Mortgage Updates from Austin Loan Officers!

Posted on June 14, 2013 by Sam Carroll Leave a comment

As extraordinary demand for homes in Austin and the rest of the country continues unabated…it made me wonder whether lenders are relaxing their requirements for loans.

I was curious what I should be advising my clients. So I called up three mortgage officers who have earned my trust through their ability to get loans for my clients while making the process as painless as possible.

I asked them whether lenders were accepting less as down payment and/or relaxing their lending standards to attract more loans.

Here is what they said about any mortgage updates:

Joe Krupp with Highlander Mortage (joe@joekrupp.com):

We can go as low as 3.5% down on FHA but the MI terms [mortgage and interest] are so appalling that it is in the buyer’s best interest to swing 5% down, if they can.  FHA 3.5% down payment can all be gifted, but on a conventional, the first 5% down must come from the borrower’s own funds.  That is really the only major headwind for a first-time home buyer.

David Taughingbaugh with Prosperity Bank (Dave.Taughinbaugh@prosperitybankusa.com) says that lenders aren’t relaxing their standards and it still takes 5-10% down on conforming loans.

Lucinda Bachman with Ameriprofunding (lbachman@ameriprofunding.com) echoes their views: Well…requirements aren’t really easing any, I don’t think.  At least I have not seen or felt any easing!  The down payment guides are still the same.

Bottom line – it’s tough to buy a home in Austin. Tough to find a good home within your budget and tough to meet loan requirements.

Tough…not impossible.

My advice to home buyers is to start early with a lender. Earlier than you start your actual home search.

You may need to save more for a down payment, you may need to repair your credit, you may need to pay down student debt.

With a pre-approval letter and a short period for loan approval you stand a much better chance of getting your offer accepted in Austin.

Summer is usually the peak of the Austin real-estate buying season. Whether that holds true this year remains to be seen…because there just isn’t any inventory.

In any case, getting your finances in order is always a worthwhile summer activity.

home buying, Mortgage Loans, Mortgage Rates

Build a Home and Beat the scramble for Austin houses!

Posted on June 7, 2013 by Sam Carroll Leave a comment

Why not build a home?

The hot Austin housing market has many buyers lurching from one offer to the next. Multiple bids prompted by low inventory force buyers into frustrating price battles.

What’s a buyer to do? Pay cash? I’ve had clients with lots of bucks still lose out.

Do you drastically overbid the asking price? Do you take out all contingencies?

If you can’t stomach those options, consider buying a new home. Traditionally buying a new home is like buying a new car. It depreciates the moment you drive away from the dealer.

New homes, too, have inflated prices over existing resales in the same area. Builders are recovering their costs and passing them along to buyers.

Historically, in a buyer’s market, you might forgo a newly built house unless it was your dream home after several starter ones.

However in today’s market in Austin, buying a builder home may make sense.

Being primarily a central Austin realtor I don’t often help with new home sales. Newer subdivisions are generally on the outskirts where builders can buy the least expensive land.

But things are changing.

In today’s market several builders are developing single home sites in older, established Austin neighborhoods.

I would recommend that you look at Brohn Homes, David Weekley, Streetman and Milestone. If you have deeper pockets consider Russell Eppright.

These builders have developed new homes on inner city lots. Prices are allowing some builders to buy, tear down and construct a new, ground up residence.

The advantages are:

  1. new construction and a builder’s warranty
  2. picking your own options for layout, finish out and amenities
  3. not overbidding in a competitive resale situation and
  4. knowing when you will occupy your home. (this is especially attractive if you must sell your current residence before buying a new one).

Buying a new home in an older, traditional neighborhood means not having to immediately start repairing and replacing. It means a more economical, greener and more efficient home. And it means not buying in a subdivision where houses all look the same.

A builder will mark up their product, but their margin might be less than a seller who enjoys the fruits of your competitive bid based on a product in need of repairs.

