Invest Wisely, Buy Real Estate

4th Quarter 2009 Sales Results

2010-01-06T06:44:00.000-08:00

The information presented below is complied from data sourced via the Gillespie County Multiple Listing Service. The tracking historical sales data is grouped into categories that include: "Residential", "Rural Subdivision Lots/Tracts", Acreage, Farm/Ranch" and "City Lots". These categories are further defined by "area" (e.g. in town, out-of-town/county).  

While it can be difficult to portrait a true "apples to apples" picture of current real estate sales, the numbers speak for themselves as categorized. A lot can be read "between the lines" when discussing these figures, if you would like more detailed information on these summary comparisons, feel free to contact me at your convenience.

4th Quarter-2009

Residential-City (Fredericksburg, TX) - The total number of homes sold within the 4th quarter of 2009 actually increased by 65% from sales reported within the 4th quarter of 2008 (20 in '08 and 33 in '09). The average price of a sold property declined by 9.78% ($215,210 in '08 vs. $197167 in '09) and the average number of days-on-market (DOM) has decreased an average of 16.1% (236 by end of 4th, 2008 vs. the current 198 days). The total dollar volume of homes sold actually increased by 48.86%. Notably, the average list price to sale price ratio (LP/SP) has remained statistically unchanged from 94% in 2008 to the current 94.5%.

Overall number of units sold decreased from the 3rd quarter of this year to the 4th quarter of 2009 by 17.5% (40 units were sold in 3rd qtr. ’09 vs. 33 sold in the 4th qtr. of 2009).

Year-to-date (vs. YTD, 2008), total units sold has increased by 8.2%, the average price of sold units has decreased by 9.2%, the average DOM has increased by 22%, the total dollar volume sold has decreased by 1.75% and the average LP/SP ratio has remain statistically unchanged (94% in ’08 to 93% currently).

Residential-County (Gillespie County Only) - The total number of homes (w/acreage) sold within the 4th quarter of 2009 decreased by 8.3% from the sales reported within the 4th quarter of 2008 (24 in '08 vs. 22 in '09). The average price of a sold property declined 13% ($319,079 in '08 vs. $277,757 in '09) and the average number of DOM has increased 5% (177 in '08 to 186 in '09). The total dollar volume of homes sold has decreased 20%. Notably, the average list price to sale price ratio (LP/SP) has increased from 81% in 2008 to the current 90%.

Year-to-date (vs. YTD, 2008), total units sold have decreased by 19.5%, the average price of sold units has decreased by 21.3%, the average DOM has held steady at an average of 200 days, the total dollar volume sold has decreased by 36% and the average LP/SP ratio has remained statistically unchanged.

Lots-City (Fredericksburg, TX) - The total number of lots sold within the 4th quarter of 2009 remained unchanged from the sales reported within the 4th quarter of 2008 (5 in '08 vs. 5 in '09). The average price of a sold lot nearly doubled ($44,800 in '08 vs. $109,400 in '09) and the average DOM has decreased 2.9% (588 in '08 vs. 571 in '09). The total dollar volume of lots sold has increased by 144%.

 Year-to-date (vs. YTD, 2008), total units sold have decreased by 39%, the average price of sold units has increased by 3.25%, the average DOM has increased by 72%, the total dollar volume sold has decreased by over 37% from YTD ’08 to YTD ’09.

Rural Subdivision Lots/Tracts - The total number of acreage lots sold within the 4th quarter of 2009 more than doubled (4 in '08 vs. 9 in '09). The average price of a sold acreage lot decreased by 22.7% ($138,164 in '08 vs. $106,778 in '09) and the average DOM increased by almost 70%. The total dollar volume of acreage lots sold increased by 73%.

Year-to-date (vs. YTD, 2008), total units sold have decreased by 31.9%, the average price of sold units has decreased by 21.5%, the average DOM has increased by 21.75%, the total dollar volume sold has decreased by 46.6%.

Acreage, Farm/Ranch (All MLS Counties) - The total number of properties categorized as Farm/Ranch sold within the 4th quarter of 2009 declined 28% (25 in '08 vs. 18 in '09). Average prices and DOM tend to be less significant in this category as the properties offered and sold vary tremendously. Most notably, total sales volume has decreased by 32.6% from within the 4th quarter 2008 vs. 4th quarter 2009.

Year-to-date (vs. YTD, 2008) the total number of units sold has decreased by 13.2% and the total volume sold has decreased by 43%

You will note that overall sales volume has continued to fall from our peak in 2006 to 2007, 2008 and through 2009. The average sales prices have fallen steadily throughout the same period and the average number of days on market continues to increase. While federal tax incentives and records low interest rates have provided some market support, this support is evident at the only at the lower end of the ranges of the categories noted above. We are relatively "healthy" in homes priced under $250K while the higher priced properties fight to resist the increasing downward pressure on prices and linger for longer periods of time.

3rd Quarter Sales Update

2009-10-01T08:27:00.000-07:00

3rd Quarter-2009

Residential-City (Fredericksburg, TX) - The total number of homes sold within the 3rd quarter of 2009 actually increased by 18.1% from sales reported within the 3rd quarter of 2008 (33 in '08 and 39 in '09). The average price of a sold property declined by 5.85% ($213,695 in '08 vs. $201,176 in '09) and the average number of days-on-market (DOM) has increased an average of 10.5% (152 by end of 3rd, 2008 vs. the current 168 days). The total dollar volume of homes sold actually increased by 11.25%. Notably, the average list price to sale price ratio (LP/SP) has remained statistically unchanged from 95% in 2008 to the current 94%.

Overall number of units sold decreased from the 2nd quarter of this year to the 3rd quarter of 2009 by 23.5% (51 units were sold in 2nd qtr. ’09 vs. 39 sold in the 3rd qtr. of 2009).

Year-to-date (vs. YTD, 2008), total units sold have decreased by 3.5%, the average price of sold units has decreased by 9.12%, the average DOM has increased by 27%, the total dollar volume sold has decreased by 12.28% and the average LP/SP ratio has remain statistically unchanged (94% in ’08 to 93% currently).

Residential-County (Gillespie County Only) - The total number of homes (w/acreage) sold within the 3rd quarter of 2009 increased by 63% from the sales reported within the 3rd quarter of 2008 (19 in '08 vs. 31 in '09). The average price of a sold property declined 28% ($512,100 in '08 vs. $368,610 in '09) and the average number of DOM has increased 25.27% (186 in '08 to 233 in '09). The total dollar volume of homes sold has increased 17.44%. Notably, the average list price to sale price ratio (LP/SP) has decreased from 93% in 2008 to the current 91%.

Year-to-date (vs. YTD, 2008), total units sold have decreased by 25.4%, the average price of sold units has decreased by 23.2%, the average DOM has held steady at an average of 208 days, the total dollar volume sold has decreased by 43% and the average LP/SP ratio has dropped from an average of 93% to the current 91%.

Lots-City (Fredericksburg, TX) - The total number of lots sold within the 3rd quarter of 2009 increased by 66.7% from the sales reported within the 3rd quarter of 2008 (6 in '08 vs. 10 in '09). The average price of a sold lot declined 15.75% ($70,042 in '08 vs. $59,009 in '09) and the average DOM has increased 35% (511 in '08 vs. 690 in '09). The total dollar volume of lots sold has increased by 40.14%.

Year-to-date (vs. YTD, 2008), total units sold have decreased by 44.4%, the average price of sold units has decreased by 17.7%, the average DOM has increased by 92%, the total dollar volume sold has decreased by over 54% from YTD ’08 to YTD ’09.

Rural Subdivision Lots/Tracts - The total number of acreage lots sold within the 3rd quarter of 2009 declined 33% (9 in '08 vs. 6 in '09). The average price of a sold acreage lot increased by 59% ($105,077 in '08 vs. $167,168 in '09) and the average DOM decreased by almost 20%. The total dollar volume of acreage lots sold marginally increased by 6%.

Year-to-date (vs. YTD, 2008), total units sold have decreased by 46.5%, the average price of sold units has decreased by 19%, the average DOM has increased by 6.6%, the total dollar volume sold has decreased by 57%.

Acreage, Farm/Ranch (All MLS Counties) - The total number of properties categorized as Farm/Ranch sold within the 3rd quarter of 2009 declined 24% (29 in '08 vs. 22 in '09). Average prices and DOM tend to be less significant in this category as the properties offered and sold vary tremendously. Most notably, total sales volume has decreased by 30.3% from within the 3rd quarter 2008 vs. 3rd quarter 2009.

Year-to-date (vs. YTD, 2008) the total number of units sold has decreased by 37% and the total volume sold has decreased by 47%

Affordable Housing Update

2009-08-18T14:15:00.000-07:00

The debate concerning affordable housing in Fredericksburg, TX arose again at last night’s city council meeting. Up for presentation was Johnnie Long’s Fredericks Place. Mr. Long (a well-known and reputable Hill Country builder) is in the planning stages of a 19 acre development that will ultimately provide up to 114 homes that are both “affordable” and “green”. (This project is vastly different than the ill-fated project on Highway Street that kicked off this whole debate.)

His goal is to build the development out over a 6-year timeline and to keep the prices of the four models currently envisioned to under $200,000 each. Lot set-backs will be staggered and streets will be “curvy” to provide the over-all feeling of a “non-cookie-cutter” infill development. Mr. Long is committed to “green features” such as added insulation, radiant roof barriers and high-efficiency HVAC systems (among other features).

While this presentation was not a proposal requesting/requiring council action, it was a very insightful peek into how a developer should properly prepare public and private interests for what will soon be submitted for consideration.
Mr. Long wisely provided a study evidencing the positive economic impact his development would have on Fredericksburg, TX. By setting the stage to contrast the positive impact of a long-term real estate development against what he is surely to ask for as concession from the public sector, Mr. Long begins to chip away at the base-less assertions that “give-aways” to developers serve no one but the developer.

