AUSTIN HOME SALES

Area home sales jump, fueled by tax credit
By Shonda Novak
AMERICAN-STATESMAN STAFF
Wednesday, October 21, 2009

Existing home sales in Central Texas rose 6.4 percent in September, the first year-over-year increase in more than two years, and the median sales price also was up, rising 2 percent to $185,250, the Austin Board of Realtors reported Tuesday.

Sales were buoyed by factors including a federal tax credit of up to $8,000 for eligible first-time homebuyers and mortgage interest rates that are hovering around 5 percent.

The 1,780 sales last month were up from 1,748 in August and up from 1,673 in September 2008. The number of sales due to close in October was up 24 percent from a year ago, an indication that the tax credit is continuing to spur sales, real estate agents and experts say.

With pending sales up and prices stabilizing, it seems "to indicate a market that is beginning to recover," said Charles Heimsath, an Austin real estate consultant, although he predicts "a slow ascent into recovery over the next 12 to 18 months."

Heimsath and other experts have cautioned that the housing market, locally and nationally, could lose steam if the tax credit is not renewed, although there are proposals in Congress to extend or broaden it.

"Still, it does appear the worst of the housing downturn is behind us, although it may be some time before we see a marked turn upward," said D'Ann Petersen, an economist with the Federal Reserve Bank of Dallas, adding that she expects "a slow, prolonged recovery."

Nearly half the sales in September were for homes costing between $100,000 and $199,999 — a typical price range for a first-time home.

Nick Teplitz moved to Austin from Los Angeles in late May, drawn by the city's reputation as a "hip, fun city" and lower housing costs than in California.

He said the tax credit was a factor in his purchase of a unit at 2020 Congress, an apartment building that was converted to condominiums on South Congress Avenue.

Teplitz, a writer, closed on his condo June 30, paying under $100,000 for a one-bedroom unit.

Instead of "flushing $2,000 a month down the toilet" on rent in Los Angeles, Teplitz, 32, found he could own his home in Austin for one-third that much.

He said he thinks the tax credit should be extended, because it's "definitely going to keep the market afloat right now ... and keep people buying."

Jay Gohil, chairman of the real estate board, said the tax credit is likely to feed sales into November as buyers scramble to make the deadline.

The credit was passed earlier this year as part of the federal stimulus package. It provides a 10 percent credit, up to $8,000, for first-time buyers and those who have not owned a home in the previous three years. It is available to single buyers who make less than $75,000 a year and couples who make $150,000 or less.

Through September, the 14,286 home sales were down 14 percent from the same nine months of 2008, and the median price was unchanged, at $190,000.

But home sales have been slowly improving this year along with the economy, spurred by the tax credit and low mortgage rates.

Nell Hanson, a real estate agent with JB Goodwin Co., said the company "has had a huge influx of buyers who want to use the tax credit." Although an extension of the credit would be beneficial, "the low interest rates and the potential rise in the median price in Austin for 2010 will keep sales going up," Hanson said.

Greg Cooper, CEO of Goldwasser Real Estate in Austin, said "it would be suicide for the (housing) market" if the tax credit isn't renewed.

"I can't see them (Congress) taking it away right now," Cooper said, at least not until job growth comes back and unemployment eases.

Cooper said sales at his firm were up 51 percent in September over a year earlier, and "if we close what we have pending," October's sales will be triple that of last October's.

"Obviously, the stimulus is clearly helping," Cooper said.

Steve Cochrane, managing director at Moody's Economy.com, an economic forecasting and consulting firm, said he thinks that there is "a better than even chance" the credit will be renewed. He noted that there are positive ripple effects, as owners sell their entry-level homes to first-time buyers and are able to move to another home.

Asked whether the credit is artificially propping up the market, Cochrane said: "One can argue that any kind of government stimulus is artificial. But if it acts as the spark to get the market going, that can be fine. The government doesn't have to stay in the business of providing the spark forever."

snovak@statesman.com; 445-3856

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On Sunday Sept 7, 2008, the US Government announced the takeover of Mortgage giants Fannie Mae and Freddie Mac. These two companies own or guarantee almost half of the US Mortgage market, totalling over 5 trillion dollars.