So if you want to buy a home in today’s Austin market…if you don’t want a lot of repairs… and you can wait a few months then look for signs when you see a house being razed. A builder may have bought the lot and will start to build.

Let me know if you want some help in outsmarting the market!
Contact Me.

build a home - like this one

 

 

Build, Buying Tips

Summer’s here – heads up to home buyers!

Posted on June 1, 2013 by Sam Carroll Leave a comment

Home Buyers

After an exceptionally cool spring, summer has finally arrived. The hot weather reminds us of how home buyers should look at the “summerizing” potential of houses.
Here are some tips that I’m giving my clients.

(1) Outdoor space. Most home buyers want a deck, patio or porch so they can enjoy summer outdoors, not just inside. Look at the orientation of the house or condo to see how it will fare during our hottest months. Consider whether landscaping, outdoor furniture or accent lighting will make the space more inviting.

(2) Landscaping. Consider the type of grass in the yard. Is it water-thirsty St. Augustine or a more drought- and heat-tolerant type? Think about how the lawn will survive the brutal summer and city-mandated water restrictions.

(3) Sprinkler system. If there is a sprinkler system, check that it is working properly and sprinkler heads are in good repair. Make sure you know how to reset the watering schedule to meet your lawn’s specific needs.

(4) Pool. Ask whether the current homeowner has a pool service that you may want to use. Are there are any cracks or caulking needs? Does any equipment needs replacing?

(5) Air Conditioning. The AC will be inspected as part of your home inspection before you buy, so you can find out whether the coolant, coils, compressor, air ducts or filters need replacing. Check out the ceiling fans to see whether they need dusting.

(6) Termites. Your home inspection should identify any termite issues. After you buy the house, you may want to have inspections from time to time. Termite infestation is costly. By the same token, you want to regularly spray for pest control. The summer months can bring outside pests inside your home.

(7) Windows. Windows and doors will be scrutinized for weather stripping during your home inspection. Worn or leaking seals should be identified. It’s hard to cool down your house if the cold air is just escaping. You may even want to add insulation.

(8) Beach. If you’re tired of losing out in bid battles to buy a house, go to the beach. When all else fails, take a break and rest. Then you can come back, ready to enter the fray.
Let me know if I can help navigate the summer buying season!

home buyers general land office

http://www.glo.texas.gov/adopt-a-beach/

home buying, Home Sales, Moving To Austin, Uncategorized

Housing Market Bubble forming as result of cheap money?

Posted on May 18, 2013 by Sam Carroll Leave a comment

Housing Market Bubble

At a breakfast in New York on May 15 former Fed Chairman Paul Volcker said that there was a danger of an asset bubble forming as result of cheap money. He said pretty much the same thing on March 13, 2013, at another event.

Everyone has talked about the Fed policy, but no one seems willing and able to do anything about it. The stock market and the housing market both are roaring full steam ahead… while GDP is expanding anemically and unemployment is continuing at high levels – above 7.5% for more than 4 years.

So what’s driving these markets??

Cheap money! Everyone is lining up at the trough. Even hedge fund managers – famous for making million off market anomalies – are getting into the act.

Austinites are lining up for cheap money, too. House prices jumped an average of 18% in April, from $272k in 2012 to $321k in 2013, according to the Austin Board of REALTORS.

Low interest rates, lack of inventory, and new buyers are driving these steep price increases.
One of my clients lost a bid battle by offering only 8% over the asking price. 8% – that’s stiff competition! I was worried about an 8% annual increase, but 8% over ask is nuts!!

So…I’m going to get off my soap box and go fishing. Next weekend is Memorial Day, which is a good time to rest up before the busy summer buying season.

Certainly with all the people flocking to the coast I know that Port O’Connor will be packed for the three-day weekend, and that means the bays will be packed with fishermen.

So I think offshore is the answer. The weather and the water temperature have finally gotten about right…so I”ll let you know how we do.

After that, I’ll be fit, tan and rested – ready to help Austinites who want to take advantage of cheap money!!

housing market sam carroll fish

Uncategorized

Will Congress axe the mortgage interest deduction?