This sly shot across the bow of the NIMBY crowd was further reinforced by handing the city a solution on how to accomplish such a feat on a proverbial silver platter. His suggestion that they consider a Neighborhood Empowerment Zone is classic “Negotiations 101” (define the problem them hand them a solution). NEZ’s are authorized under the Texas Local Government Code, Chapter 378.

While Mr. Long has quite a difficult road ahead, he has clearly demonstrated that he’s well-versed in the game. Opponents intending to make the argument that market forces have provided plenty of current housing stock priced under $200K should recall that this wasn’t nearly the case just one year ago. As our market corrects (as they always do), folks should be cognizant of how long it actually takes to put a project on the ground. We’re not arguing over conditions today or even next month. We’re talking about projecting into Fredericksburg’s future and assuming, like most things in life, housing will not be getting any cheaper.

Affordable Housing

2009-07-13T11:15:00.000-07:00

As the debate on the role the City of Fredericksburg should (or shouldn’t) play in facilitating the creation of affordable housing resurfaces, care should be taken not to accept the stereotypes typically associated with this important topic.

Having attended many meetings/forums, etc. on the topic (both here and in other markets) it is not uncommon to hear beneficiaries of these efforts referred to as “them”, “those people” or “that element”. We can debate the intended image those terms are meant to convey but, in the end, they are always unmasked as scare tactics employed by opponents who refuse to understand the critical nature of the debate and the importance to the community of the creation of housing stock for the full spectrum of the socio-economic ladder.

Similarly, opponents seize upon terms such as “subsidy”, “give-aways” and the like to blur the fact that public investment in private enterprise can (and demonstrably does) contribute financial payback of that investment with gains to the public that reap financial rewards for years to come.

This community has been wisely conservative its choices of activities to “subsidize”. We have chosen to invest in fireworks displays, Christmas decorations, horse racing, lawn clean-up, etc., etc. Each of these has a measurable payback to the community yet are not characterized as subsidies or give-aways.

Investing in housing that is “affordable” to a large percentage of our hard-working population will pay dividends over and above any cost to the public and well into the future. Let’s focus on the big picture and not on the convenient stereotypes. The folks who make this town work should be able to afford to live here.

2nd Quarter Real Estate Sales

2009-07-02T07:06:00.000-07:00

2nd Quarter-2009

Residential-City (Fredericksburg, TX) - The total number of homes sold in the 2nd quarter of 2009 declined 18.3% from sales reported in the 2nd quarter of 2008 (93 in '08 and 76 in '09). The average price of a sold property declined 25.4% ($280,518 in '08 vs. $209,263 in '09) and the average number of days-on-market (DOM) has increased an average of 24% (166 in 2nd qtr. 2008 vs. the current 206 days). The total dollar volume of homes sold declined 39.04%. Notably, the average list price to sale price ratio (LP/SP) has decreased from 94.09% in 2008 to the current 93.02%.

Year-to-date (vs. YTD, 2008), total units sold have decreased by 15.82%, the average price of sold units has decreased by 25%, the average DOM has increased by 12.43%, the total dollar volume sold has decreased by 43.1% and the average LP/SP ratio has remain statistically unchanged.

The number of units sold registered in the 1st quarter of 2009 has increased noticeably in the 2nd quarter (44 sold in the 1st qtr. And 76 sold in the 2nd).

Residential-County (Gillespie) - The total number of homes (w/acreage) sold in the 2nd quarter of 2009 declined 18.27% from the sales reported in the 2nd quarter of 2008 (93 in '08 vs. 76 in '09). The average price of a sold property declined 25.41% ($280,518 in '08 vs. $209,236 in '09) and the average number of DOM has increased 24.1% (166 in '08 to 206 in '09). The total dollar volume of homes sold has declined 39%. Notably, the average list price to sale price ratio (LP/SP) has decreased from 94.09% in 2008 to the current 93.02%.

Year-to-date (vs. YTD, 2008), total units sold have decreased by 24.5%, the average price of sold units has decreased by 25%, the average DOM has increased by 12.4%, the total dollar volume sold has decreased by 43% and the average LP/SP ratio has remain statistically unchanged.

The number of units sold registered in the 1st quarter of 2009 has increased noticeably in the 2nd quarter (44 sold in the 1st qtr. And 76 sold in the 2nd).

Lots-City (Fredericksburg, TX) - The total number of lots sold in the 2nd quarter of 2009 declined 47% from the sales reported in the 2nd quarter of 2008 (17 in '08 vs. 9 in '09). The average price of a sold lot declined 7.82% ($62,682 in '08 vs. $55,778 in '09) and the average DOM has increased 92.94% (241 in '08 vs. 465 in '09). The total dollar volume of lots sold has decreased 51.2%. Notably, the average LP/SP ratio has decreased by 7.57%.

Year-to-date (vs. YTD, 2008), total units sold have decreased by 64.7%, the average price of sold units has decreased by 34.71%, the average DOM has increased by 48%, the total dollar volume sold has decreased to the current 91.5%.

The number of units sold registered in the 1st quarter of 2009 has increased noticeably in the 2nd quarter (3 sold in the 1st qtr. And 9 sold in the 2nd).

Rural Subdivision Lots/Tracts - The total number of acreage lots sold in the 2nd quarter of 2009 declined 39.1% (23 in '08 vs. 14 in '09). The average price of a sold acreage lot declined 35.3% ($129,405 in '08 vs. $83,761 in '09) and the average DOM increased by 50%. The total dollar volume of acreage lots sold decreased 60.60%. Notably, the average LP/SP ratio has decreased by 3.05%.

Year-to-date (vs. YTD, 2008), total units sold have decreased by 56.86%, the average price of sold units has decreased by 34.83%, the average DOM has increased by 29%, the total dollar volume sold has decreased by 71.89.

Acreage, Farm/Ranch (All MLS Counties) - The total number of properties categorized as Farm/Ranch sold in the 2nd quarter of 2009 declined 30.95% (42 in '08 vs. 29 in '09). Average prices and DOM tend to be less significant in this category as the properties offered and sold vary tremendously. Most notably, total sales volume has decreased by 45.6% from 2nd quarter 2008 vs. 2nd quarter 2009.

Year-to-date (vs. YTD, 2008) the total number of units sold has decreased by 65.9% and the total volume sold has decreased by 62.76%

Seller Financing

2009-04-08T08:39:00.000-07:00

Offers of “seller financing” (a/k/a owner financing) have been popping up more and more in ads listing Fredericksburg, TX real estate for sale. What can this mean for a buyer or seller?

For a seller, it is a way to differentiate your offering to the buying public. While it can often be interpreted as a “hint” that you are “motivated” (not always a good card to play), in today’s challenging market, who cares! If you weren’t “motivated” your property wouldn’t be on the market in the first place.

Savvy seller’s have learned that an offer to finance a buyer’s purchase of your property can be a nice way to bank some cash (down payment), receive a pretty good return on your investment (the interest rate charged) and retain the possibility of regaining ownership of that property in the event a buyer defaults on the note. The keys, of course are the creditworthiness of the buyer and the negotiated down payment (generally 20% or more) and the interest rate (typically, slightly higher than published mortgage rates).

Of course, a creditworthy buyer will compare your terms to that they might receive from a financial institution. It is likely that (all things being equal) they will opt for bank financing. In the current lending environment, however, potential buyers with available cash and “decent” credit (i.e. not “sterling credit”) may not have the option of shopping around for financing.

The questions a seller must ask when considering this are: Do I need 100% of my cash now? What will I do with that cash if I get it all now? Do I have a mortgage to pay off? Will a buyer’s down-payment pay off my current mortgage? What kinds of competing returns can I receive on my funds?

The bottom line for seller’s is that the option to provide financing to a potential buyer sets you apart from the competition, expands your pool of potential buyers and allows you options on handling your sales proceeds.

A buyer considering negotiating for seller financing faces many questions. First and foremost is whether or not the financing offered is competitive with other, more traditional, lenders. Be sure to factor in fees, points and all the other miscellaneous fees lenders charge when comparing the bottom line. ( e.g. a seller typically won’t charge an “origination fee” so common to “traditional” lenders). The savings can be significant.

As noted, a buyer today with less than perfect credit often will not qualify for the low rates advertised (without paying substantial “buy-down” points, etc.) and seller financing may be a very legitimate (or only) option.

Flexibility and creativity are keys in selling (and buying) real estate in our current market. Fredericksburg, TX is no different. Be sure you work with an agent that is familiar with the ins and outs of all aspects of these important transactions.

1st Quarter 2009 Real Estate Sales

2009-03-31T11:39:00.000-07:00

While it can be difficult to portrait a true "apples to apples" picture of current real estate sales, the numbers speak for themselves as categorized. A lot can be read "between the lines" when discussing these figures, if you would like more detailed information on these summary comparisons, feel free to contact me at your convenience.
1st Quarter-2009

• Residential-City (Fredericksburg, TX) - The total number of homes sold in the 1st quarter of 2009 declined 32.3% from sales reported in the 1st quarter of 2008 (31 in '08 and 21 in '09). The average price of a sold property declined 22.26% ($254,144 in '08 vs. $197,562 in '09) and the average number of days-on-market (DOM) has increased an average of 16% (174 in 1st qtr. 2008 vs. the current 202 days). The total dollar volume of homes sold declined 47.34%. Notably, the average list price to sale price ratio (LP/SP) has remained statistically unchanged.

• Residential-County (Gillespie) - The total number of homes (w/acreage) sold in the 1st quarter of 2009 declined 68.75% from the sales reported in the 1st quarter of 2008 (16 in '08 vs. 5 in '09). The average price of a sold property declined 28.15% ($301,031 in '08 vs. $216,300 in '09) and the average number of DOM has increased 25.3% (229 in '08 to 287 in '09). The total dollar volume of homes sold has declined 77.55%. Notably, the average LP/SP ratio has remained statistically unchanged (93% vs. 93%).

• Lots-City (Fredericksburg, TX) - The total number of lots sold in the 1st quarter of 2009 declined 82.35% from the sales reported in the 1st quarter of 2008 (17 in '08 vs. 3 in '09). The average price of a sold lot declined 69.22% ($91,679 in '08 vs. $28,217 in '09) and the average DOM has decreased 70.6% (255 in '08 vs. 75 in '09). The total dollar volume of lots sold has decreased 94.6%. Notably, the average LP/SP ratio has decreased by 4.3%. 

