as the landlord, and advertising costs when you have a vacancy. You might need to add property management fees to this amount if you are not planning to manage the property yourself. Figure out whether your rental income will cover all of this, as well as leave you some extra money each month that you can put in a savings account to cover future repairs. Again, a good investment property agent can help you calculate these figures. Don’t forget to factor in a reasonable appreciation figure as well as the usual tax advantages of owning real estate.

6. Consider a duplex over a single-family home because there will probably always be some rent coming in. If you own a single-family home and your tenants move out, it might take several months to find another tenant, and in the meantime you will have to cover all of your property expenses out of your own pocket.

7. Be aware that because credit is harder to find in today's tight market, most lenders are requiring a 20 percent down payment for investment properties.

8. Be a realist. Be very conservative with your expectations of how your property will appreciate. And unless you are handy with repairs, buy a property that's in above-average condition. Repairs can hurt your cash flow.

9. Finally, it's always good to have an exit strategy. If it's not working out, you can hire a professional to manage it or you can sell it.

Apartments or Houses for Fredericksburg, TX

2008-11-25T08:01:00.000-08:00

As the City of Fredericksburg TX continues to explore solutions to the perceived lack of affordable housing, clear and convincing evidence exists that there is, indeed, a need for this type of product. All one has to do is look at statistics provided by the U.S. Census Bureau, the Texas State Demographer, FISD, the Gillespie County MLS and the Bureau of Labor Statistics (among others) to see that prices continue to trend higher while poverty levels are increasing and wages are not keeping pace with inflation (not to mention home prices).

While some may argue that meeting this demand by granting tax-payer funded incentives to private developers is a bad idea, it has been proven time and again that it is the only idea that works. The “do nothing” alternative presents risks to the community in the form of exacerbating the chronic labor shortages faced by local employers and will (by default) encourage more low-income multi-family development. If people need a roof over their heads, someone will provide it. The question for our community is what kind of roofs do we want to see and live with.

Multi-family developments are certainly not bad things. We’ve all lived in an apartment or two (or eight) in our time. Recognize however that the “business of apartments” has changed dramatically since most of us most likely made that housing choice. Large-scale apartment communities (50+ units) fall into two categories these days; “subsidized” and “securitized”. Subsidized units typically involve some kind of government funding and come with “income qualifying” strings attached. Securitized units are “free market” in the sense that they will charge the highest rates possible (and spend the least in maintenance practicable) to achieve the highest returns for their publicly traded REIT’s.

While each type of unit serves its targeted demographic well, they effectively bookend the low and high end of any given market. What about the “middle”? Who serves that? Who has the ability to serve that? The answer to that is a whole other post, so I’ll stick to my point.

As in the debate on affordable, single-family housing, apartment developers clearly consider land cost and income demographics in their development equations. High land prices and the lower the area incomes virtually assure more projects aimed at the lower end of the apartment spectrum (subsidized). Again, there is nothing wrong with someone meeting an identifiable demand; the question for the community is “how do we want that demand to be met?”

Coming full-circle, the alternative to more taxpayer subsidized multi-family development (yes, local incentives are given to these projects too) is properly incentivized single-family residential development.

“Affordability” can be defined by assessing local income levels, current underwriting criteria and the availability to downpayment assistance programs. Once defined, affordable mortgage amounts can be deduced resulting in target home prices. The cost to construct certain types and configuration of dwellings can be assessed and subtracted to identify the resulting market lot price targets. None of this can be accurately calculated, however, unless and until a clear message is delivered from city officials as to incentive packages that will be granted to projects meeting established criteria.

Is it in the best interest of the community to incentivized development in return for stabilizing the local labor market and/or slowing the spread of taxpayer supported multi-family development? In the special place that is Fredericksburg, TX, I would answer with a resounding YES!

What about those who say “well Jeff, not everyone can afford a house”, or “hey, I had to live in many apartments and save my money for years before I could afford a home”? These are certainly valid statements and are (by the way) very reflective of my own experiences.

These arguments; however, ignore the fact that times have changed. Home prices and inflation are far outpacing the real growth in wages. I suspect that many of us who make these arguments couldn’t achieve what we managed to do then, today.