Posted on May 11, 2013 by Sam Carroll Leave a comment

Mortgage Interest Deduction…

Congress’ Joint Committee on Taxation published a 560-page report on tax reforms, including suggested changes, on May 6 https://www.jct.gov/publications.html?func=startdown&id=4517

The report refocuses the spotlight on the mortgage deduction.

The Joint Committee on Taxation summarized the findings of 11 reform “working groups,” including one focused solely on real estate, according to real estate writer and author Ken Harney http://bit.ly/10skEv3

The tax deduction on mortgage interest is likely to come under pressure as lawmakers digest the report. One of the tradeoffs of streamlining the tax code and reducing the federal deficit could be modifications to the MID.

The National Association of REALTORS and state realty groups have long fought any cuts to the MID.

Some real estate pundits say that capping the maximum size of mortgage eligible for deduction would be the answer. They suggest that something below the present cap of $1.1 million for first and second homes would be the target.

In fact, Democrats say that $500,000 would be the max and that won’t affect home values because only 5% of the homes sell for more.

$500,000???? Where are they living???

$500,000 doesn’t go very far in central Austin these days. While the average Austin home is around $300,000 – which includes greater Austin from Georgetown to Lake Travis to Kyle – finding a house in Tarrytown for $500,000 is impossible.

OK, Austin is clearly above the national average. But buying a $501,000 house doesn’t mean you’re necessarily wealthy in Austin.

Opponents of the mortgage interest deduction say it encourages wealthy home owners to buy and build more, rather than average homeowners. A tax break for the wealthy.

I say fooey.

I believe the average Austin homeowner – meaning one who has a home in Austin they bought for $550,000 – might not have done it if the mortgage interest deduction were not available.

Ending the MID also would not encourage current renters to purchase…and goodness knows we have enough renters downtown now.

Congress has a tough job, but hey they opted for it. Getting rid of the MID won’t give them my vote.

The tax savings is $60 billion, but the hit to the economy could be much more. See for yourself  www.taxreform.gov

Interest Rates, Mortgage Loans, Mortgage Rates

Who’s responsible for the hot Austin home prices?

Posted on May 3, 2013 by Sam Carroll 1 Comment

Home Prices Hot in Austin

Home prices across the country jumped 9.3% in February from a year earlier, according to the Case-Shiller Index that tracks 20 major cities. This was the fastest pace in seven years, the Wall Street Journal reports. http://on.wsj.com/YdVVZ8

That’s great news for the economy. But it’s not so great for frustrated home buyers who: (1) have submitted several offers only to be outbid or (2) are still struggling to obtain mortgage financing.

Some cities such as Phoenix and San Francisco saw double digit increases. The Dallas area reported 7.1% and the Austin Board of REALTORS reported about an 8% increase for March compared to a year earlier.

The primary driving factors are investors and the Fed, though a secondary factor is limited supply – most markets report an inventory of less than three months.

Investors are shopping for rentals and paying cash. The Fed, for its part, continues to:

  1. Keep mortgages rates extremely low
  2. Reduce yields on other investments, which makes housing more attractive. They are currently between 3.5-4.0% for most investors.

So, lower mortgage rates and even lower inventory have combined to drive home prices up! Still, everyone agrees that an average increase of 9% per year is not sustainable.

Historically, home prices should rise about 3-4% a year, and outpace inflation. Does that mean a bubble is forming?

If this pace continues I would say yes. But more importantly, when interest rates go back to more normal levels (6-7%) homes bought today might seem overpriced.

As interest rates rise home prices in some areas may fall. http://bit.ly/11VzkkJ

Austin is experiencing a dramatic influx of new residents, which will continue to fuel its demand for housing a bit above the national average. But the premise is the valid. As interest rates rise home prices will moderate.

Be careful of paying too much for your home now. It’s easy to get caught up in the emotion of a bid battle, frustrated by the low inventory, and anxious about the increasing demand.