Note: these figures can be slightly misleading as the volume sold so far in 2009 is statistically insignificant and not readily comparable to 2008 volume.

• Rural Subdivision Lots/Tracts - The total number of acreage lots sold in the 1st quarter of 2009 declined 71.4% (28 in '08 vs. 8 in '09). The average price of a sold acreage lot declined 26% ($171,702 in '08 vs. $126,925 in '09) and the average DOM was statistically unchanged. The total dollar volume of acreage lots sold declined 78.87%. Notably, the average LP/SP ratio has decreased by 3.37%.

• Acreage, Farm/Ranch (All MLS Counties) - The total number of properties categorized as Farm/Ranch sold in the 1st quarter of 2009 declined 58.82% (34 in '08 vs. 14 in '09). Average prices and DOM tend to be less significant in this category as the properties offered and sold vary tremendously. Most notably, total sales volume has decreased by 61.41% from 1st quarter 2008 vs. 1st quarter 2009.

Selling Season?

2009-03-17T07:53:00.000-07:00

Amid the primarily bleak news continuing to pour forth about the state of our economy, we are beginning to see glimpses of ‘good” news that could herald the stirrings of a recovery. Oops, hold on. Scratch that.

News reports today are that the recession is catching up with Texas and that more “pain” is forecast. Economists are predicting that unemployment could rise to as high as 8% statewide. Gillespie County is reporting record high unemployment (a relatively respectable 4.3%) and all sales indicators for Fredericksburg TX real estate continue to give heartburn to people like me.

Of course, these are the same economists that utterly failed to “predict” the current mess we find ourselves in so I tend to take all their current predictions with a grain of salt. These folks are about as reliable as weather forecasters in my opinion. I have learned to go with what I see first-hand.

I’ll spare you the frightful statistics on sales, price reductions, etc. and simply say that it is a terrible time to be a seller of real estate but a pretty good time to be a buyer. Financing is available, tax incentives are huge (for 1st time buyers, anyway), sellers are “motivated” and inventory is plentiful.

Be forewarned; however, that agents all over town are psyching their sellers up for the “selling season”, that “traditional” time it is believed that the market is strongest (March to mid-summer). I predict that the pace of price reductions will slow noticeably as false hopes are re-infused into the Fredericksburg market and sellers are encouraged to “hold tight”.

Being the contrarian, I would opine that now is the best time to put your best price forward, to jump ahead of all the other competing properties. Arguably, “the season” does bring out more buyers and today’s buyers are incentivized in ways they haven’t been before (e.g. low interest rates, fear of other investment vehicles, tax credits, etc.) so why not take advantage of that as a seller?

Buyers in this market are all about “deals”, perceived or otherwise. If you truly want to sell, you have to stand out. Standing out today is all about price, price and price. The buyers are there, you just have to get them off the fence.

Buyers, you will be lured off that fence in various ways so be patient, but be ready.

Real estate has always been a great hedge against inflation and other economic woes. While real estate may have led us into the current mess, it is also what will lead us out of it. Values in Gillespie County/Fredericksburg, TX/the Hill Country have held up very well (thank you very much) and should be seen as a sign of the inherent and unchanging desirability of our little corner of the world.

"REDUCED"!

2009-02-20T13:29:00.000-08:00

With year-to-date Fredericksburg, TX real estate sales falling so far below the same figures from this time last year, it is interesting to note the “buzz” being proclaimed about the number and pace of price reductions on listed properties.

I continually hear from clients, etc. that prices must finally be falling as so many listings are being touted as “REDUCED”. Is a price reduction truly relevant if the property was, a) overpriced to begin with, and b) still over-priced?

While many agents were quick to begin suggesting more realistic pricing for their clients, a lot of sellers have resisted the advice and insisted on prices that do not accurately account for current market conditions.

Less informed (or less scrupulous) agents will happily accept a listing at an unrealistic price just to “have the business”. Hidden is their assumption (hope) that they can subsequently have the seller lower the price over the term of the listing.

When an agent suggesting realistic prices competes for a listing with an agent suggesting less realistic pricing the “realistic agent” must fight the urge to “get the business” and tell a client what they want to hear to do so. If, against their better judgment, they give-in and secure an unrealistically priced listing, everyone loses.

The agents lose because they then face the cost of advertising a property that won’t sell (as priced) and the sellers..well, you know. Taking it further, an agent will logically focus their best efforts on listing that will actually sell and the natural tendency is to “forget about” the overpriced one. The disservice this provides a seller is truly unethical.

So, back to the price reductions. We’ve seen over 200 so far this year (compared to about 35 or so this time last year). Does a drop in “price” equate to a drop in “value”? Remember folks, it’s all relative.

Let’s say, for example that I feel my home is worth $1,000,000 and I list it at that price. The property tax folks may have it valued at $600,000 and my neighbor just sold a house very comparable to mine for $700,000. If I “REDUCE” my price to $950,000 is that really relevant to “market value”? Hardly.

While a $50,000 price reduction may sound awfully good, if the home was over-priced to begin with, it’s really not that big of a deal. Always remember, “market value” is defined as:

“The most probable price which a property should bring a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated: (2) both parties are well informed advised, and each acting in what he considers his own best interest: (3) a reasonable time is allowed for exposure in the open market: (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property unaffected by special or creative financing or sales concessions* by anyone associated with the sale.”-National Residential Appraisal Institute

In other words, a property is worth what some is willing to pay for it AND what someone is willing to sell it for.

I’ve posted before on pricing in a down market (e.g get ahead of falling prices and you’ll be noticed first by the most buyers) and, let’s face it, the Fredericksburg, TX real estate market, while (relatively) healthy is in a “correction”. Sellers shouldn’t be fooled in to pricing that ignores that reality.

Real Estate "Stimulus"

2009-02-19T08:48:00.000-08:00

Here are six things that buyers of Fredericksburg TX real estate need to know about the freshly enacted $8,000 first-time home-buyer tax credit that is a part of the $787 billion stimulus bill that President Obama signed into law Tuesday, 2/17/09:

1. Eight grand, new buyers: The tax credit included in the economic stimulus legislation is much narrower than the $15,000 credit previously proposed. The approved credit is equivalent to 10 percent of the purchase price of the home--although it's capped at $8,000--and applies only to first-time homebuyers and principal residences. But unlike an earlier $7,500 homebuyer tax credit, this one does not have to be repaid.

2. First time buyers defined: For the purpose of this legislation, a "first-time home buyer" is someone who hasn't owned a principal residence for three years before buying a house. (The date of purchase is considered the day that the title is transferred.) That means if you've owned a vacation home--but not a principal residence--within the past three years, you would still qualify for the credit.

3. 2009 buyers only: Only those who purchase a home on or after January 1 and before December 1, 2009 are eligible for the credit. Anyone who bought a home last year won't be able to take advantage of it.

4. Income limits: The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit, that's $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits.

5. Refundable: Because the tax credit is "refundable," qualified buyers can take advantage of it even if they don't have much tax liability.

6. Recapture: Buyers have to own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government. (Exceptions will be made in certain cases, such as death or divorce.)

More “stimulus” for the real estate market is being outlined daily. Apparently, on March 4, we will have more details on what types of mortgage, bankruptcy and foreclosure relief is planned with the goal of jump-starting the economy.

Really?

2009-01-29T07:42:00.000-08:00

After just over a year of finally arriving into the 1980’s and instituting a key lockbox system for use by Fredericksburg, TX realtors, this grand experiment appears on the verge of failure. Readers may be surprise, shocked, humored or indifferent to learn that real estate practitioners in our fine community stubbornly adhere to an antiquated, inefficient and (borderline) reckless method of storing and distributing the keys necessary to facilitate the showing of real property listed for sale in Fredericksburg, TX.

To avoid the potential liability of revealing too much on how keys of listed property are stored, logged, tagged, distributed and/or collected, suffice to say that the stubborn reluctance to recognize the liability inherent with the various haphazard systems of key management employed by local offices would send any risk manager worth his salt into a major tailspin.

Having failed to make any progress with the “liability argument” much has been debated about the “efficiency argument” that holds in wonder a group of professionals who fail to place a value on the time it takes them to wander from office to office picking up and dropping off keys (not to mention the cost of the gas to do so), looking for keys that someone failed to turn in, etc. Isn’t your time, effort and frustration worth anything to you? What is this saying to your clients?

Failure on the liability and efficiency fronts turns us to the “leadership argument”. Agents dropping the system cite spotty usage as one reason they are opting out of efficiency (in favor, as it were, of liability and inefficiency). Our Board of Directors and Officers have within their power the ability to mandate usage of this system. They apparently prefer to build “consensus” and play politics rather than actually lead and make decisions that will protect the entire membership (despite themselves).

The failure to recognize liability, efficiency and/or leadership leaves us nothing left to play except, perhaps, for the “cost argument”. Agents opting out of the system cite “cost” as a concern (along with the aforementioned lack of universal implementation). We’re talking about $180/year per agent. That works out to about $0.50 per day per agent. Are they really saying they can’t see the wisdom in spending $0.50 per day to make themselves more efficient and to protect themselves and their loved ones from unspeakable liability? Really?

When times are tough, people have a tendency to cut back on what they may deem to be “luxuries”. Is a system that boosts efficiency and reduces liability a luxury? Hardly. Is $180/year going to break your bank? Do the math folks. Add up your time and the cost of your gas and multiply it by the number of times you show property in Fredericksburg, TX. $0.50 per day…really??!!

Spawning Newbies

2009-01-26T13:30:00.000-08:00

Be on the lookout for a curious phenomenon to occur as 2009 progresses in Fredericksburg, TX. As the economy stalls and leaders in Washington (and elsewhere) look for ways to stimulate both the housing markets and the overall economy, jobs will continue to be shed in the industries we’ve been hearing so much about. What will become of the workers unfortunate enough to have been put out on the street as a result of these difficult times?