Foreclosures and Short Sales in Fredericksburg TX

2008-11-13T12:30:00.000-08:00

With the recent state of the national economy, the question of foreclosures in the Hill Country, Fredericksburg, Mason, Llano, etc. often comes up. Is it a “problem” in our area? Are there opportunities for investors to pick up “bargains” at foreclosure sales?

While the Fredericksbrurg, TX and Hill Country markets are not immune to the foreclosure phenomenon, we have to a very large degree not been subject to the rash of forced sales more common on the east and west coasts. Have there been foreclosures? Sure. Very many? Not really.

Lenders in our area have tended heavily towards the conservative. Additionally, Texas home equity lending laws have been a tremendous help in preventing the kind of ridiculous, sub-prime lending you hear so much about in the media today.

If you believe, however, that our economy will continue to suffer through a quarter (or several quarters) of recession, it could benefit you to know the basic of foreclosure law should you (as a property owner) find yourself faced with financial hardship. Conversely, fortunes have been made by savvy investors who follow foreclosure trends and are able to acquire real property at “discounted” prices.

The nationwide foreclosure boom has focused more attention on a transaction referred to as a “short sale”. In an attempt to avoid the time-consuming (and often times expensive) foreclosure process, lenders are increasingly agreeing to “short sell” a mortgaged property.

By agreeing to sell the property for less than the current balance owed on the note, a lender “comes up short” on recovering the full amount. The “short” part of the term also applies to the timeline generally associated with the process as these attempts are often limited to an amount of days roughly equivalent to the time it take to process a “regular” foreclosure. A “short sale” can be a win-win for the property owner and the lender. ‘Short sale” properties are often listed with realtors and heavily promoted.

Are “short sales” common in Fredericksburg and/or the Hill Country? Not as common as in the major metropolitan areas, but they do occur. It is my opinion that this process will become increasingly more frequent as our market corrects and lenders and borrowers opt to try an avoid foreclosures.

The Debate Continues

2008-11-11T15:04:00.000-08:00

The debate on affordable housing in Fredericksburg, TX took two steps forward and a half steps back at last weeks Planning & Zoning hearing. On the agenda were proposed changes to several existing zoning ordinance classifications, the creation of a new one and the re-zoning of a neighbor to allow for small lots and more density.

Having apparently received enough critical feedback from neighbors duly notified of the impending discussions, P&Z wisely opted to separate the discussion on the zoning classification changes/creation and the re-zoning of the neighborhood for fear that, if considered as a package, the issue would go down in total defeat.

Their plan worked in that some significant changes to existing rules were amended and a new classification (R-1A) was approved by P&Z. These proposed changes/additions now move to the 12/1 City Council agenda for review, discussion and a vote.

The proposed re-zoning of the Walch Terrace neighborhood was roundly criticized by those potentially affected. Clearly seeing the writing on the wall, P&Z requested that city staff withdraw this proposal which, of course, they did. Score one for the neighborhood!

This agenda was devised by city staff, P&Z and (to some degree) City Council at the behest of the Affordable Housing Task Force as a means of taking a critical first step towards removing various regulations from the path of affordable development. The goal of these changes was to encourage “infill” housing into existing neighborhoods by encouraging lot division and increased building coverage.

While it is my personal opinion that these measures will make little difference in “available dirt” becoming more “affordable”, they do stand to increase density in the city core and perhaps minimally affect “suburbanization”.

These steps are progress in the long road to achieving the stated aim of these various committees, task forces, council’s, etc. (to allow for more “affordable housing”). Each public official and task force member should be congratulated on the partial success of this effort. More has been accomplished in the last several months than has in the last dozen years.

More steps are needed, however, and it is my hope that collective wisdom involved in the process are not disheartened by the one “defeat” resultant from this meeting. It was a bad idea, poorly executed. You did the right thing by pulling it. Take your licks and keep on movin’.

Unless and until we define what “affordable” means to our community and realistically assess the true demand for this product, I don’t see how we can craft future incentive packages to encourage real progress. Unless and until we are ready to recognize that the “waiver” of a fee not currently being collected cannot logically be termed as a “giveaway” and unless and until we realize that the potential expansion of the tax base far outweighs any incentives granted, unless and until we acknowledge that “affordability” does not end with the purchase price (but rather includes maintenance, sustainability, efficiency, utilities, taxes, etc.) how can we make further progress?