Nevertheless, don’t pay more now and be sorry later. http://ti.me/17xzSzm

home prices case-shiller home prices indices austin

Austin, Home Sales, Real Estate

Apartment Glut – Does Austin faces one?

Posted on April 26, 2013 by Tom Crandall Leave a comment

Apartment Glut
Washington, DC faces an Apartment Glut, according to Bloomberg.   This report is being closely watched by real estate analysts because apartment construction has been viewed as a one-way bet in recent years.

Every major city is building apartments right and left. Austin is no different.

Shonda Novak in today’s Statesman reports on how the new apartment projects on East Riverside Drive will force lower income residents out of the central core to the outlying areas. “The risk we have is that Austin is going to become a doughnut of the haves and the have-nots, with the have-nots living outside the city.”

Several weeks ago the Austin Business Journal reported that downtown rents were averaging around $2.30 per square foot. That means a 1000 sq ft apartment is renting for $2300-2400 per month plus utilities. That’s closer to a mortgage payment than a rent payment, for many people.

Austin has been in an apartment-building spree for the last several years with no abatement in sight. On the horizon are projects at the old Post Office site on 6th street, the Green Water Treatment Plant and others. So there are thousands of square feet still to be added to the Austin rental market.

Washington probably won’t be the only city suffering an apartment glut. The more being built, the more the likelihood of a glut. That’s the boom-bust cycle of real estate.

But as the supply increases, rents will moderate and become more affordable. Apartment complexes will try to attract new tenants. So maybe some residents who were forced out will return to central Austin.

My question is when will all those apartment renters become home buyers? Will they be held back by their student debt? By the responsibility of owning? By fear of losing the amenities offered by apartment complexes?

I find these questions more perplexing than a possible doughnut effect in central Austin. The home supply in Austin is extremely tight, there are a lot of buyers looking for homes right now.

Are apartment dwellers to join the ranks of home buyers in the near future?

Austin may have an apartment glut…but I don’t see a housing glut in central Austin anytime soon!

Apartments, Austin, Downtown Austin, Downtown Housing ,

The Baby Boomer – Retirement Requirements?

Posted on April 18, 2013 by pg1116 1 Comment

Baby Boomer Retirement
Are you a Baby Boomer? Planning for retirement? Many of us are nearing the magic age of 65 or 66 or whatever Social Security has deemed the retirement age.

Okay, now what?

Allstate says that there are 7 things you should address to plan for a happy boomer retirement.  I’ve added my own comments.

(1) Make sure you’re healthy. I think better advice is to make sure you have all the medical coverage you need. That definitely means a supplemental policy to Medicare.

(2) Keep close ties with your whole family. Yes, children and grandkids are important but the closest tie is your partner. Planning mutual goals, residences and activities that are important and acceptable to both is paramount. Trying to find the life balance with your partner continues in retirement. Surprise!

(3) Make friends. Friends with mutual interest are a necessity. If you’re a fisherman, traveler or gardener make sure you cultivate those with similar interests. For most of us, work has been the focus of our existence. Find a way to continue or to mentor younger people in your profession.

(4) Nurture a hobby. That goes back to making friends. Find your passion and pursue it.

(5) Develop a good attitude. To me this means to finally find a balance between work or hobby and life. I want to be connected to the world, to instantly learn about tragic events in Boston, to watch the financial markets. Still, I don’t want to be connected 24 hours a day. This means setting your own boundaries.

(6) Own your own home. This is very important and may require downsizing to a more affordable, lower maintenance residence that allows you more free time and less responsibility. This definitely goes back to (2). What does your partner want?

(7) Get your retirement income in order. Okay, understood. But unless you have unlimited reserves, how much is enough? How long are you going to live? Are you going to have health issues, etc.? Most of us plan to continue to work, but hopefully on a relaxed schedule.

So my advice is to do as the beer commercial says: find your own beach! Wherever that is and enjoy your Baby Boomer years.