If history is any guide (and it usually is) a significant number of these folks will opt in try their hand at real estate. The scandalously low barriers to entry in our profession make it all too easy for those scrambling to make ends meet (or those simply looking for a change) pick real estate as a target. After all, how hard can it be?

Everyone knows a realtor (or 20) and most are easily seduced by the seemingly easy way we are all perceived to make the big bucks. My hope is that those considering following this “easy money” will do a little homework before they get into a business that is a lot harder than it looks. They will be surprised and will perhaps have missed an opportunity to pursue something that may have been more to their liking.

The lure of being “self-employed” has its obvious temptations but it also carries the sobering reality of complete and total self-reliance. Not everyone’s personality and family/financial situation can bear the strains of no steady paycheck, no employer funded retirement, no paid vacations or sick days, etc.

For a myriad of reasons, folks seem to think that if all else fails, they’ll try real estate. Again, how hard can it be? I would ask any buyer or seller of property, however, if that is the attitude they want representing their (likely) most valuable asset.

Do you call the plumber fresh out of plumbers school out to diagnose and fix your pipes? Do you want to be your surgeons very first quadruple bypass? People look to experience in all things and should logically do so with real estate, but do they? In many, many case the answer is (illogically) no.

The recent “boom” years in Fredericksburg, TX real estate saw the membership roles of our local board of realtors swell to a number that was roughly equal to having one realtor in membership for every one deal that was consummated. With those numbers, who is getting rich? Granted, as in most businesses, the top 20% of agents did 80% of the deals but how do you, the consumer, the buyer or the seller, identify the experienced and qualified agents?

Given that the growth in the heady times could have resulted from the lure of “easy money”, could my prediction of the growth in the number of rookie agents swarming to town in the “tough times” make any sense? If you believe the media that economic recovery will have to begin with the housing markets and that any “stimulus packages” will be throwing vast amounts of money in that direction and for that result, then you can see why those looking for “change” may opt to find it in real estate. So, do you go with the rookie or with the pro?

YE 2008 Sales Data

2009-01-02T09:29:00.000-08:00

Despite the plethora of bad economic news, 2008 saw real estate in Fredericksburg TX hold its own pretty well, proof that real estate markets are “local”. This means that “national economic trends” “U.S. Housing Statistics”, the “Case/Schiller Index”, etc. are composites of what may be happening in other parts of the country but they do not account for the specifics of actual activity in our little corner of the world.

That said, the following is a recap of the Fredericksburg Texas and Gillespie County Texas real estate market as evidenced by sales and listing data provided by the Gillespie County Board of Realtors Multiple Listing Service for the year ending December 31, 2008 as compared to the same period for 2007:

• Residential-City - The total number of units sold in 2008 declined by 16.88% from 2007 and the total dollars sold declined by 18.72% ($37,211,150 in 2007 vs. $30,243,391 in 2008). The average days on market increased from 146 in 2007 to 163 in 2008 (+11.64%) and the average sold price declined from $232,570 in 2007 to $227,394 in 2008 (-2.22%). Hardest hit were sales in the range of $250-$500,000 where the number of units sold decreased by nearly 19%.

• Residential-County- The total number of units sold in 2008 declined by 9.47% from 2007 and the total dollars sold declined by 4.32% ($35,583,104 in 2007 vs. $34,046,128 in 2008). The average days on market increased from 181 in 2007 to 199 in 2008 (+9.94%) but the average sold price actually increased from $374,560 in 2007 to $395,885 in 2008 (+5.41%). This increased average can be attributed to a small spike in sales in the $750,000 to $3,000,00 ranges.

• Residential-All- Combining the figures above to view the state of the residential market for all of Gillespie County (including figures for Fredericksburg) and the total number of units sold in 2008 declined by 14.83% from 2007 and the total dollars sold declined by 16.16% ($90,715,107 in 2007 vs. $76,052,419 in 2008). The average days on market increased from 162 in 2007 to 183 in 2008 (+12.96%) and the average sold price declined from $263,707 in 2007 to $259,565 in 2008 (-1.57%).

• Lots-City- Mirroring last years’ sales, 38 units were sold. The average priced increased from $67,639 to $73,745 but the average days on market more than doubled from 164 in 2007 to 335 in 2008. This is an accurate reflection of the fact that builders dramatically reduced their “spec” building efforts throughout 2008.

• Land & Farm-All- Total unit volume decreased by 19.35% from 155 units sold in 2007 to 125 units sold in 2008 but the total dollars sold in this wide-ranging category only decreased by 3.40% (from $48,398,974 in 2007 to $46,754,249 in 2008).

All-in-all, not too bad! My belief is that efforts made by the new administration in Washington combined with historically low interest rates will work to further insulate the Texas Hill Country (in general) and Fredericksburg Texas (in particular) from the woes being experienced in other troubled markets.

Opportunity is Knocking

2008-12-31T10:04:00.000-08:00

The perfect storm of buying opportunity is upon us here in Fredericksburg, TX.

Ignoring (for a moment) the fact that prices in our area have not fallen as might reasonably be expected, total sales volume for YE 2008 is off a whopping 18.7% from the same time last year (dollar volume of single family homes w/in the City of Fredericksburg), the spread between list price and sales price has widened and inventories are at their highest level in many, many years it is easy to make the case that “now” is the time to buy real estate in Fredericksburg and/or the Texas Hill Country. Couple this trend with historically low interest rates and you have an attractive formula for successful investing.
Back briefly to prices not falling substantially. Those conditioned by either experience or the media may reasonably expect that the real estate market disasters currently befalling most of the country are sure to happen here as well. While I can attest that the local market is “correcting” it is doing so very slowly and fully reflective of the fact that local sellers simply do not “have to” sell. Very few folks here are in trouble as evidenced by the near total lack of foreclosures and short sales. As we are primarily a “discretionary market” buyers feel no pressure to buy in the Fredericksburg area. Sellers who don’t have to sell and buyers who don’t have to buy equals the current market stalemate.

Though credit markets have reportedly seized up, that is not the case in Texas (in general) or the Hill Country (in particular). Every lender I have dealt with states that they have plenty to lend. Of course there are caveats such as tighter appraisal reviews and higher down-payment requirements…always a catch! At present, a lot of the available funds are being sought by those choosing to re-finance that these ridiculous rates.

Buyers who chose to wait until prices come down more are (unwittingly) gambling that interest rates will hold steady (or drop further) as well. While one never knows these days, it’s hard to imagine rates dropping any further. What is not widely understood is the impact interest rates can have on the real monthly cost of homeownership. Even 10% drop in home prices is immediately nullified by a mere one percentage point increase in interest rates on a 30-year note.

Fortunes have been made and lost by those attempting to “time” the peaks and valleys of real estate markets. Don’t let this historic combination of low rates, weak market demand and near record supply fool you in to thinking you should wait a little longer. While I’ve predicted that prices may fall a wee bit more into the first half of 2009, interest rates are highly volatile and tend to rise a lot faster than they fall. Don’t miss the boat!

Time to Refinance Fredericksbrug, TX Property?

2008-12-10T09:36:00.000-08:00

The Federal Reserve's decision to buy up mortgaged-backed securities caused mortgage rates to fall and created new opportunities. Should you refinance your mortgage now? Before you rush to refi, take a few minutes to determine if it's the right move for you.

When does it make sense to refinance my Fredericksburg, TX Property? 

Refinancing involves starting over and applying for a new loan. Whether homeowners deal with the original lender or a new one, the new loan will pay off the old loan and the borrower then makes payments according to new loan terms.

Good reasons to refinance include getting a lower interest rate, shortening the term of the mortgage to build equity faster, lowering monthly payments or switching from an adjustable rate to a fixed-rate mortgage.

Even if you just secured a new mortgage recently, it might make sense to refinance. Homeowners should consider refinancing if, in the long run, it will save them money.
First you have to find out the cost of getting the new loan. Refinancing can cost around 2 percent to 3 percent of the total loan amount.

To determine if it will save you money, calculate your break-even point. You can calculate it by dividing the mortgage fees by the monthly savings. The answer you get tells you how many months it will take for you to break even.

If you plan on retiring in the house, strongly consider refinancing. If you plan to sell within two and a half years, it may be unwise to refinance as the payback of the cost to refinance may not be recovered.

How do you figure your monthly savings?

You'll have to get an estimate of the rate for which you'll qualify. A mortgage broker or loan officer can tell you that. Ask your Fredericksburg loan officer, or consult a mortgage calculator to determine what your principal and interest payment would be with the new loan. Don't compare that with your current mortgage payment, which likely includes a pro rata share of your property tax and insurance payments. Your payment coupon should show an itemization of your current monthly principal and interest payments. Now you can figure out how much you would save every month.

Find out if your current loan has a prepayment penalty. If it does, determine what the penalty would be if you refinance, and add that amount to your closing costs to determine your new break-even point. It might make sense to hold off on refinancing until you're clear of the prepayment penalty period.

What if you owe more than your house is worth? 

For homeowners upside down on their mortgages, refinancing probably won't be in the cards. Try to look at it from the lender's viewpoint.

Let's say you bought your home for $300,000 at the market top, but recent sales indicate your home is worth just $225,000. A neutral third-party appraiser confirms this. You owe $280,000. How can you expect the lender to give you a loan for $280,000 at more favorable terms?

The fact is, you'll likely have to pony up the difference between what you owe and what the refinancing bank is willing to lend you. If you have the cash and you expect to stay in the home for many years, then it may be worth taking this step. Eventually, Fredericksburg, TX property values will rise again, but it will take time.

The worst thing you can do is walk away from the home altogether. If you're considering foreclosure, consult an attorney. Try to avoid foreclosure if at all possible.

What if you're not “ordinary”? 

If you're self-employed, the process is a bit trickier. Fewer lenders want to deal with unconventional financial situations, but if you have a high credit score and a large down payment plus proof of your income, it's possible to find a deal.

