Zillow.com Now Posting Homes For Sale in Austin

Zillow.com, the website that provides “Zestimates” of home values for properties in the U.S. has now enabled new features that allow homes to be listed for sale. This is the next logical step for Zillow as they try to gain a foothold as the place to go for home information. More on that later.

For Sale listings can be entered both by home owners and also by Listing Agents. Oddly, there is also something called “Make Me Move”, where owners can “tell others the price you’d be willing to sell your home for, without actually putting it on the market. It’s that magical number you just can’t refuse.” Zillow says, “Once you set your Make Me Move price, potential buyers can contact you anonymously via e-mail. Then it’s up to you whether or not to sell your home.”

I predict the “Make Me Move” feature won’t last long. Every kook in the Country will be placing a MMM price of triple the value of the home and it will eventually turn out that nobody will take it seriously. Also, once Owners realize that 9 out of 10 emails they receive are from people saying “please provide your absolute bottom dollar price and email more pictures”, owners will pull their MMM listings pretty fast. Zillow should just stick to posting homes either for sale or not, and leave out this weird “Make Me Move” category.

But with regard to the For Sale part of it, I decide to enter a listing to see how it works. Here’s how it went.

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East Austin Real Estate Appreciation

I decided to see what the actual appreciation has been in East Austin over the past 7 years, as reflected in average sales prices for some of the areas we call East Austin. The blue line at the top of the graph below represents the entire Austin housing market for houses only, and the other lines are the average sales prices for East Austin zip codes. I left the actual dollar amounts off the chart because they caused too much clutter and made the chart to hard to read. I have the actual numbers posted below the chart

East Austin Real Estate Appreciation

So what does this show us?

One way to measure the strength of a particular neighborhood or area of Austin is to look at its performance relative to the larger Metro area overall. In other words, looking at the slope of the lines above, if a particular area is performing about the same as the city overall, the lines would run parallel. This is in fact what we see with zip code 78721 and 78723 (the red and purple lines). Those East Austin zip code areas more or less maintain their relative positions to the citywide averages (and to each other) from 1999 through Dec 3, 2006 (when I ran the stats). So, a home owner in those areas of East Austin did not enjoy appreciation in home values any better or worse than the overall Austin average over the past 7 years.

East Austin zip codes 78702 and 78722 reveal something much different though. The relative position of those areas enjoyed much greater appreciation than the average of Austin. Let’s look at the chart below.

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Californians Can Learn From Texas About Falling Home Values

This article posted below is in today’s Austin Statesman. It makes reference to the late 1980’s and early 1990’s when Austin’s real estate market was in the tank, and compares what happened in Austin back then to what some are now experiencing in California. Namely, owning real estate that is worth less that the amount owed – being upside down in their properties.

Those of us who were in Austin in the mid 1980’s remember that a perfect storm of the Texas Oil Bust, 1986 tax law changes, and the S&L (Savings and Loan) fraud/crisis wiped out the Austin real estate market. The legend holds that large numbers of Austinites simply left the keys on the kitchen counter and left in droves (I don’t know anyone who actually did that). Real estate fortunes evaporated almost overnight and the US Government became the biggest real estate owner in Austin, selling homes through HUD and RTC (Resolution Trust Corporation)

The tech industry took hold in Austin the early 1990’s and everything was great for the next decade, until the stock market slide and the high-tech bust, and thus our recent 5 year skid that ended about a year ago.

It’s funny, whatever you want to believe about the severity, or lack thereof, of the current real estate market in “bubble” areas such as California, Arizona and Nevada, can be confirmed or contradicted by any number of news articles and stories. I don’t know which ones to believe, but I do know that it’s not a good idea to be upside down in real estate. The article below takes a less than optimistic view of the California market.

SANTA ROSA, Calif. — In a laid-back kind of way, the Flamingo Resort Hotel and Spa, where I am staying, is centrally located. Drive in one direction and you’re less than a mile from downtown. Drive in another and you’re at a casual shopping center. Drive in still another and you’re on your way to Glen Ellen and wine country.

My son Ollie, who lives in Santa Rosa, told me that real estate values are down.

A day later, the Santa Rosa Press Democrat had an article observing that the median price is down 4.2 percent — to $565,000. This means the median home price here is now only 10 times the $55,000 median household income in the area.

Worse, prices have fallen for four consecutive months. This means that many of those who bought at the top — which the Press Democrat identifies as August 2005, when the median home price in the area peaked at $619,000 — are now upside down. With virtually no down payment and creative financing, recent buyers now owe more than their house or condo is worth.

This may be a good time for Californians to talk to Texans who went through the Texas real estate crash in the late 1980s and early 1990s.

