Phil Hutson

An article by staff writer Lauri Zachry in the Round Rock Leader, the local newspaper serving Williamson County, caught my attention recently. Since I live in Round Rock, my kids attend school there, and about 40% of my home sales are in the area, I am very much attuned to what's going on in the community. But that being said, I was still amazed at the growth that this area continues to see, and hence ANOTHER bond proposal for MORE new schools!

The most recent bond election voters approved for the district was in November 2006. Voters approved four propositions totaling more than $267 million. Projects funded by the 2006 bond include the opening of three new elementary schools and one new middle school this fall. The district's fifth high school, Cedar Ridge High School, will open for the 2010-11 school year.

In spite of the last bond package passed only two years ago, and in spite of the Nov. 4 general election being dominated by the presidential race, Round Rock ISD wants to remind voters that a two-proposition bond package for $293.9 million will be there to vote on. Most of the first bond proposition is devoted to new facilities and schools. The first bond proposition totals approximately $156.6 million.

The district wants to construct three new elementary schools in the Stone Oak, Paloma Lake and Parmer Lane corridor areas. The Paloma Lakes subdivision is in the northeast quadrant of the district near U.S. Highway 79 while the Parmer Lane corridor is near the RRISD Athletic Complex. These two schools would accommodate up to 900 students. The Stone Oak elementary location will be a smaller school (for 700 students) located north of FM 1431 near the Stone Oak subdivision to help relieve overcrowding at Cactus Ranch Elementary.

RRISD will have four public hearings throughout October to provide input on construction for the new facilities, upgrades, technology and land and bus purchases. These public hearings will also give residents a chance to ask questions regarding the election. The dates and times for the public hearings are as follows:

· Oct. 14 - Westwood High School, 12400 Mellow Meadow Drive, Austin, and Round Rock High School, 300 Lake Creek Drive

· Oct. 21 - McNeil High School, 5720 McNeil Drive, Austin

· Oct. 28 - Stony Point High School, 1801 Bowman Road

The pro-bond Political Action Committee, Classrooms 4 Kids, also wants voters to be informed before making their decision regarding the school bonds, said Classrooms 4 Kids co-chair Raymond Hartfield.
"We want to get the awareness up of this bond election," Hartfield said. "Yes, you'll be voting for president, state representative and for county commissioners but we don't want people to forget about this important election too. Since people will be voting for school bonds, we want them to make an informed decision."

The second considered bond proposition is totaled approximately at $137.4 million for school additions and renovations, curriculum, more buses and technology infrastructure. The RRISD Citizen's Bond Study Committee presented bond package recommendations to the school board and the community June 5.

The citizens study committee presented its tentative list of new construction, upgrades and technology infrastructure projects May 19 during a public hearing in the lecture hall at Round Rock High School. The original list the group started with totaled almost $440 million, but the committee reduced the list to $350 million, even though the district bond finance committee suggested further reducing the list to $300 million, said Catherine Hanna, 2008 Citizens Bond Study Committee co-chair and Classrooms for Kids co-chair. "We had some hard decisions to make," Hanna said. "We really don't have any fluff on this list."

During earlier bond study committee meetings, the district considered creating a 500- to 700-seat auditorium in the eastern portion of the district, smaller, 600-seat auditoriums at Round Rock and Stony Point high schools and an alternative high school. The citizen's bond study committee was unable to justify displacing other needed priorities for the two auditoriums, said Dwayne Kostiha, citizens bond study committee co-chair, in June. The board had until Aug. 26 to call the bond election to be placed on the Nov. 4 general election ballot. Early voting for the November bond election begins Oct. 20.

For information about Round Rock, contact Phil Hutson for a free relocation guide, or call (888) 410-5858.

I don't suppose it comes as any surprise to anyone that, as a buyer looking to purchase a new home, or a REALTOR searching for his buyer looking to buy a new home, that most New Home Builders are discounting heavily in order to move inventory. As I've noted in several blogs, the Austin metro area continues to outpace most other areas in home sales, but it is beginning to show signs of slowing. The foreclosure rate for the area is increasing, and a lot of people that had been looking to buy a new home will instead go for the much lesser price of a foreclosure. Even the smell of new paint and carpet will not overcome a 20-30% decrease in the market value of a foreclosed home price tag!