Hold On To Your Wallet

2008-10-29T12:37:00.000-07:00

Hold on to your wallets people. The election, taxes, “the bailout”, interest rates, “the credit crisis”, blah, blah, blah. It all adds to the disturbing trend in real estate towards higher prices (resulting from higher costs). Just as prices should be falling, circumstances seem to be conspiring to prevent just that. This is interestingly opposite of that whole supply and demand thing we’ve all learned about.

The increased cost to borrow and the (rightfully) more stringent underwriting standards have reduced the pool of potential buyers yet sellers have not keyed in on this fact. Ever optimistic, sellers continue to hold out for last years prices offered to fewer buyers using more expensive money and get upset with their agents because their properties don’t sell.

Seller’s of non-homestead assets are almost certainly facing a higher capital gains rate in the next administration. What are they waiting for?

This resistance to what should be a natural downward movement on prices (costs) is being further exacerbated by whoever it is that send down the International Residential (Building) Code from on high. Did you know that homes built after 1/1/11 will be required to have fire sprinkler systems? This new government mandate (largely un-reported I might add) will add an estimated average of $1.61/s.f. of cost to a new home.

Believe me, my years of commercial property management experience (sprinklers are common, and necessary, in commercial structures) shows me that pressurized water pipes installed in ceilings will eventually leak. Note too that commercial ceilings most often consist of lay-in tiles that provide easy access to MEP systems. Conventional homes, of course, use sheetrock ceilings that are as inaccessible as they are expensive and time-consuming to repair.

While not mandated for existing homes or remodeling projects, the “safety” argument holds little sway with me. I suppose a small saving grace could be slightly reduced insurance premiums. This is clearly another instance of big brother knowing what’s best and shoving it down our throats. When will we say “enough is enough”?

Fredericksburg, TX real estate is expensive enough as it is yet I still hold out hope that sanity will rule the day and the market will do what markets are supposed to do…adjust and correct. The unabashed capitalist, free-market guy that I am can only pray that big brother (in all its shapes and forms) decides to just stay out of our way.

What Do We Do Now?

2008-10-15T14:29:00.000-07:00

I’ve been repeatedly asked what it is that real estate agents do when the market is “in the toilet” as it appears to have been/is/will be.

My first response is that things are not as bad here in Fredericksburg as they may first appear. I tell people not to listen too much to the media and the talk about the “nation real estate market” as there is no such beast. All real estate markets are local.

While the “credit crisis” may have placed a damper on those buyers with “credit problems” there is no lack of credit for appropriately qualified buyers (e.g. buyers that have a demonstrable ability to pay back the loan).

Those buyers prescient enough to maintain good credit and a store of cash for higher down-payments are also wise enough to wait until the sellers that have to seller (vs. sellers who merely would like to sell) drop their prices to a point that these buyers will interpret to be “the bottom”. If and when that happens, activity will increase.

My message in this to sellers is that if your truly want to sell (or need to sell) there are plenty of buyers out there…at the right price. The sooner you get to that price the better off you’ll likely be.

Back to the original question of what we do with our time. Many agents will opt for vacations or completing that home “honey-do” list or simply sit around and wait for the phone to ring. Others will cold call and prospect for business and still others may quit the business altogether.

I won’t tell you what I do because then all my competition will do it too. Suffice to say that I’m not sitting on my hands. My overall goal is to position myself and the services I provide to stand further and further ahead of what others may be doing. I’ll be creating opportunities rather than waiting from them to present themselves.

There will be no whining or complaining about the Dow, Lehmann Brothers, the strength of the dollar or the “bailout”, none of that is within my ability to control (though it should be!). No standing around complaining about the inevitable tax increases and no standing around with my hand out asking Uncle Sam for help.

Improving myself and the services I provide my clients is what will carry me out of the “slump” and afford some nice, juicy returns for savvy buyers looking at opportunities in Fredericksburg TX Real Estate.

3rd Quarter Sales Update

2008-10-01T08:58:00.000-07:00

As September ends and we begin what all signs point to will be a dismal 4th quarter, some interesting YTD multiple listing service market indicators (Gillepsie County properties only):

• There are 852 active listings for sale. In 2008 we have averaged 33 sales per month which leads to the revelation that we currently have nearly a 26-month supply of inventory on hand. Recall that previous posts opine that a market “in equilibrium” typically has a 6-month supply of inventory.

