This is from this morning’s Austin American Statesman. Pretty good article overall, with some good info. I was especially interested in the comments about investors inflating the new home sales in Austin. We sell very few brand new homes to Buyers because I worry about exactly what the article mentions, among other things.
My personal test for new home areas is to see how the new home prices compare to resale homes. Unless the new homes are selling for more than the comparable resale homes in the surrounding areas, I wouldn’t purchase there myself unless I planned on remaining for a very long time (5 to 10 years). The reason is that I don’t think it’s a good idea to invest in a home which has a resale value, the day you move in, which is less than you just paid. This, combined with small or zero downpayment loans is how peolpe get into trouble and become “upside down” in the property they own. It’s better, in my opinion, to stick to developed neighborhoods that cannot experience downward pricing pressure from nearby new home neighborhoods.
Tuesday, October 03, 2006
Austin Central Texas new home market stays hot
Experts raise caution about investor sales.
Central Texas continues to buck signs of a cooling housing market seen elsewhere in the country.
Area builders started 4,266 homes in the third quarter, up about 8 percent from the same quarter of 2005, and closed on 4,518: a record, according to Residential Strategies Inc., a Dallas-based firm that tracks new home activity.
Thanks to strong job growth and moderating mortgage rates, Austin’s housing market has been healthy all year. In contrast, markets are cooling rapidly in many other parts of the country.
“It seems to be the rest of the nation is doing poorly, and we tend to go against that,” said Mark Sprague, Austin partner with Residential Strategies.
Over the past 12 months, Central Texas builders have cranked out 16,973 homes, up more than 20 percent from a year ago.
The construction pace indicates that builders are confident that there are plenty of buyers either already here or moving in.
The median price in the quarter rose 8.5 percent, to $196,933, as builders shifted their emphasis to higher-priced homes, in part because of an influx of buyers from more expensive markets.
For example, starts of homes costing more than $300,000 have risen 64 percent in the past year, triple the overall increase in starts, according to Residential Strategies.
Starts in the $151,000 to $200,000 price range rose 14.8 percent.
The escalating price of construction materials also is driving up the cost of many new homes.
Although Sprague was upbeat about the state of the Austin housing market, he raised one caution about sales to investors, which can give a false sense of market demand.
“The hope is that investor interest will subside in the coming year so as not to overhype the market, as has occurred elsewhere in the nation,” he said.
Local real estate consultant Charles Heimsath agrees.
“The market is inflated by investor demand, which doesn’t actually put bodies into houses; it just turns a sale,” Heimsath said. “Then, eventually, you create a bubble, and eventually the bubble will burst. I’m not saying that will happen in Austin, but it’s something we need to carefully monitor.”
Sprague said he thought the Austin market will remain strong through 2007, unless the job growth picture changes.
The region has been adding jobs for 32 months in a row.
In August, the local work force reached 714,000 jobs, up 2.8 percent from the same period a year ago.
NEW HOME SALES
Nation: Through August, sales were down 14 percent
Austin: On track for a record year
SUPPLY OF UNSOLD NEW HOMES
Nation: 6.6 months
Austin: Less than two months
Nation: Down 0.5 percent
Austin: Up 6 percent