Homeowners who have second mortgages may also run into some difficulties. Before you can refinance the first mortgage, the holder of the second mortgage must agree to subordinate the second mortgage to the new first mortgage. If that lender refuses, the homeowner must then qualify for a new first mortgage that will pay off the second.

In these cases, it's best to go to a mortgage broker rather than directly to a bank, because a broker has access to a variety of lenders that offer different loan products.

What steps do you need to take? 

The fact is, you need two stellar assets these days before you can refinance: an excellent credit score and enough equity in your home. If you have at least 10 percent equity in your home -- ideally 20 percent or more -- or some spare cash to fill in the difference between the amount owed and the amount you can borrow, start the process by checking your current mortgage note to be sure there's no prepayment penalty.

Next, get a copy of your credit report and check your credit. These days most lenders are requiring good credit scores, though some programs exist to help out borrowers with mediocre scores. The problem is that those borrowers likely will have to pay a surcharge or higher interest rates. Under these circumstances, you need to decide if it makes sense to refinance.

Besides abundant equity and a good credit score, lenders will also want you to be able to document your employment, income and assets. Lenders have abandoned the practice of offering loans without verifying this information. If you meet all of those requirements, it's time to start shopping for a loan. You can chose to either work with your current lender or find a new one.

Be aware that sticking with the original lender may be easier and less expensive. The lender may not need a new property appraisal, a title search or other items that would normally be required on a new loan. That lender should also be willing to offer a better price because it's easier and more cost-effective to keep a good customer than it is to spend marketing dollars finding a new one.

That said, it never hurts to check out the competition. Start shopping by comparing the rates of local Fredericksburg, TX lenders.

If you do decide to shop around, make sure that you do all your shopping within a 30-day time frame so as not to ding your credit score with too many inquiries.

Thanks to the plan from the Federal Reserve to buy up mortgage-backed securities, rates are lower and the refinance business is booming again. For Fredericksburg homeowners who qualify, now may be the time to trade in that old mortgage for a better one.

Buying Investment Property

2008-12-10T06:53:00.000-08:00

When the stock market is zooming up and down like a theme-park ride, the solidity and tangibility of Fredericksbrug, TX real estate as an investment is increasingly appealing to many people.

If you are considering becoming the new owner of an investment property, some things about today's economy are in your favor. More people are renting, because it's harder to qualify for a mortgage and because some people are genuinely scared to buy a home they might believe is still overpriced. So there is a large pool of potential tenants. And there are many houses (and a scattering of duplexes) to choose from because so many properties are on the market.

This is not an investment for the faint of heart. Being a landlord requires a good deal of time and money, possibly over many years. You need to be willing to make repairs or hire someone to do so. You have to be responsible for collecting rent, dealing with unruly tenants and finding new tenants when vacancies occur.

For Lloyd Lindsay, 25 years of owning investment properties has had more positives than negatives. "I bought this house for retirement income," Lindsay said. "For 25 years it's been a good investment."

If you're thinking of taking the plunge, here are some tips to consider:

1. Sell your house, buy a duplex, rent out one half of the duplex and live in the other half. This is a great way to start out as an investor/manager. Learn how to manage property, collect rent and take care of needed repairs in the first few years. Also, just by moving from your house to a duplex, you immediately have someone else paying a portion of the mortgage. Fredericksburg is chronically short of duplexes for sale, so in this option will require some patience.

2. Buy a single-family home and rent it out. Experiment with one nice single-family home that is close to where you live. You will have to be at the property frequently to collect rent or to make repairs, and it is easier and simpler if it is close by. In a market like Fredericksburg, remember that location is key. Better-located properties rent for more and rent more quickly (they also typically cost more to buy). The closer-in properties historically hold their value better and are less prone to the normal market cycles.

3. As a general rule in the Fredericksburg area, expect to pay $160,000 for a starter rental house and about $185,000 for a duplex. Duplexes in more expensive neighborhoods can cost $300,000 or more.

4. Do your homework. The most important part of the homework is figuring out what you can collect for rent and whether this will cover your expenses as a property owner. You can only get for rent what the neighborhood will bear. A good agent can help you figure out what a reasonable rent would be in your neighborhood. You can also drive around and call the numbers on signs advertising "duplex for rent" or "home for lease" to help you get a feel for what rents are like. Also, check the Fredericksburg Standard real estate section weekly.

5. Calculate your expenses as a property owner. These will be your mortgage payment, property taxes, insurance, any possible homeowners association fees, maintenance, repairs, any utilities you decide to cover as the landlord, and advertising costs when you have a vacancy. You might need to add property management fees to this amount if you are not planning to manage the property yourself. Figure out whether your rental income will cover all of this, as well as leave you some extra money each month that you can put in a savings account to cover future repairs. Again, a good investment property agent can help you calculate these figures. Don’t forget to factor in a reasonable appreciation figure as well as the usual tax advantages of owning real estate.

6. Consider a duplex over a single-family home because there will probably always be some rent coming in. If you own a single-family home and your tenants move out, it might take several months to find another tenant, and in the meantime you will have to cover all of your property expenses out of your own pocket.

7. Be aware that because credit is harder to find in today's tight market, most lenders are requiring a 20 percent down payment for investment properties.

8. Be a realist. Be very conservative with your expectations of how your property will appreciate. And unless you are handy with repairs, buy a property that's in above-average condition. Repairs can hurt your cash flow.

9. Finally, it's always good to have an exit strategy. If it's not working out, you can hire a professional to manage it or you can sell it.

Apartments or Houses for Fredericksburg, TX

2008-11-25T08:05:00.000-08:00

As the City of Fredericksburg TX continues to explore solutions to the perceived lack of affordable housing, clear and convincing evidence exists that there is, indeed, a need for this type of product. All one has to do is look at statistics provided by the U.S. Census Bureau, the Texas State Demographer, FISD, the Gillespie County MLS and the Bureau of Labor Statistics (among others) to see that prices continue to trend higher while poverty levels are increasing and wages are not keeping pace with inflation (not to mention home prices).

While some may argue that meeting this demand by granting tax-payer funded incentives to private developers is a bad idea, it has been proven time and again that it is the only idea that works. The “do nothing” alternative presents risks to the community in the form of exacerbating the chronic labor shortages faced by local employers and will (by default) encourage more low-income multi-family development. If people need a roof over their heads, someone will provide it. The question for our community is what kind of roofs do we want to see and live with.

Multi-family developments are certainly not bad things. We’ve all lived in an apartment or two (or eight) in our time. Recognize however that the “business of apartments” has changed dramatically since most of us most likely made that housing choice. Large-scale apartment communities (50+ units) fall into two categories these days; “subsidized” and “securitized”. Subsidized units typically involve some kind of government funding and come with “income qualifying” strings attached. Securitized units are “free market” in the sense that they will charge the highest rates possible (and spend the least in maintenance practicable) to achieve the highest returns for their publicly traded REIT’s.

While each type of unit serves its targeted demographic well, they effectively bookend the low and high end of any given market. What about the “middle”? Who serves that? Who has the ability to serve that? The answer to that is a whole other post, so I’ll stick to my point.

As in the debate on affordable, single-family housing, apartment developers clearly consider land cost and income demographics in their development equations. High land prices and the lower the area incomes virtually assure more projects aimed at the lower end of the apartment spectrum (subsidized). Again, there is nothing wrong with someone meeting an identifiable demand; the question for the community is “how do we want that demand to be met?”

Coming full-circle, the alternative to more taxpayer subsidized multi-family development (yes, local incentives are given to these projects too) is properly incentivized single-family residential development.

“Affordability” can be defined by assessing local income levels, current underwriting criteria and the availability to downpayment assistance programs. Once defined, affordable mortgage amounts can be deduced resulting in target home prices. The cost to construct certain types and configuration of dwellings can be assessed and subtracted to identify the resulting market lot price targets. None of this can be accurately calculated, however, unless and until a clear message is delivered from city officials as to incentive packages that will be granted to projects meeting established criteria.

Is it in the best interest of the community to incentivized development in return for stabilizing the local labor market and/or slowing the spread of taxpayer supported multi-family development? In the special place that is Fredericksburg, TX, I would answer with a resounding YES!

What about those who say “well Jeff, not everyone can afford a house”, or “hey, I had to live in many apartments and save my money for years before I could afford a home”? These are certainly valid statements and are (by the way) very reflective of my own experiences.

These arguments; however, ignore the fact that times have changed. Home prices and inflation are far outpacing the real growth in wages. I suspect that many of us who make these arguments couldn’t achieve what we managed to do then, today.

Foreclosures and Short Sales in Fredericksburg TX

2008-11-13T12:28:00.000-08:00

With the recent state of the national economy, the question of foreclosures in the Hill Country, Fredericksburg, Mason, Llano, etc. often comes up. Is it a “problem” in our area? Are there opportunities for investors to pick up “bargains” at foreclosure sales?

While the Fredericksbrurg, TX and Hill Country markets are not immune to the foreclosure phenomenon, we have to a very large degree not been subject to the rash of forced sales more common on the east and west coasts. Have there been foreclosures? Sure. Very many? Not really.

Lenders in our area have tended heavily towards the conservative. Additionally, Texas home equity lending laws have been a tremendous help in preventing the kind of ridiculous, sub-prime lending you hear so much about in the media today.

If you believe, however, that our economy will continue to suffer through a quarter (or several quarters) of recession, it could benefit you to know the basic of foreclosure law should you (as a property owner) find yourself faced with financial hardship. Conversely, fortunes have been made by savvy investors who follow foreclosure trends and are able to acquire real property at “discounted” prices.

The nationwide foreclosure boom has focused more attention on a transaction referred to as a “short sale”. In an attempt to avoid the time-consuming (and often times expensive) foreclosure process, lenders are increasingly agreeing to “short sell” a mortgaged property.

By agreeing to sell the property for less than the current balance owed on the note, a lender “comes up short” on recovering the full amount. The “short” part of the term also applies to the timeline generally associated with the process as these attempts are often limited to an amount of days roughly equivalent to the time it take to process a “regular” foreclosure. A “short sale” can be a win-win for the property owner and the lender. ‘Short sale” properties are often listed with realtors and heavily promoted.