• New listings are up almost 40% from the same time last year.

• The shear number of price reductions YTD is up a telling 230%! While this may indicate that sellers are finally reading the writing on the wall, it could also mean, given the still anemic sales YTD, that prices are still too high as these decreases have not substantially lured buyers from the sidelines. A deep look shows that most homes that have sold reveal one or more price reductions in the listing history before a sale was consummated.

• The number of sold properties has hit a 5 year low.

• The total dollar volume of sold properties has hit a 4 year low. Interestingly, the average prices of sold properties have not dropped as much as these figures may indicate (see previous post on 3rd Qtr. Sales).

Despite the media doom and gloom, election-year uncertainty (yes, taxes are going to increase….you head it here first!) and Wall Street “rescues” all is not lost for the Texas Hill Country. The Fredericksburg area has long been a desirable option for retirees, second-homers, investors, etc. and the fundamentals of this attraction (location, climate, scenery, etc.) have not changed.

While we all may have enjoyed, profited from and been taxed on our decisions to invest in Fredericksburg TX Real Estate, our run-up in prices was no where near what it had been in other parts of the country. Prices will level-off, credit will again flow, the sun will rise, etc., etc. Hang in there!

What the *#&@ ?

2008-09-22T14:36:00.000-07:00

What does all the recent financial turmoil mean to Fredericksburg Texas real estate? The short answer is, I can only guess but it’s not likely to be pretty.

Federal bailouts, AIG, Lehman Brothers, Merrill Lynch, WAMU, etc., etc. They stalwarts of our financial industry seem to be dropping like flies. With this trouble (perhaps, in part, because of it) comes a serious lack of credit available to finance the purchase of real estate. While it was the abundance of “easy credit” that got us in to this mess, it will likely be the nearly complete lack of credit that makes it all worse.

Buyers with good credit and lots of cash for a down-payment will be fine. But then, that was never the issue was it? We thought that Congress/the feds were all making our lives better by loosening the purse strings and letting the mortgages flow. No doc loans, no money down, no income verification and all that. Who thought it was a good idea to lend billions of dollars to folks who could never pay it back?

We as real estate agents played along, only too happy for that quick and easy sale. To borrow, paraphrase and de-politicize a favorite recent line, “the chickens have come home to roost.” Now what?

My crystal ball tells me prices will continue to drop. Great news for buyers, not so much for sellers. Financing for us regular folks will cease to exist for the next several months. The rich will get richer as the Feds begin to auction off the bad loans of the various institutions to hedge funds who will happily pay for 30%-50% on the dollar. The Feds will then sell off foreclosed assets for less than that. See, I remember the late 80’s. I worked for the FDIC and was a part of disposing of hundreds of millions of dollars worth of real estate for tens of millions of dollars. This is very “déjà-vu”.

If you happen to be liquid right now, the coming months will be a bonanza of opportunities to load up on “distressed” assets and bank them for the inevitable turn-around. Things will get better, they always do. New fortunes will be made.
You are witnessing perhaps the greatest “cycle” our industry will see for another generation. This mess will make the 80’s look like a day in the park in many areas of the county.

Will this decimate the Hill Country and Fredericksburg the way it will (has), say California, Michigan, Flordia, etc.? No, it won’t. I take some solace in that we Texans may have learned a little from the 80’s. While we enjoyed some nice appreciation, we didn’t go nuts. That will be our saving grace. Relatively speaking, we didn’t climb too high so we won’t have far to fall.
Are we in the Hill Country/Fredericksburg at the bottom yet? I don’t think so but it will all depend on how the availability of credit is restored as a part of the latest bailout scheme. As I’ve said before, we’ll be fine. It may be slow for a bit but I have seen few sign of “forced selling” and that bodes well for all of us.

Two pieces of contradictory advice (and remember, it’s worth what you’re paying for it): Seller’s, lower your prices a bit but don’t panic, hold on a little longer. Liquid buyers, look to more distressed markets for your long-term wealth building plays (yes, I can help you with that) and buy in Fredericksburg with the knowledge that your money will be pretty safe in the long run. The rest of us, watch and learn. My boldest prediction is that we will see this all happen again within the next 15-20 years….