The Builders, anticipating this months ago, began offering incentives to both buyers and Realtors as enticements, and to help slow this attrition. As expected, the incentives were much less in the "hot" months from March-July, but starting about 6 weeks ago they really started "upping the ante"! Below are just a few of examples from several "production" Builders' ads:

DR Horton Homes - "5% commission on 30 day closing"; "up to $20,000 in buyer incentives (homes from $180,000-$210,000); "up to $50,000 in incentives (homes from $275,000-$325,000); "{6% commission/buyer closing costs paid"

KB Homes - "$0 down USDA loans still available"; "buyer discounts on ALL ready-for-move-in homes!"; "5% commission"

Standard Pacific Homes - "6% commission on closeout homes"; 5% commission on all specs"; 4% commission on New construction"; $10,000 buyer incentives

David Weekley Homes- "Up to $40,000 in FREE options"; "FREE trip w/airfare and accommodations to Cabo San Lucas"

Drees Custom Homes - "$5000 Realtor bonus on any home sold"; $30,000-$60,000 discounts"

Perry Homes - "$5,000-$25,000 Realtor bonus on all inventory homes"

Mercedes Homes - "Up to $30,000 paid towards closing costs"

Highland Homes - "Up to $30,000 in discounts"

There are approximately 40 "production" Builders in the Austin area, with most offering some type of promotion/discount/incentive. These are just a few examples. For a more complete list, go to Builder Discounts at www.showcaseofhomes.com.

Have we seen the bottom of the housing market? In my opinion, NO. And although the Texas economy, specifically the Austin metro area, is still fairly vibrant, we are continuing to see declines in both number of homes sold, and price/sf. The "mortgage crisis" that has taken center stage the last few months will be corrected, and fewer homes will be sold because part of the correction will be a RETURN to legitimate methods by lenders to qualify potential home buyers! So where's the bottom, and when's the rebound?

Although every area of the country has "reasons why" their home market is down, I believe the answer(s) are somewhat generic as far as "bottoming out" and "rebounding". I'll cover these first, and then briefly mention my thoughts on a Texas specific "rebound" at the end.

What Has to Happen?

Two major events have to occur before the housing market will begin to bottom out. First, home prices have to stop falling, and second, investor confidence in the traditional U.S. residential mortgage must be restored. What must happen for home prices to stop falling?

The answer is a painful process. Prices fall when there are more houses for sale than there are buyers who want to buy (or can afford to buy). The abrupt "nuclear event" that occurred in July 2007 (see "Wall Street Implosion Causes Nuclear Explosion") shut off a substantial amount of demand for new homes almost overnight. The large group of low income home buyers that was active in the market in June 2007 was gone completely the next month. Meanwhile, new homes were still piling into the market. The excess supply has continued to grow as foreclosed homes are put on the market. This overwhelming imbalance of supply and demand caused prices to fall.

Prices will stop falling when the excess supply is eliminated from each local market. This can happen in only one way. First, new construction must be reduced to virtually nothing. This actually began in the Austin area last summer, as New Home Builders began renegotiating their "take-down" schedules on lots from developers,and started various "Buyer incentive/discount" programs. The relentless population growth in most of America will ultimately absorb the excess inventory. The inventory of unsold homes will decline until selections get too limited to meet the needs of picky home buyers. At this point the market will begin to shift from a buyer's market to a seller's market. Prices will stabilize, and the market will begin to heal itself.

How Long to Heal?

The pace of this turnaround will vary from city to city. If home builders cut back dramatically on new supply, the recovery will occur faster. Communities with fewer foreclosures will work through the excess supply more quickly. Communities like Austin, Texas, with strong job and population growth will create demand that will absorb the excess units faster. Conversely, communities with slow job growth could take years to bounce back from the excess supply. Political action could change the timeline as well. If the Federal government were to offer tax credits for people to buy homes, the excess inventory could be soaked up even faster. This would cause the housing market to bottom and turn around much faster.

Another stimulus that would speed the recovery is gently rising mortgage rates. Typically, when mortgage rates are falling, homebuyers postpone buying. But when they see that mortgage rates have stopped declining and may rise, they hop off the fence and buy. As the economy begins to rebound in 2009, look for mortgage rates to take an upward turn. As long as rates do not increase dramatically enough to impact affordability, this should stimulate housing demand.

What About Texas?

The long-term outlook for the Texas housing market is clearly strong. In the 1970s and 1990s, house prices in Texas rose in nine out of ten years. And even in the 1980s - the most challenging decade for Texas in the past 38 years - house prices increased eight out of ten years.

Job growth in Texas has doubled the national average for most of the past ten years. Demographic experts estimate another 13 million people will live in Texas by 2030. Many Texas cities still have tight inventories of homes for sale with prices continuing to appreciate. The state's metropolitan areas have strengths and weaknesses in their local markets. Attractive properties located in older neighborhoods close to downtown, like Hyde Park and Tarrytown in Central Austin, are still performing well and will continue to do so. The challenges in big city housing markets will be in select sections of the suburban perimeter. In the short term, these markets will struggle because too many new homes have been built. Even in the hot home markets around Austin, like Round Rock, where home sales have been very good, sales have dropped off substantially since the first of the year.

