Almost a year ago I wrote about the Austin Short Term Rental (aka STR, Vacation Rental, VRBO) issues surfacing in the Austin community. That blog article generated 57 comments and a lot of heated back and forth. I eventually had to close the comments for that article because I felt everything had been said that could be said at that stage of the process. This article is an update on what has happened with STRs in Austin since the last blog post, and what will happen next.
The issue has moved forward through a “Working Group” process which concluded last August. City Staff is currently reviewing a draft set of regulations. The full Planning Commission will consider the recommendation after City Staff finishes the review. From there, a Code Amendment and set of new rules will be sent to Austin City Council. That probably won’t happen until 2012.
The Working Group Process
I participated in the Working Group process in the role of a Government Affairs Committee member of the Austin Board of Realtors. The Austin Board of Realtors involves itself in any local issue which could affect the private property rights of home owners. In many ways, ABOR is somewhat of a “Silent Knight'” working for the benefit of Austin homeowners, though most home owners are probably unaware that they are served in this manner.
ABOR seeks to protect the rights of property owners and opposes rules or laws that would diminish the private property rights of Austin property owners. The ABOR position on Short Term Rentals in Austin is, in short:
The Austin Board of REALTORS® supports preserving the character of Austin neighborhoods and protecting the quality of life of its residents. ABoR also believes homeowners have a right to lease their homes, regardless of the length of the lease, without municipal licensing requirements or registration fees. We also believe that the City of Austin should hold formal stakeholder meetings to address the issues concerning short-term rentals and develop a solution that balances the needs of neighborhood residents and residential property investors.
The stakeholder meetings did occur, a middle ground was determined which, as predicted in my earlier article, didn’t give either side the warm fuzzies, but that’s how these things go.
Sylvia and I recently installed new hardwood floors in our entire home. Bedrooms, closets, kitchen, hallway, etc. Everywhere except the laundry room and 2 bathrooms, which received new tile the month before. The process of doing this in an occupied home required a packing and moving of stuff not dissimilar to actually moving. Every part of the home had to be emptied out completely, just not all at once. So we migrated piles of stuff from one part of the house to the other as the new floors were installed. Meanwhile, we lived in a semi-construction zone for 10 days.
I learned a lot about wood flooring and the install process, but this article is about our stuff. I heard myself say at some point, while carting boxes out to the garage, and will now quote myself, “how is it possible that people who have gotten rid of so much stuff still have so much stuff?!”
No joke, our living space over the last 4 homes in 12 years looks like a bell curve. We’ve gone from 2,000 sqft to 3,700 to 3,300 and now down to 1,800 square feet. During each move, we’ve parted ways with what seemed like massive amounts of stuff. I’ve always enjoyed that aspect of moving. The cleansing and thinning out of the material barnacles that cling to us as we live life. We could fill a semi trailer with all the stuff we’ve given to Goodwill over the years. Especially on this last move going from 3,300 sqft down to 1,800.
Yet, here I am trying to move stuff out of the way for new floors and I just can’t believe we still have too much. How do people who’ve unloaded so much still have too much? By only getting rid of the easy stuff. Now it’s down to the emotional stuff, and that’s harder. Way harder.
Where exactly is “Westlake” in Austin? Well, it depends on which boundaries you use. In the broadest sense, “Westlake” is considered to be those areas which attend Westlake High School, or those areas within the Eanes ISD boundaries, as shown on this map.
So, in general terms, the area west of Austin known as “Westlake” is everything that feeds into Eanes ISD schools.
If a buyer tells us they want a home that attends “Westlake Schools”, we will restrict the search in the Austin MLS to homes where School District = Eanes ISD aka “Westlake Schools”.
Many people also think of “Westlake” as the 78746 zipcode. In fact, the entire 78746 zipcode is contained within the boundaries of Eanes ISD, except for a small southern portion that crosses Barton Creek into the Barton Creek Greenbelt and Austin ISD. None of that area is developed though, so all homes in the 78746 zipcode attend Eanes ISD schools.
The 78733 zipcode is also contained within Eanes ISD. This includes neighborhoods such as Barton Creek West and Cuernavaca. But if you ask people there where they live, they are more likely to self-identify with the neighborhood rather than say “Westlake”. See map below.