3rd Quarter Sales

2008-09-03T12:33:00.000-07:00

As the third quarter for home sales comes to a close in Fredericksburg, TX it is readily apparent that the “national housing crisis” has had a measurable effect on the local market. Whether through lack of available financing, overpricing or just plain old psychology buyers are buying fewer and less costly homes in Fredericksburg.

The analysis that follows is based on MLS data for the period 1/1/07 through 8/31/07 vs. 1/1/08 through 8/31/08 and only represents homes sold within the city limits of Fredericksburg, TX:

• The Median Sold Home Price is down 2.55% ($215,500 vs. $210,000);
• The Average Sold Price is also down by 0.9% ($233,222 vs. $231,100);
• The average number of days on market has increased by 3.4% (148 days vs. 153 days);
• The total dollar volume closed YTD has decreased by 7.10%;
• While 2007 evidenced shows that nearly 70% of properties purchased involved financing (other than cash), only 60% YTD for 2008 involved financing. This could be interpreted as evidence of the increasingly difficult financing environment.

Clearly the market has cooled somewhat but we have yet to face the problems so commonly reported on the nightly newscasts. The good news is that Fredericksburg’s economy remains among the healthiest in the State of Texas.

Anecdotal evidence supports the theory that high gas prices over the recent summer months kept folks closer to home. Our convenience to San Antonio, Austin, Houston, Dallas, etc. played well into the new economics of summer “stay-cations”. Only time will tell if tax receipts bear this out.

Our economic fundamentals remain strong and the draw of the Hill Country has not lessened. We stand poised for a sustainable recovery. The $64,000 question is when will that happen?

I will never be mistaken for an economist but my crystal ball tells me that real estate sales will continue to lag behind the “boom” years of 2003-2006. The continuing shake-out on Wall Street and our lending institutions will continue to make funds scarce for all but the most highly qualified buyers.

Buyers that do have cash, sizable down-payments and or pre-arranged financing will continue to see asking prices soften a bit and will see the spread between list prices and sales prices continue to grow.

Sellers should heed the trends noted above and expect longer times on market and lower actual sales prices (prices further restricted by appraisals required by lenders). Jumping ahead of these documented trends will serve you well.

Hill Country Wind Farms

2008-08-26T14:18:00.000-07:00

Various firms investigating the economic viability of placing “wind farms” in the Hill Country (Gillespie County) prompted the formation of the Save Our Scenic Hill Country Environment alliance (for more, visit www.soshillcountry.org ). The flowing article (re-printed from the August 26th Austin American-Statesman is sure to add fuel to the debate on wind farms near Fredericksburg, Texas

Court sides with wind farm in suit by landowners
Neighbors called 400-foot turbines' 'aesthetic impact' a nuisance.
By Robert Elder  AMERICAN-STATESMAN STAFF  Tuesday, August 26, 2008

A state appellate court has handed a victory to the wind energy business in Texas in a closely watched "nuisance" lawsuit brought by West Texas landowners.

The 11th Court of Appeals in Eastland last week upheld a district court judgment against landowners who had sued FPL Energy LLC over the company's massive Horse Hollow wind farm in Taylor County. The jury had found that the wind turbines were not a nuisance to neighbors and rejected their claim for damages.

Horse Hollow is one of the world's largest wind-generating facilities, with about 425 turbines spread over more than 50,000 acres of land southwest of Abilene.

Before trial, the judge rejected the landowners' claims for damages based on the "aesthetic impact" of the 400-foot turbines. The jury was the first to hear a nuisance claims suit against wind farms in Texas.

The appeals court affirmation said "Texas case law recognizes few restrictions on the lawful use of property."

The ruling "is going to kill all the arguments about filing a lawsuit because you don't like the way (a turbine) looks," said Dallas lawyer Trey Cox, the lead counsel for FPL Energy, a subsidiary of Juno Beach, Fla., utility FPL Group Inc.

Disputes over the noise of turbines or their environmental impact shouldn't be affected by the ruling. Cox predicted: "That's something you can objectively fight about in court. But the issue of what's pretty and what's ugly, we can't argue about that."