But even in these areas, supply is being quickly withdrawn as new home starts plummet. It may take a few years for these areas to return to a balanced supply. For now, builders are accepting substantial concessions to make a sale. If you plan to buy a house to live in for a number of years, this would be a great time to buy. If you think you may not live in a house for two years before you move again, you might be better off to rent.

For a comparative market analysis of the Austin, Texas, metro area, contact Phil Hutson @ (888) 410-5858 or phil@showcaseofhomes.com

Tuesday, September 16, 2008 - 5:00 PM

Austin economy ranks 4th on Milken/Greenstreet list

Even in a tougher economy Austin is still outperforming many other areas of the country in job creation and other economic markers.

The Austin-Round Rock region ranks 4th among the country's largest metropolitan areas on the Milken Institute and Greenstreet Real Estate Partners' 2008 Best Performing Cities list. That's a dramatic improvement from Austin's 20th place ranking on last year's list. The list ranks cities according to a series of matrices such as job creation and salary and technology growth.

Provo-Orem, Utah; Raleigh-Cary, N.C.; and Salt Lake City, Utah, were the top ranked cities on the list, in that order.

Among other Texas metro areas, the McAllen-Edinburgh-Mission region ranked No. 7 on the list followed by Killeen-Temple-Fort Hood at No. 13, San Antonio at No. 15, Houston at No. 16, and Dallas at No. 23. To see the full rankings, click here. That's not to say we are immune to the real estate downturn as our foreclosures continue to climb, but relatively speaking the Austin metro area is still fairly healthy in comparison to several other markets in the survey.

I also noticed the Midland-Odessa area in west Texas, where a HUGE chunk of our nation's oil deposits are, is experiencing a re-birth of it's economy (place cursor over Texas and see where the #1 "Top 5 Small Metro Areas" is)! Needless to say, with a barrel of oil well exceeding $100/barrel, this area is booming! I was out there several weeks ago visitng my sister and staying at her newly constructed home - a home that costs her $125/sf to build, that 5 years ago could have been built for around $95/sf!!

J.D. Power ranks home builders/Pulte, Centex among market leaders

By Inman News, Wednesday, September 10, 2008

Brands of Pulte Homes Inc. ranked highest in customer satisfaction in a New-Home Builder Customer Satisfaction Study released Wednesday by J.D. Power and Associates. Overall customer satisfaction for all builders was 779 on a 1,000-point scale in 2008, J.D. Power reported, which is up from 741 in the 2007 survey, with overall satisfaction increasing in 28 of 29 markets that were surveyed in both 2007 and 2008. The 2008 survey includes 33 U.S. market areas.

Austin, Texas, was one of the 33 markets included in this survey, and the local results were slightly different than the national tally. David Weekley, Centex, and Standard Pacific Homes were the top three vote recipients, with David Weekley Homes receiving the Grand Overall Award for customer satisfaction. Several other Builders including DR Horton, Highland, Kimball-Hill, Legacy, Mercedes, and Ryland also scored highly.

Nine factors drive overall customer satisfaction with home builders (listed in order of importance): builder's sales staff (15%); builder's warranty/customer service staff (15%); workmanship/materials (14%); price/value (14%); home readiness (13%); construction manager (13%); recreational facilities provided by the builder (7%); builder's design center (6%); and location (4%).

"Home builders have adapted well to changes in the market that have necessitated a shift from an order-taking mode to an intensified focus on sales service and negotiation with prospective home buyers," said Paula Sonkin, vice president of the real estate and construction industries practice at J.D. Power and Associates. Strong home-building companies have recognized the importance of offering superior product quality, delivering homes on time and providing skilled sales staff in order to excel in hyper-competitive markets," said Sonkin. "With more negotiation occurring during the sales process, home buyers are receiving larger sales incentives. In addition, upgraded features that used to be considered options-such as granite countertops-are now being included as standard, which increases the perceived value of the home and subsequently results in increased satisfaction. With new-home prices on the decline in many areas, as well as larger inventories and renewed efforts of home builders to truly delight customers, it's a great time for consumers to consider buying a new home."

The study also finds that more than nine in 10 new-home buyers (92%) report receiving sales incentives. Among home buyers who report receiving incentives when purchasing their home, the average sales incentive totaled more than $16,500. The types of incentives that home buyers report receiving most often include a reduction in the base price of the home and credit toward options and upgrades.

For information on local Builders, and/or updated information on New Home Inventory discounts, contact Phil Hutson at (888) 410-5858, or go to www.showcaseofhomes.com.