Are “short sales” common in Fredericksburg and/or the Hill Country? Not as common as in the major metropolitan areas, but they do occur. It is my opinion that this process will become increasingly more frequent as our market corrects and lenders and borrowers opt to try an avoid foreclosures.

The Debate Continues

2008-11-11T15:06:00.000-08:00

The debate on affordable housing in Fredericksburg, TX took two steps forward and a half steps back at last weeks Planning & Zoning hearing. On the agenda were proposed changes to several existing zoning ordinance classifications, the creation of a new one and the re-zoning of a neighbor to allow for small lots and more density.

Having apparently received enough critical feedback from neighbors duly notified of the impending discussions, P&Z wisely opted to separate the discussion on the zoning classification changes/creation and the re-zoning of the neighborhood for fear that, if considered as a package, the issue would go down in total defeat.

Their plan worked in that some significant changes to existing rules were amended and a new classification (R-1A) was approved by P&Z. These proposed changes/additions now move to the 12/1 City Council agenda for review, discussion and a vote.

The proposed re-zoning of the Walch Terrace neighborhood was roundly criticized by those potentially affected. Clearly seeing the writing on the wall, P&Z requested that city staff withdraw this proposal which, of course, they did. Score one for the neighborhood!

This agenda was devised by city staff, P&Z and (to some degree) City Council at the behest of the Affordable Housing Task Force as a means of taking a critical first step towards removing various regulations from the path of affordable development. The goal of these changes was to encourage “infill” housing into existing neighborhoods by encouraging lot division and increased building coverage.

While it is my personal opinion that these measures will make little difference in “available dirt” becoming more “affordable”, they do stand to increase density in the city core and perhaps minimally affect “suburbanization”.

These steps are progress in the long road to achieving the stated aim of these various committees, task forces, council’s, etc. (to allow for more “affordable housing”). Each public official and task force member should be congratulated on the partial success of this effort. More has been accomplished in the last several months than has in the last dozen years.

More steps are needed, however, and it is my hope that collective wisdom involved in the process are not disheartened by the one “defeat” resultant from this meeting. It was a bad idea, poorly executed. You did the right thing by pulling it. Take your licks and keep on movin’.

Unless and until we define what “affordable” means to our community and realistically assess the true demand for this product, I don’t see how we can craft future incentive packages to encourage real progress. Unless and until we are ready to recognize that the “waiver” of a fee not currently being collected cannot logically be termed as a “giveaway” and unless and until we realize that the potential expansion of the tax base far outweighs any incentives granted, unless and until we acknowledge that “affordability” does not end with the purchase price (but rather includes maintenance, sustainability, efficiency, utilities, taxes, etc.) how can we make further progress?

Hold On To Your Wallet

2008-10-29T12:35:00.000-07:00

Hold on to your wallets people. The election, taxes, “the bailout”, interest rates, “the credit crisis”, blah, blah, blah. It all adds to the disturbing trend in real estate towards higher prices (resulting from higher costs). Just as prices should be falling, circumstances seem to be conspiring to prevent just that. This is interestingly opposite of that whole supply and demand thing we’ve all learned about.

The increased cost to borrow and the (rightfully) more stringent underwriting standards have reduced the pool of potential buyers yet sellers have not keyed in on this fact. Ever optimistic, sellers continue to hold out for last years prices offered to fewer buyers using more expensive money and get upset with their agents because their properties don’t sell.

Seller’s of non-homestead assets are almost certainly facing a higher capital gains rate in the next administration. What are they waiting for?

This resistance to what should be a natural downward movement on prices (costs) is being further exacerbated by whoever it is that send down the International Residential (Building) Code from on high. Did you know that homes built after 1/1/11 will be required to have fire sprinkler systems? This new government mandate (largely un-reported I might add) will add an estimated average of $1.61/s.f. of cost to a new home.

Believe me, my years of commercial property management experience (sprinklers are common, and necessary, in commercial structures) shows me that pressurized water pipes installed in ceilings will eventually leak. Note too that commercial ceilings most often consist of lay-in tiles that provide easy access to MEP systems. Conventional homes, of course, use sheetrock ceilings that are as inaccessible as they are expensive and time-consuming to repair.

While not mandated for existing homes or remodeling projects, the “safety” argument holds little sway with me. I suppose a small saving grace could be slightly reduced insurance premiums. This is clearly another instance of big brother knowing what’s best and shoving it down our throats. When will we say “enough is enough”?

Fredericksburg, TX real estate is expensive enough as it is yet I still hold out hope that sanity will rule the day and the market will do what markets are supposed to do…adjust and correct. The unabashed capitalist, free-market guy that I am can only pray that big brother (in all its shapes and forms) decides to just stay out of our way.

what Do We Do Now?

2008-10-15T14:31:00.000-07:00

I’ve been repeatedly asked what it is that real estate agents do when the market is “in the toilet” as it appears to have been/is/will be.

My first response is that things are not as bad here in Fredericksburg as they may first appear. I tell people not to listen too much to the media and the talk about the “nation real estate market” as there is no such beast. All real estate markets are local.

While the “credit crisis” may have placed a damper on those buyers with “credit problems” there is no lack of credit for appropriately qualified buyers (e.g. buyers that have a demonstrable ability to pay back the loan).

Those buyers prescient enough to maintain good credit and a store of cash for higher down-payments are also wise enough to wait until the sellers that have to seller (vs. sellers who merely would like to sell) drop their prices to a point that these buyers will interpret to be “the bottom”. If and when that happens, activity will increase.

My message in this to sellers is that if your truly want to sell (or need to sell) there are plenty of buyers out there…at the right price. The sooner you get to that price the better off you’ll likely be.

Back to the original question of what we do with our time. Many agents will opt for vacations or completing that home “honey-do” list or simply sit around and wait for the phone to ring. Others will cold call and prospect for business and still others may quit the business altogether.

I won’t tell you what I do because then all my competition will do it too. Suffice to say that I’m not sitting on my hands. My overall goal is to position myself and the services I provide to stand further and further ahead of what others may be doing. I’ll be creating opportunities rather than waiting from them to present themselves.

There will be no whining or complaining about the Dow, Lehmann Brothers, the strength of the dollar or the “bailout”, none of that is within my ability to control (though it should be!). No standing around complaining about the inevitable tax increases and no standing around with my hand out asking Uncle Sam for help.

Improving myself and the services I provide my clients is what will carry me out of the “slump” and afford some nice, juicy returns for savvy buyers looking at opportunities in Fredericksburg TX Real Estate.

3rd Quarter Sales Update

2008-10-01T08:57:00.000-07:00

As September ends and we begin what all signs point to will be a dismal 4th quarter, some interesting YTD multiple listing service market indicators (Gillepsie County properties only):

• There are 852 active listings for sale. In 2008 we have averaged 33 sales per month which leads to the revelation that we currently have nearly a 26-month supply of inventory on hand. Recall that previous posts opine that a market “in equilibrium” typically has a 6-month supply of inventory.

• New listings are up almost 40% from the same time last year.

• The shear number of price reductions YTD is up a telling 230%! While this may indicate that sellers are finally reading the writing on the wall, it could also mean, given the still anemic sales YTD, that prices are still too high as these decreases have not substantially lured buyers from the sidelines. A deep look shows that most homes that have sold reveal one or more price reductions in the listing history before a sale was consummated.

• The number of sold properties has hit a 5 year low.

• The total dollar volume of sold properties has hit a 4 year low. Interestingly, the average prices of sold properties have not dropped as much as these figures may indicate (see previous post on 3rd Qtr. Sales).

Despite the media doom and gloom, election-year uncertainty (yes, taxes are going to increase….you head it here first!) and Wall Street “rescues” all is not lost for the Texas Hill Country. The Fredericksburg area has long been a desirable option for retirees, second-homers, investors, etc. and the fundamentals of this attraction (location, climate, scenery, etc.) have not changed.

While we all may have enjoyed, profited from and been taxed on our decisions to invest in Fredericksburg TX Real Estate, our run-up in prices was no where near what it had been in other parts of the country. Prices will level-off, credit will again flow, the sun will rise, etc., etc. Hang in there!

What the *#&@ ?

2008-09-22T14:38:00.000-07:00

What does all the recent financial turmoil mean to Fredericksburg Texas real estate? The short answer is, I can only guess but it’s not likely to be pretty.

Federal bailouts, AIG, Lehman Brothers, Merrill Lynch, WAMU, etc., etc. They stalwarts of our financial industry seem to be dropping like flies. With this trouble (perhaps, in part, because of it) comes a serious lack of credit available to finance the purchase of real estate. While it was the abundance of “easy credit” that got us in to this mess, it will likely be the nearly complete lack of credit that makes it all worse.

Buyers with good credit and lots of cash for a down-payment will be fine. But then, that was never the issue was it? We thought that Congress/the feds were all making our lives better by loosening the purse strings and letting the mortgages flow. No doc loans, no money down, no income verification and all that. Who thought it was a good idea to lend billions of dollars to folks who could never pay it back?

We as real estate agents played along, only too happy for that quick and easy sale. To borrow, paraphrase and de-politicize a favorite recent line, “the chickens have come home to roost.” Now what?

My crystal ball tells me prices will continue to drop. Great news for buyers, not so much for sellers. Financing for us regular folks will cease to exist for the next several months. The rich will get richer as the Feds begin to auction off the bad loans of the various institutions to hedge funds who will happily pay for 30%-50% on the dollar. The Feds will then sell off foreclosed assets for less than that. See, I remember the late 80’s. I worked for the FDIC and was a part of disposing of hundreds of millions of dollars worth of real estate for tens of millions of dollars. This is very “déjà-vu”.

If you happen to be liquid right now, the coming months will be a bonanza of opportunities to load up on “distressed” assets and bank them for the inevitable turn-around. Things will get better, they always do. New fortunes will be made.
You are witnessing perhaps the greatest “cycle” our industry will see for another generation. This mess will make the 80’s look like a day in the park in many areas of the county.