Retirement , , ,

Will Austin Seller’s Market Mellow?

Posted on April 12, 2013 by Sam Carroll Leave a comment

Austin Seller’s Market – Bust or Churn?

Austin Seller's Market
If the Austin Seller’s Market continues churning along as it has, it could be a sign of a bubble.  Home prices in some markets will level off or even fall when mortgage rates rise, possibly by the end of this year or early next year, according to a Zillow study reported by Bloomberg

Median family incomes aren’t keeping up with price rises in some markets, Zillow found. “When interest rates rise, property prices will have to either remain stagnant while incomes catch up or, quite possibly, home values will have to fall in some markets. ” said Stan Humphries, Zillow’s chief economist.

What does this mean for an Austin Seller’s Market? No one expects prices to fall like they did 2007-2008. In fact, real estate prices have just begun to rise again.

Still, they did increase dramatically in 2012 and in the first half of 2013.

What should happen – and does in every market – is price fluctuation. Just as in the stock market the real estate market can continually rise without pulling back.

Dramatic price rises without retrenchment create a bubble and we know the results of a real estate bubble.

When would that happen? HSH.com predicts that rates could see 4% by the end of the year and 4.5% in 2014. However, that’s a guess and rates will probably rise faster than expected.

In the Austin market, we will probably see much of the same during 2013. But as rates rise, price increases and multiple bids may moderate.

That would be good for the market and good for buyers. For demand to remain high, prices need to level off for a spell.

Austin sales jumped 15% this March over 2012 , according to MLS stats. 15% is a huge increase.

Historically low rates have led to the price rise as much as anything. With the abnormally low rates, buyers have been willing to spend more for a home because their monthly payments remained low.

But as rates rise, prices will either have to level off or fall.

Austin’s influx of new residents means demand will remain strong for some time. Nevertheless, higher rates will mean prices may level off later in the year and could cause Austin Seller’s Market to mellow.

Downtown Austin, Downtown Housing, Home Sales , , ,

Real Estate Tax Tips For Austinites

Posted on April 5, 2013 by Sam Carroll Leave a comment

It’s tax time again in Austin, Texas – and the rest of the US. Real estate can affect your tax bill, so here are some great Real Estate Tax Tips.

  1. Deduction for moving expenses: 3 requirements:
    1. Related to job
    2. Distance – must be 50 miles farther from your old home than your old job location was from your old home.
    3. Time – within one year
  2. Deduction for selling expenses
    1. Biggest tax is gain on sale of home.
    2. When figuring basis, some settlement costs are includable in your basis, as well as improvements you have made. These expenses cannot be related to a mortgage. B
    3. Costs such as brokerage fees are deductible from your basis
  3. Rental Property deductions
    1. Rentals score big with deductions including: depreciation, cleaning, insurance, travel, repairs, taxes and utilities.
    2. Just a reminder that depreciation is a whole subsection to the IRS.
    3. Income – obviously all rental income must be reported and you will pay federal taxes on that revenue. That’s why its important to capture all the available expenses.
  4. Home office deductions. Wow, see your tax adviser. These are acceptable deductions but get some professional advice and remember when you sell you will have to repay the depreciation.
  5. Mortgage Interest Deductions.
    1. One of the largest and most important deductions for most of us.
    2. Mortgage interest deductions are acceptable for both primary and secondary residences.
    3. Check the tax code for guidance. This is one deduction that your federal legislators are trying to change. Be advised.

As with all our federal taxes there are benefits and acceptable deductions for owning a primary, secondary or rental property. Just be aware of the rules and follow them or be prepared to defend them in an audit.

Real Estate Tax Tips

When my wife and I moved from Seattle we deducted a stamp tax on the sale of our house as a county tax. We were called in for an audit because unbeknownst to us a stamp tax was not deductible from federal taxes even though state and local taxes were.

So use these helpful real estate tax tips to save you money and by doing so, avoid a potential tax audit.

Austin, Real Estate, Taxes , ,