Steve Thompson, the Houston lawyer who represented the Abilene-area landowners, did not return a message Monday.

The plaintiffs didn't contend that FPL's operations were illegal, but they said a legal business can be considered a nuisance if it's abnormal and out of place with its surroundings.

The 11th Court ruling, written by Justice Rick Strange, noted that several Texas courts have accepted the argument, but in cases where the nuisance had occurred from things such as flooding or odors.

The appellate ruling was the second win for wind projects this month. Earlier, U.S. District Judge Lee Yeakel of Austin said he would dismiss a suit that sought to stop further construction of two wind power projects along the Gulf Coast in Kenedy County. The projects are expected to place more than 600 turbines on 60,000 acres near Laguna Madre, south of Corpus Christi.

Yeakel has not yet issued his final order in the case.

The Coastal Habitat Alliance, an environmental group that includes the King Ranch, filed the suit, saying the turbines could kill untold numbers of migratory birds and damage the bay. The suit sought to overturn the decision by the Texas General Land Office to allow the projects to be built without environmental review or input from the public.

Affordability Continued

2008-08-12T13:42:00.000-07:00

The Affordable Housing Task Force (Fredericksburg, TX) provided its report and recommendations to the City Council on 8/4/08. While I was unable to attend the meeting/presentation the Fredericksburg Standard provided a lengthy (hopefully accurate) report of the latest in the affordable housing soap opera. I am endeavoring to obtain a copy of the report so stay tuned for any updates/adjustments, etc. to this commentary.

Predictably, the Task Force report is loaded with consultant double-speak (big red flag!) with recommendations falling into three major categories: “Entity, Development and Communication” (huh?). To sum it up, they are recommending the following (each will be addressed by me in turn): that the City of Fredericksburg form a Community Development Corporation; that Planning and Zoning hold joint workshops to establish new language and policies and that the community needs to be well-informed of these efforts.

I suppose this is a respectable “first step” but Council and the Task Force had hopes high that their report would recommend concrete solutions not just more study/workshops and “communication”. Tentative half-measures such as addressing lot sizes were mentioned but there was a glaring lack of detail on what it is going to take from the city to solve this community-wide concern.

Note: A long-planned, Planning and Zoning approved “affordable” subdivision was put on hold buy Council recently pending the Task Force results mentioned herein and subsequent actions to be considered as a result of this report. Given its apparent contents, I’m sure the developer is mystified as to what any of this means to his efforts. Ironically, the developer/builder of this proposed affordable housing PUD is named Timeless Luxury Homes.

IMHO, forming a Community Development Corporation (CDC) as a charitable, tax exempt, non-profit 501(c)3 entity places city government square in the path of the solution rather than moving it out of the way to allow market factors to solve the problem. A city-sponsored CDC (along with all the politics and bureaucracy that implies) would, in effect, be competing with market-based solutions (e.g. a private CDC) for the race to develop “affordable housing”. What private developer in their right mind will attempt competing with a taxpayer-supported entity that controls all the rules of the game? Answer: none. By default the city and its well-intentioned CDC will become the sole source for “affordable housing” in Fredericksburg, TX. If the political/taxpayer will to pursue this course exists, I have yet to see it.

Joint workshops? Hmmm, I like many others, was under the impression that this task force would be suggesting multiple lines of attack against planning and zoning rules and regulations that impeded progress in this arena. Granted, they did touch on lot size as being a factor. Simply put, anything mandated by zoning and subdivision regulations is a significant cost to a developer. These costs are passed on to the end consumer in the form of higher lot and home prices. Mandates regarding street width, curbs, gutters, sidewalks, storm drains, landscaping, lot sizes, building setbacks, density, parking, impervious cover, etc., etc. all add to the cost of development and should all be “on the table” for discussion/revision.

Informing the community? Is there a more obvious CYA than that? The implication is that we have to inform everyone and get input from all areas lest “leadership” on the issue be off the mark or called into question. They of course failed to mention that the real estate, banking, development, etc. communities (stakeholders I believe they call us) have yet to be allowed input. We are told that is coming.

