Texans should be Fed up with real estate doom and gloom

I have a small beef with the national real estate news media. I was reading an article from CoStar Group about the 2008 real estate outlook. I like Costar because they're pretty straightforward and reliable.

The article, entitled "Housing Outlook Dims for 2008", reminded me of the same doom and gloom headlines from other national news outlets.

WHY TEXANS SHOULD HAVE A BEEF WITH THE NATIONAL MEDIA

They're biased. Reporters chatter about housing "booms" and "busts", but not stability because middle ground is boring. California, Arizona, and Florida sellers are suffering after real estate speculators rushed to those markets and overpaid. Houston and other areas of Texas aren't suffering the way the headlines would lead you to believe.

They don't know our market. I reported yesterday that the Houston market was "ho-hum" because it's slightly declined, but hasn't gone bust. Was this sensational news? No, but it was the truth. Texas didn't severely appreciate so we were largely ignored during your news hayday of 2003-2005. Smart investors heard of our relative stability and are now flocking to us.

They don't report the full story. My friend from Berne, Switerzland said foreign consumers are pulling their funds out of America because our media's reports of the housing markets crashing "everywhere". Consumers in the U.S and other countries still do not understand why the subprime market failed and how banks will come back even stronger with better practices established. They also don't hear about many local markets (like Austin) that are doing well.

HOW TO SURVIVE REAL ESTATE IN ANY MARKET

Real estate is not a national game for most of us. It's very specific to local markets. In fact, neighborhoods can have their own mini "booms" and "busts". Parts of your city and state will be hotter or slower at given times based on amenities, demand and supply.

1. NEVER overpay for a property in any market. If you have no reserves, can't afford the down payment (10-20%), can barely afford the payment including standard maintenance, are betting on appreciation, or have to get a weird loan...you have a problem. Stop. Don't walk. Run away to a lower priced property or the waiting bench.
2. TALK to a neighborhood/area specialist about what's happening in your market and how it affects your purchase or sale. Even if you hear real estate is "hot", do you really know where your market is on the bell curve? Don't be caught with a hot potato just because Dateline NBC says so.
3. WATCH the national mortgage, banking, and housing markets. Stay informed and keep a skeptical eye on the data source. News companies make money selling the news people want to stop and pay attention to. Boring stable markets aren't of interest. Financial Times is one of the best international and national resources out there. REALTOR.com, Bankrate, and the National Association of Home Builders are good resources, but keep in mind that they are "interested" parties who try to be as objective as possible.

RELATED SOURCES

Texas A&M Real Estate Research Center

Costar Story on 2008 National Outlook-Dim

Texas Mortgage Outlook.

RELATED BOOK PICK

Comments

[anonymous]

Dee,
Is business hurting? Yes, Austin appears to be doing well compared with the rest of the country, but the national media is doing us a service right now - keeping things grounded to avoid the huge price runups that happened on the coasts. Our ~10% appreciation (this year) doesn't look so bad compared to Cali, but compared to historical TX appreciation of ~3%, we are facing some issues.

Look at the Mueller redevelopment - all lots were gone fast and now there is news about available lots. This is a good thing for consumers; if they are priced out or prices rise too high, the fallout is far worse medicine than a slow down.

How many builders in Austin have shifted from building new homes in the <=$200k range to now close to $300k (for the same model). This kills move-up buyers or prevents locals from upgrading. The main source of buyers is then from migration. Austin is slowing - in the under $200k range, sales are down ~25%ish y-o-y. While it might not matter now, future growth comes from these homebuyers.

You recently had a post about builders in Houston cutting construction of homes <150k, what sort of long term affect is that going to have?

[Dee Copeland]

Thank you for the comment.

Business is doing very well! Most of the agents I know are swamped and hiring assistants. In fact, I have a lead buyer specialist position open as well as a listing coordinator spot.

I think my point is that Austin and Texas are not doing as bad as the rest of the U.S, but you don't hear about this as much. You have to make a smart decision in any market. If it's a buyer's market in a niche spot, plan for it. I had an extensive discussion with my friend in Switzerland and the people she know are blindly pulling their money out of the U.S. because they don't understand what's happening. She said it was a big problem.

Houston Builders were moving away from the $150k consumer range due to the lack of mortgages and started building in higher price ranges because they were selling well. Maria actually wrote that article and I commented on it. I think builders started focusing on the sub-150k range, so building in that range increased. When you back off, it looks like a decrease, but overall, it's around the same. I bet they realized that inventory is where it should be, so decided to move to where the money was.

Austin builders are starting to focus on lake areas and infill development. Prices keep increasing, but I also think this is simply because buyers who need affordable payments can't get loans anymore. Overall, our stats show demand in that $200-350k range. My investors and buyers are buying and selling homes or condos in the $200-400k range after carefully evaluating.

I welcome other opinions. Of course, I do not shade the truth for perceived gain. I rarely accept new investor clients and just put the info out there for discussion. These are just my thoughts on what I see and from people I talk to. It's always great to hear others.

[Dee Copeland]

I got a post on another blog where I syndicated this topic, so wanted to show that comment here:
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To say that the there is not a real estate bubble is putting your head in the clouds. I do recognize that the Houston market has been more stable (relative to other markets), but c'mon inventory is at an all time high and prices will need to adjust downwards. There is more supply out there than qualified and willing buyers. Only realtors refuse to acknowledge this...since this impacts your profit. Also, I've heard plenty from other bloggers that prices in Austin have dropped 20-30%!!! Maybe instead of refusing to acknowledge this market, you try to make the most of it by injecting some realism into your approach.
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I'm saying the overall market has slowed in terms of units sold, but not in top factors such as job growth, appreciation, and overall growth. Each real estate market is different and if you only look at units sold, you're missing the boat.

1. In West Austin, we have multiple offers. Same goes for many areas of Dallas. The worst areas are the ones that investors were speculating in during 2005 and 2006, like East Austin, which was 50-60% appreciation during the short period. Even now, many homes in East Austin are sold in 30 days if they're vintage or ultra-modern. The average days on market for the MLS area is less than 60-90.
2. The average days on market in Austin is currently 70 days. Dallas had 80 days on market IN DECEMBER, the slowest time of the year. How can we be in a "bust" when homes are selling in under 90 days? Is that what you call a bad market? IF so, I'm sure Californians and Floridians would disagree.
3. If there was a bust, why are prices still on the rise? The worst hit so far is the subprime markets I just did a market update in Dallas. Homes priced above $300k actually SAW AN INCREASE in sales!

If you don't live here and sell here, don't tell us our market is doomed. If you want to say it decreased from historic highs, ok. My buyers aren't getting contracts accepted due to multiple offers, so please call them and let them know that the market has slowed.
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I also wanted to add that my main point on a lot of posts is that, despite the market, we should always have a CMA and avoid speculating. You can buy right in any market if you get your facts straight and make an offer based how motivated the seller is.

From my other post:
"...I sell real estate that people have to make money from. We have to buy well, evaluate, and sell at the right price. I'm currently helping some investors who got caught during the mortgage market shift and they're not fairing so well. They will probably break even despite being conservative. The speculators are losing their shirts and rightfully so. That's what happens when you gamble on the market."