Below are the Austin housing market stats for October 2011 and year to date.
|Austin Sales Market Update – October 2011|
|Homes only (condos, duplexes, etc. not included) compiled from Austin MLS data|
|Sep 2011||Oct 2011||Oct 2010||Yr % Change|
|Avg $ SQFT||$113.57||$115.78||$116.04||-0.23%|
|Not Sold %||44.39%||45.79%||58.29%||-21.45%|
As shown above, average and median sold prices are down 2.3% and 3.6% for Oct 2011 compared to Oct 2010. The number of homes sold increased and the number of failed sales efforts (Withdrawn or Expired) decreased. The sold to list price ratio increased a bit and the Days on Market improved.
Nothing really suprising or new here. The Austin real etstae market is still moving along somewhat, treading water for the most part. See the Year to Date and 44 month graphs below.
Sylvia and I just sold a couple of acreage lots that we purchased in Oak Hill back in Feb 2007. For those who remember, Austin’s real estate market was still running full tilt in early 2007. I bought three lots in a new subdivision, we built a new custom home on one of them and moved in, and held the other two for investment.
The Original Plan – what was suppose to happen
We bought the lots directly from the developer for around $85K and $90K each. I figured they would be worth $150K or more within the following year or two. The house we built, which we really didn’t need but which I though would be a good investment, cost about $475K to build turnkey, including lot purchase. It appraised for $610K when we closed the loan, which I thought was a bit high, but nevertheless I figured the value would appreciate to over $700K within two 2 years. We’d sell it, take the tax free capital gains, and buy again in Westlake near the high school.
I think of this strategy as “laddering up”, whereby each successive home purchase/build and move-up results in tax free income and an increase in net worth. Others I know have done this with “slow flips”, buying fixers and staying the required 2 years while renovating, then capturing the tax free capital gain and reinvesting into the next home. Over time, this is a powerful formula.
On paper, this all made sense. The home we’d lived in prior and sold to build this one was built in 2003 on another lot we’d owned since 1999, and it had appreciated nicely. Because of our convoluted tax system, there was a sizeable capital gain profit to be taken tax free on the sale of that one. Those proceeds were dumped into the new one to start a new two-year clock ticking. Any home you sell that you’ve owner-occupied for at least 2 of the past 5 years is not subject to capital gains tax upon sale, so in an appreciating Austin real estate market, moving often can actually be a wealth building strategy and a way to earn tax free capital gains.
What Actually Happened
The plan didn’t work out as expected.
The Real Estate company Redfin recently announced the release of its Agent Scouting Report in its various markets around the US. This allows Redfin “clients” (term in quotes because anyone can sign up at Redfin.com and instantly be a “client”, whereas most agents think of a client as someone who has signed an actual Listing or Buyer Representation Agreement).
What is the Scouting Report? It allows consumers to view some stats on the current and past activities of Austin real estate agents. Here is a screen shot of Sylvia’s below, so you can see what we’re talking about, then I’ll elaborate further.
It would be a good idea to click on the screen shot to view an enlarged version. If you have a Redfin account, you can click here to view the actual live version.
The Scouting Report allows anyone, in seconds, to type in the name of an Austin Realtor and see what the past 36-month production stats are for that agent. If this becomes a widely adopted and accepted way for consumers to evaluate agents before hiring, it could be a game changer for our industry. I’m all for it, with some reservations. But overall, I think it’s a good thing.
For example, Sylvia’s Scouting Report will reveal that, in the past 36 months, she’s closed 107 sales (53 Buyers, 54 Sellers), which is about 3 per month over a 36 month period, through the Austin MLS. It doesn’t include builder sales or non-MLS sales. The report will show a map of the location of each home and a link to the photos, sold price and full details of each sold home. The easy-glance maps helps a consumer see the geographic areas of operation of an agent, and where the concentration of business is for that agent.
One word keeps appearing in most of the articles and Blogs I’ve read about this – “Disruptive”. As one who thinks the term “disruptive is thrown around too often by the media, especially in the past 5 years about the real estate industry, I think this could actually be disruptive to the real estate industry and its agents.
Let’s start with one well known fact. Real Estate Consumers do a very poor job of selecting agents. The Scouting Report might change that and start weeding out the dead wood agents from the industry.