I’ve no doubt that the city leaders and the citizens of Fredericksburg, TX have their hearts in the right place and clearly see the need for “affordable housing”. What has been absent in this whole discussion (or I’ve missed it so far) has been any consistent definition of what constitutes “affordable” and any concrete evidence of a quantifiable demand for this product. A rational, risk-taking developer is unlikely to roll the dice without clarity of the rules from the city and without verifiable market evidence of a legitimate demand.

Affordability Impasse

2008-07-31T10:27:00.000-07:00

While the negotiations between Timeless Luxury Homes and the City of Fredericksburg to provide “affordable housing” via the Barons Crossing proposed PUD reached an impasse last Friday, everyone involved in this process should be congratulated on their hard work. The silver lining is that there are some very smart, very dedicated people trying to clear the regulatory burdens that stand between the problem and its resolution.

It remains clear that much needs to be addressed within the regulatory environment for the private sector to have a clear understanding of the rules under which they are challenged to bring a needed product to the market. While eagerly awaiting the recommendations of the affordable housing subcommittee task force, it is clear from listening to the discussions, thought processes, etc. I have been privy to that while many options remain to be explored, the right questions are in fact being asked.

Anyone with an interest in this important community discussion should be aware that there is only so much “government” can/should do to help. Short of going into the business of providing a “government product” (not an attractive solution at present) it will take a level of commitment and participation from everyone involved in the development process to solve the problem.

Upon receiving clarity and commitment to a new set of “rules for the game” (subd. requirements, incentives, waivers, etc.) land owners, developers, realtors, bankers, attorneys, title companies, surveyors, land planners, engineers, architects, road builders, material providers, homebuilders, appraisers, etc. must begin to think beyond the traditional development models to create scenarios that are conducive to placing a product on the ground in Fredericksburg Texas that is truly affordable both in the present and in the future. Its being done all over the country, we can do it too.

Mortgage Rates Near One Year High

2008-07-24T08:57:00.000-07:00

Further echoing the messages from previous posts, the real estate market in Fredericksburg, Texas continues to face downward pressure as rising interest affect both the availability of credit and the ability of many borrowers (buyers) to access it. With tighter, more expensive money as the rule, buying power is reduced and prices (by necessity) must continue to fall.

All is not doom and gloom however. The good news is that there appears to be plenty of buyers still searching for their Fredericksburg Texas dream property so sellers should not panic. Sellers should, however, be aware of factors affecting their audience (interest rates, increased competition, etc.) and set (or re-set) their expectations accordingly.

Clearly the real estate market in our community is experiencing an “adjustment” but this is simply a sign that market factors are at work balancing the supply and demand and that all is working as it should.

Mortgage Rates Near a Year High
By RUTH SIMON and JAMES R. HAGERTY
July 23, 2008; Wall Street Journal Page C14

Home-mortgage rates are nearing their highest levels in a year, adding to pressures on the already weak housing market.

Rates on conforming 30-year fixed-rate mortgages rose by nearly 0.40 percentage point in the past week to an average of 6.71%, according to HSH Associates in Pompton Plains, N.J. Rates on jumbo loans, which are too big to be eligible for purchase by Fannie Mae or Freddie Mac, currently average 7.84%.

The higher rates are making it more difficult for borrowers to refinance and putting another crimp on weak home sales. "It's a tough market and rates going up isn't helping it," said Steve Walsh, a mortgage broker in Scottsdale, Ariz.

Mortgage rates typically move in line with rates on 10-year Treasurys. Treasury rates have risen, but so has the spread between rates on 30-year mortgages and 10-year Treasurys, said Nicholas Strand, a mortgage strategist at Barclays Capital.

Banks set their interest rates on mortgages based on demand for those loans from investors, including Fannie Mae and Freddie Mac. When demand is weaker, they must offer investors a higher interest rate.

Walter Schmidt, a senior vice president at FTN Financial Capital Markets in Chicago, said the latest increase largely reflects fears that Fannie Mae and Freddie Mac wouldn't be able to buy as many mortgages in the months ahead as they have recently. The two companies are the biggest buyers of mortgages and related securities. Both are facing heavy losses on defaults, and investors believe they probably will have to raise large amounts of capital to cope with those losses.

Freddie added to jitters last week by saying it might sell some mortgage securities to reduce capital needs. And some smaller Asian banks have been selling mortgage securities, said Arthur Frank, a director at Deutsche Bank Securities in New York.