Will this decimate the Hill Country and Fredericksburg the way it will (has), say California, Michigan, Flordia, etc.? No, it won’t. I take some solace in that we Texans may have learned a little from the 80’s. While we enjoyed some nice appreciation, we didn’t go nuts. That will be our saving grace. Relatively speaking, we didn’t climb too high so we won’t have far to fall.
Are we in the Hill Country/Fredericksburg at the bottom yet? I don’t think so but it will all depend on how the availability of credit is restored as a part of the latest bailout scheme. As I’ve said before, we’ll be fine. It may be slow for a bit but I have seen few sign of “forced selling” and that bodes well for all of us.

Two pieces of contradictory advice (and remember, it’s worth what you’re paying for it): Seller’s, lower your prices a bit but don’t panic, hold on a little longer. Liquid buyers, look to more distressed markets for your long-term wealth building plays (yes, I can help you with that) and buy in Fredericksburg with the knowledge that your money will be pretty safe in the long run. The rest of us, watch and learn. My boldest prediction is that we will see this all happen again within the next 15-20 years….

3rd Quarter Sales

2008-09-03T12:32:00.000-07:00

As the third quarter for home sales comes to a close in Fredericksburg, TX it is readily apparent that the “national housing crisis” has had a measurable effect on the local market. Whether through lack of available financing, overpricing or just plain old psychology buyers are buying fewer and less costly homes in Fredericksburg.

The analysis that follows is based on MLS data for the period 1/1/07 through 8/31/07 vs. 1/1/08 through 8/31/08 and only represents homes sold within the city limits of Fredericksburg, TX:

• The Median Sold Home Price is down 2.55% ($215,500 vs. $210,000);
• The Average Sold Price is also down by 0.9% ($233,222 vs. $231,100);
• The average number of days on market has increased by 3.4% (148 days vs. 153 days);
• The total dollar volume closed YTD has decreased by 7.10%;
• While 2007 evidenced shows that nearly 70% of properties purchased involved financing (other than cash), only 60% YTD for 2008 involved financing. This could be interpreted as evidence of the increasingly difficult financing environment.

Clearly the market has cooled somewhat but we have yet to face the problems so commonly reported on the nightly newscasts. The good news is that Fredericksburg’s economy remains among the healthiest in the State of Texas.

Anecdotal evidence supports the theory that high gas prices over the recent summer months kept folks closer to home. Our convenience to San Antonio, Austin, Houston, Dallas, etc. played well into the new economics of summer “stay-cations”. Only time will tell if tax receipts bear this out.

Our economic fundamentals remain strong and the draw of the Hill Country has not lessened. We stand poised for a sustainable recovery. The $64,000 question is when will that happen?

I will never be mistaken for an economist but my crystal ball tells me that real estate sales will continue to lag behind the “boom” years of 2003-2006. The continuing shake-out on Wall Street and our lending institutions will continue to make funds scarce for all but the most highly qualified buyers.

Buyers that do have cash, sizable down-payments and or pre-arranged financing will continue to see asking prices soften a bit and will see the spread between list prices and sales prices continue to grow.

Sellers should heed the trends noted above and expect longer times on market and lower actual sales prices (prices further restricted by appraisals required by lenders). Jumping ahead of these documented trends will serve you well.

Hill Country Wind Farms

2008-08-26T14:20:00.000-07:00

Various firms investigating the economic viability of placing “wind farms” in the Hill Country (Gillespie County) prompted the formation of the Save Our Scenic Hill Country Environment alliance (for more, visit www.soshillcountry.org ). The flowing article (re-printed from the August 26th Austin American-Statesman is sure to add fuel to the debate on wind farms near Fredericksburg, Texas

Court sides with wind farm in suit by landowners
Neighbors called 400-foot turbines' 'aesthetic impact' a nuisance.
By Robert Elder  AMERICAN-STATESMAN STAFF  Tuesday, August 26, 2008

A state appellate court has handed a victory to the wind energy business in Texas in a closely watched "nuisance" lawsuit brought by West Texas landowners.

The 11th Court of Appeals in Eastland last week upheld a district court judgment against landowners who had sued FPL Energy LLC over the company's massive Horse Hollow wind farm in Taylor County. The jury had found that the wind turbines were not a nuisance to neighbors and rejected their claim for damages.

Horse Hollow is one of the world's largest wind-generating facilities, with about 425 turbines spread over more than 50,000 acres of land southwest of Abilene.

Before trial, the judge rejected the landowners' claims for damages based on the "aesthetic impact" of the 400-foot turbines. The jury was the first to hear a nuisance claims suit against wind farms in Texas.

The appeals court affirmation said "Texas case law recognizes few restrictions on the lawful use of property."

The ruling "is going to kill all the arguments about filing a lawsuit because you don't like the way (a turbine) looks," said Dallas lawyer Trey Cox, the lead counsel for FPL Energy, a subsidiary of Juno Beach, Fla., utility FPL Group Inc.

Disputes over the noise of turbines or their environmental impact shouldn't be affected by the ruling. Cox predicted: "That's something you can objectively fight about in court. But the issue of what's pretty and what's ugly, we can't argue about that."

Steve Thompson, the Houston lawyer who represented the Abilene-area landowners, did not return a message Monday.

The plaintiffs didn't contend that FPL's operations were illegal, but they said a legal business can be considered a nuisance if it's abnormal and out of place with its surroundings.

The 11th Court ruling, written by Justice Rick Strange, noted that several Texas courts have accepted the argument, but in cases where the nuisance had occurred from things such as flooding or odors.

The appellate ruling was the second win for wind projects this month. Earlier, U.S. District Judge Lee Yeakel of Austin said he would dismiss a suit that sought to stop further construction of two wind power projects along the Gulf Coast in Kenedy County. The projects are expected to place more than 600 turbines on 60,000 acres near Laguna Madre, south of Corpus Christi.

Yeakel has not yet issued his final order in the case.

The Coastal Habitat Alliance, an environmental group that includes the King Ranch, filed the suit, saying the turbines could kill untold numbers of migratory birds and damage the bay. The suit sought to overturn the decision by the Texas General Land Office to allow the projects to be built without environmental review or input from the public.

Affordability Continued

2008-08-12T13:40:00.000-07:00

The Affordable Housing Task Force (Fredericksburg, TX) provided its report and recommendations to the City Council on 8/4/08. While I was unable to attend the meeting/presentation the Fredericksburg Standard provided a lengthy (hopefully accurate) report of the latest in the affordable housing soap opera. I am endeavoring to obtain a copy of the report so stay tuned for any updates/adjustments, etc. to this commentary.

Predictably, the Task Force report is loaded with consultant double-speak (big red flag!) with recommendations falling into three major categories: “Entity, Development and Communication” (huh?). To sum it up, they are recommending the following (each will be addressed by me in turn): that the City of Fredericksburg form a Community Development Corporation; that Planning and Zoning hold joint workshops to establish new language and policies and that the community needs to be well-informed of these efforts.

I suppose this is a respectable “first step” but Council and the Task Force had hopes high that their report would recommend concrete solutions not just more study/workshops and “communication”. Tentative half-measures such as addressing lot sizes were mentioned but there was a glaring lack of detail on what it is going to take from the city to solve this community-wide concern.

Note: A long-planned, Planning and Zoning approved “affordable” subdivision was put on hold buy Council recently pending the Task Force results mentioned herein and subsequent actions to be considered as a result of this report. Given its apparent contents, I’m sure the developer is mystified as to what any of this means to his efforts. Ironically, the developer/builder of this proposed affordable housing PUD is named Timeless Luxury Homes.

IMHO, forming a Community Development Corporation (CDC) as a charitable, tax exempt, non-profit 501(c)3 entity places city government square in the path of the solution rather than moving it out of the way to allow market factors to solve the problem. A city-sponsored CDC (along with all the politics and bureaucracy that implies) would, in effect, be competing with market-based solutions (e.g. a private CDC) for the race to develop “affordable housing”. What private developer in their right mind will attempt competing with a taxpayer-supported entity that controls all the rules of the game? Answer: none. By default the city and its well-intentioned CDC will become the sole source for “affordable housing” in Fredericksburg, TX. If the political/taxpayer will to pursue this course exists, I have yet to see it.

Joint workshops? Hmmm, I like many others, was under the impression that this task force would be suggesting multiple lines of attack against planning and zoning rules and regulations that impeded progress in this arena. Granted, they did touch on lot size as being a factor. Simply put, anything mandated by zoning and subdivision regulations is a significant cost to a developer. These costs are passed on to the end consumer in the form of higher lot and home prices. Mandates regarding street width, curbs, gutters, sidewalks, storm drains, landscaping, lot sizes, building setbacks, density, parking, impervious cover, etc., etc. all add to the cost of development and should all be “on the table” for discussion/revision.

Informing the community? Is there a more obvious CYA than that? The implication is that we have to inform everyone and get input from all areas lest “leadership” on the issue be off the mark or called into question. They of course failed to mention that the real estate, banking, development, etc. communities (stakeholders I believe they call us) have yet to be allowed input. We are told that is coming.

I’ve no doubt that the city leaders and the citizens of Fredericksburg, TX have their hearts in the right place and clearly see the need for “affordable housing”. What has been absent in this whole discussion (or I’ve missed it so far) has been any consistent definition of what constitutes “affordable” and any concrete evidence of a quantifiable demand for this product. A rational, risk-taking developer is unlikely to roll the dice without clarity of the rules from the city and without verifiable market evidence of a legitimate demand.

Affordability Impasse

2008-07-31T10:28:00.000-07:00

While the negotiations between Timeless Luxury Homes and the City of Fredericksburg to provide “affordable housing” via the Barons Crossing proposed PUD reached an impasse last Friday, everyone involved in this process should be congratulated on their hard work. The silver lining is that there are some very smart, very dedicated people trying to clear the regulatory burdens that stand between the problem and its resolution.