Both companies have been placed in a government conservatorship under the newly created Federal Housing Finance Agency (FHFA). The CEO's of both companies will step down and Fannie Mae and Freddie Mac will both be under the day to day direction of FHFA Director Jim Lockhart for the time being. The goal is to stabilize the companies having a positive effect on our country's fincial system and preserving their ability to provide or guarantee mortgages for American home buyers.

Interest rates dropped 1/4 of a point today and are expected to decrease a full point if the takeover is a success.

The government will take approximately 80% ownership of the firms through the issuance of senior preferred stock and warrants. This stake in the companies would provide a return to taxpayers in the future depending on the success of the companies. Common stock holders are expected to lose much of their investments, similar to a bankruptcy filing. Already low shares of the two companies took a hit Monday when the market opened. Other financial stocks have recorded gains on the news in the US and abroad.

USDA financing is assistance for qualified low income families to purchase rural properties. In order to be eligible for many USDA loans, household income must meet certain guidelines. Also, the home to be purchased must be located in an eligible rural area as defined by USDA.

Rural Housing Direct Loans are loans that are directly funded by the Government. These loans are available for low- and very low-income households to obtain homeownership. Applicants may obtain 100% financing to purchase an existing dwelling, purchase a site and construct a dwelling, or purchase newly constructed dwellings located in rural areas. Mortgage payments are based on the household's adjusted income. These loans are commonly referred to as Section 502 Direct Loans.

Purpose: Section 502 loans are primarily used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.

Eligibility: Applicants for direct loans from HCFP must have very low or low incomes. Very low income is defined as below 50 percent of the area median income (AMI); low income is between 50 and 80 percent of AMI; moderate income is 80 to 100 percent of AMI. Click here to review area income limits for this program. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance, which are typically within 22 to 26 percent of an applicant's income. However, payment subsidy is available to applicants to enhance repayment ability. Applicants must be unable to obtain credit elsewhere, yet have reasonable credit histories. .

Terms: Loans are for up to 33 years (38 for those with incomes below 60 percent of AMI and who cannot afford 33-year terms). The term is 30 years for manufactured homes. The promissory note interest rate is set by HCFP based on the Government’s cost of money. However, that interest rate is modified by payment assistance subsidy.

Standards: Under the Section 502 program, housing must be modest in size, design, and cost. Modest housing is property that is considered modest for the area, does not have market value in excess of the applicable area loan limit, and does not have certain prohibited features. Houses constructed, purchased, or rehabilitated must meet the voluntary national model building code adopted by the state and HCFP thermal and site standards. Manufactured housing must be permanently installed and meet the HUD Manufactured Housing Construction and Safety Standards and HCFP thermal and site standards.

Approval: Rural Development officials should make a decision within 30 days of the Rural Development office's receipt of the application.

For more information check out the USDA Income and Property Eligibility Site: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?Home

July 2008 - Greater Austin Area Single-Family Homes

- Number of Homes Sold: 2,071
- Average Number of Day on Market: 64
- Median Price: $195,000
- Number of New Listings: 3,504

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Austin Homes Remain Valuable Investment

Austin-area home prices continue their upward trend, according to the latest Multiple Listing Service (MLS) report from the Austin Board of REALTORS®. The median price for single family homes reached a record high for July, up three percent from one year ago to $195,000.

In July, 2,071 single-family homes were sold, down 21 percent from one year ago. These sales contributed $534,206,166 to the local economy. July saw active listings rise 15 percent from one year ago to 10,913, representing five-and-a-half months of housing inventory.

“Unlike many other areas of the country, Austin continues to enjoy increasing home values,” says ABoR Chairman Socar Chatmon-Thomas. “This, coupled with low unemployment rates and a steadily growing population, makes Central Texas a great choice for home buyers.”

While housing sales relaxed, the leasing market remained strong. The 1,469 properties leased in July reflect a 20 percent increase from the previous year, while the median price of these properties rose by two percent to $1,200. The average number of days a lease property sat on the market totaled 37 in July, an eight percent decrease from July 2007.