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Austin Realtors Advised to Protect Ourselves From Lawsuits

Sylvia returned from a Realtor Risk Management Course yesterday with all sorts of frightening and scary news. This was an MCE course (Mandatory Continuing Education) required to maintain her Broker’s License and the instructor was an attorney. After Sylvia rattled off the list of things we do that the attorney says we shouldn’t be doing, I couldn’t help but wonder what sort of industry this has become. This basic message from the attorney? – don’t be too helpful to clients or it can get you sued. I wonder how many Realtors actually follow this sort of advice and thereby provide less service to their clients because they are more concerned about being sued than they are helping people. I don’t buy it. We are Service Industry Professionals and should be, at all times, providing the best service we can to our real estate clients – even if doing so exposes us to a little more risk.

So what were some of the specific things the attorney said agents should NOT be doing?

The attorney at this Risk Management course says, as agents, we should stay completely out of the inspection process and leave it all between the Inspector and our Buyers. We should never refer the Buyer to just one inspector (even if we have a really good one we’ve always used), but should instead provide a list of at least three. Same with any other Vendor we refer – always give a list and never recommend just a single vendor. Under no circumstance, he says, should we do a walkthrough or even be present at the inspection. He says doing so opens us up to liability in case the Buyer later discovers defects that she thinks we should have noticed or “should have known about”, or thinks we referred a bad inspector, and then decides to sue us.

The attorney says our answer should always be “I don’t know” to questions such as “what sort of appreciation can we expect in this neighborhood” or “what has the appreciation been in this area the past year?” We should refer those questions to a third party source, according to the Risk Management Course, because if we offer an opinion that the Buyer relies on, and it turns out to be wrong, the Buyer might later sue us.

The attorney says we should always encourage Buyers to get a Home Warranty so that if an appliance breaks down shortly after closing, the Buyer will be covered and won’t be mad at us and therefore will be less likely to sue us.

Remember, this is an attorney teaching a Risk Management course, but my God!. Notice that, in an education course like this, it’s all about helping the agent avoid being sued. That’s fine, but the risk avoidance methods suggested are at the expense of the level and quality of service provided to the client. I know attorneys are paid to be cautious, but I have to disagree with this entirely.

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The Problem with East Austin Real Estate

I’m not sure what to think about East Austin. I still don’t recommend it to investors, though I know many investors have done well and are doing well there (selling mostly to other investors and brave young buyers), and I have friends who’ve invested there. One friend of mine purchased a 2 bedroom home a year ago for around $120K. He put $25K into it right away, fixing up the kitchen and bathroom and other cosmetic issues, and then rented it for only $650/mo to a couple of waitresses chasing cheap rent. Those numbers don’t work for me, but the tiny place is probably worth close to $200K now, so he’s thinking long term appreciation.

Also read : Is Rental Property Investing in Austin Still Profitable?

I myself have made at least a half dozen serious trips into East Austin the past year, previewing homes and making sure I’m not missing out on deals I should be recommending to my investors. Each time I do this, I see nothing that comes close to making sense for the type of investors we typically work with. Our typical Austin investor wants a clean newer home located in a popular, reasonably close-in suburban area with good schools that will attract quality renters. Basically, family neighborhoods with good schools where you see Moms pushing jogging strollers, kids riding bikes and Dad jogging with the dog. Think Circle C and Steiner Ranch for example.

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Austin Real Estate Sales Market Update – Oct 2006

The average price of a single family home sold through the Austin MLS is up 10% from October of last year, and we’re up 9% year to date. I created a graph below to illustrate what real estate appreciation in Austin has looked like over the past 7 years. As you can see, we enjoyed a 17% appreciation rate from 1999 to 2000, which was the tail end of our last real estate boom in Austin, then the market hit the skids in 2000 with 3% appreciation (stock market started to crater about March of 2000) and then we were flat as a pancake from 2001 through 2004, with falling prices in both 2002 and 2003. From 2001 to 2004, our net appreciation over those years combined was an unremarkable 0.7%.

I threw in Condos and Townhomes on this graph, but as usual include only single family homes in the overall stats on the other charts below. The Austin MLS includes all residential sales in the stats they report, but I like to keep single family homes separate since that’s what most people own and buy.

Austin Sales Market Graph

I remember in 2001 and 2002 when I started receiving a lot of calls from investors looking to “park some money” anywhere other than the stock market, which was in freefall and investors were watching the wealth shrink. At that time, I would ask “why do you want to invest in Austin? Our market is dead and rent values are plunging?” Those who did invest in 2001/2002, purchased a home that did not increase in value over the next several years and that was very difficult to rent and even saw rents fall each year.

I’ve overlayed the rent values over this time period (times 100 for easier viewing) onto the graph below and you can see what a slow sales market did to our rental market. Sellers who couldn’t sell were forced to rent, which flooded the rental market with excess inventory. Builders, who had no buyers left to sell to due to job losses, started agressively going after renters. So we had a simultaneous increase in rental inventory and a decrease in renters. You can see the result below.

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