It remains clear that much needs to be addressed within the regulatory environment for the private sector to have a clear understanding of the rules under which they are challenged to bring a needed product to the market. While eagerly awaiting the recommendations of the affordable housing subcommittee task force, it is clear from listening to the discussions, thought processes, etc. I have been privy to that while many options remain to be explored, the right questions are in fact being asked.

Anyone with an interest in this important community discussion should be aware that there is only so much “government” can/should do to help. Short of going into the business of providing a “government product” (not an attractive solution at present) it will take a level of commitment and participation from everyone involved in the development process to solve the problem.

Upon receiving clarity and commitment to a new set of “rules for the game” (subd. requirements, incentives, waivers, etc.) land owners, developers, realtors, bankers, attorneys, title companies, surveyors, land planners, engineers, architects, road builders, material providers, homebuilders, appraisers, etc. must begin to think beyond the traditional development models to create scenarios that are conducive to placing a product on the ground in Fredericksburg Texas that is truly affordable both in the present and in the future. Its being done all over the country, we can do it too.

Mortgage Rates Near One Year High

2008-07-24T08:55:00.000-07:00

Further echoing the messages from previous posts, the real estate market in Fredericksburg, Texas continues to face downward pressure as rising interest affect both the availability of credit and the ability of many borrowers (buyers) to access it. With tighter, more expensive money as the rule, buying power is reduced and prices (by necessity) must continue to fall.

All is not doom and gloom however. The good news is that there appears to be plenty of buyers still searching for their Fredericksburg Texas dream property so sellers should not panic. Sellers should, however, be aware of factors affecting their audience (interest rates, increased competition, etc.) and set (or re-set) their expectations accordingly.

Clearly the real estate market in our community is experiencing an “adjustment” but this is simply a sign that market factors are at work balancing the supply and demand and that all is working as it should.

Mortgage Rates Near a Year High
By RUTH SIMON and JAMES R. HAGERTY
July 23, 2008; Wall Street Journal Page C14

Home-mortgage rates are nearing their highest levels in a year, adding to pressures on the already weak housing market.

Rates on conforming 30-year fixed-rate mortgages rose by nearly 0.40 percentage point in the past week to an average of 6.71%, according to HSH Associates in Pompton Plains, N.J. Rates on jumbo loans, which are too big to be eligible for purchase by Fannie Mae or Freddie Mac, currently average 7.84%.

The higher rates are making it more difficult for borrowers to refinance and putting another crimp on weak home sales. "It's a tough market and rates going up isn't helping it," said Steve Walsh, a mortgage broker in Scottsdale, Ariz.

Mortgage rates typically move in line with rates on 10-year Treasurys. Treasury rates have risen, but so has the spread between rates on 30-year mortgages and 10-year Treasurys, said Nicholas Strand, a mortgage strategist at Barclays Capital.

Banks set their interest rates on mortgages based on demand for those loans from investors, including Fannie Mae and Freddie Mac. When demand is weaker, they must offer investors a higher interest rate.

Walter Schmidt, a senior vice president at FTN Financial Capital Markets in Chicago, said the latest increase largely reflects fears that Fannie Mae and Freddie Mac wouldn't be able to buy as many mortgages in the months ahead as they have recently. The two companies are the biggest buyers of mortgages and related securities. Both are facing heavy losses on defaults, and investors believe they probably will have to raise large amounts of capital to cope with those losses.

Freddie added to jitters last week by saying it might sell some mortgage securities to reduce capital needs. And some smaller Asian banks have been selling mortgage securities, said Arthur Frank, a director at Deutsche Bank Securities in New York.

The Time to Act

2008-07-09T12:56:00.000-07:00

The interconnectedness of Wall Street and Main Street continues to manifest itself with ever-increasing signs that today’s (relatively) low interest rates are about to increase significantly. For buyers or sellers of real estate in Fredericksburg, Texas, this has serious consequences.

Among the unintended consequences of having kept interest rates artificially low is the fact that low interest rates have weakened the value of the dollar, thus increasing the “real” price we pay for any and all goods that are imported into this country (oil, food, clothing, steel, concrete, copper etc.). As the cost of these things climb, so too do the price of the “things” they ultimately create (e.g. housing).

As the cost to build more housing increases, the demand to buy this housing decreases. Attempting to offset this price pressure by holding interest rates low (e.g. making money “cheaper” to borrow and therefore more attractive) has run into the perfect storm of economic factors that has lead to the exact opposite effect than what was intended.

Adding to the mix are the continuing credit woes at Fannie Mae and Freddie Mac (quasi-government agencies currently owning or backing $5.2 trillion in home mortgages) whose stock prices are off almost 75% from their highs in the early 90’s. As these critical capital markets lose their ability to raise capital via the stock market they are increasingly turning to the bond markets as a ready source of liquidity. The problem with that is investors see the stock price suffering and rightly have concerns about the financial viability of these institutions and, as a result, demand higher rates on the bonds being offered. As the cost of Fannie and Freddie’s funds increase, what do you think happens to interest rates being offered on home mortgages?

Pressure to strengthen the dollar (and thus lower the cost of all import) necessitates an increase in interest rates. Pressure to shore up Fannie Mae and Freddie Mac necessitates an increase in interest rates. Increased interest rates translate into an increased cost to homebuyers. Increased costs to homebuyers will further weaken demand for existing housing stock. This decreasing demand will translate into lower prices paid for homes and increases in the time it takes to sell a home (and we all agree that time is money).

For Fredericksburg real estate specifically, this should be yet another sign to buyer that they should strongly consider acting now, before rates increase, as a higher rate adds tremendously to the overall “cost” of a 15-30 yr. mortgage.

For sellers of Fredericksburg, TX real estate, this should be a further sign that already anemic demand will dry up even more and show that if, indeed, you are serious about selling, you’d better reconsider your price position and do so soon.

The time to act is now…

Steals or Deals

2008-07-07T08:57:00.000-07:00

What’s the difference between a “deal” and a “steal” for buyers in the world of Fredericksburg Texas real estate? A “deal” can loosely be defined as contract negotiated for between 10%-15% off of the asking price (assuming of course the asking price was reasonable to begin with, but that’s another story). A “steal” can be defined as something you won’t find in this market (at least not yet anyway).

As mentioned in earlier posts, we are a discretionary market to a very large degree (e.g. buyers don’t have to buy here and most sellers are not being “forced” to sell) and while the evidence is clear that the real estate market has softened in Fredericksburg, TX, it is also clear we are not in panic mode.

Buyers, if you’re looking for a “steal”, try Miami, Las Vegas or Detroit. If you’re looking for a “deal”, now is the time to be aggressively looking at the wealth of offerings in the market. You are best off doing so with an experienced professional representing your interests. Remember that the listing agent works for the seller, not you. While agents who are members of the Gillespie County MLS all have access to the same information, it’s what an agent does with that information (combined with your needs) that makes all the difference in the “deal” you end up with.

Sellers please know that the buyers in the current Fredericksburg real estate market are “deal hunters” and will gravitate to what they perceive as the best bargain under their particular circumstances. Does this mean you have to give you property away? Of course not, it simply means you have to price your property “right” from the beginning and be flexible in your expectations and potential negotiations. There appear to be plenty of buyers out there but remember that there is also much more for them to choose from that usual.

Buyer’s should consider making their offers sooner rather than later as interest rates are sure to increase. Sellers should consider putting their best price forward as soon as possible as interest rates are sure to rise and the economy shows few signs of recovering anytime soon. You heard it here first!

Seeing the Future

2008-07-01T13:27:00.000-07:00

Peering into my crystal ball for trends affecting (for better or worse) the Fredericksburg Texas real estate market I see:

1. Mortgage interest rates will rise. Bumping along near historic lows for the last several quarters, these rates are under tremendous pressure to increase as they are the single largest factor affecting the current weakness in the value of the U.S. dollar. The weak dollar is reflected most prominently in the record price we are now paying for oil (and hence, gasoline), food and other consumer staples.

2. It is only a renewed strength in the U.S. dollar (created, in part by rising interest rates) that will ease our pain at the pump (in the sort term) but look for the price of oil to remain well over $100/bbl and gas to remain above $3.00/gal. for the foreseeable future. The ever-increasing global demand will not be abating. The silver-lining in this is that folks will travel but stay closer to home which has traditionally benefitted the community of Fredericksburg TX with our proximity to Austin, San Antonio, Dallas and Houston.

3. Pain at the pump will continue to translate into decreased US demand for oil/gas, increasing pressure on politicians to produce more “supply” and more downward pressure on consumer spending.

4. The “credit markets” will recover from the sub-prime fiasco but lenders will be ever-more cautious about extending credit to all but the most well-qualified borrowers. This, in turn, will contribute to a continued “softening” overall of real estate markets where prices in most areas will not return to their pre-2007 levels for some time.

5. The value of and demand for rural real estate will recover quickly be the lead the sector in sales volume and appreciation (especially land with surface water and/or capable of producing a consumer crop). Provided existing tax rules (valuation methods, exemptions, capital gains, etc.) remain relatively constant, there is no place else to invest sizeable funds with very little risk, very low carrying costs and historically favorable returns.

6. Ever more savvy real estate buyers/investors/sellers will rely more and more on the internet to research purchases/comparable sales, etc. and appreciate that market knowledge, experience and outside-the-box thinking will increasingly be found outside the doors of the more traditional “branded” models of brokerage service providers.

7. As the internet continues to be the “great equalizer” in the real estate industry, consumers will realize that bigger is not necessarily better and that industry knowledge and market experience will trump “branded name recognition” every time.

8. Fractional real estate offerings and purchases will emerge as the single most important innovation in property ownership in the last 25 years. Popular in high-end resort-oriented communities for years, this “new” form of ownership will open a door to luxury ownership that simply has not been available before now. The ability to own a deeded, mortgage-able, depreciable and inheritable share of high-end property (one that will likely appreciate and can be bought or sold as easily as a single family residence) will unlock billions in baby-boomer wealth that has heretofore been unable (or unwilling) to pursue the second home of their dreams at a fraction of the traditional price.

Remember, you heard it here first!

The Midyear 2008 Residential Real Estate Analysis

2008-06-30T13:07:00.000-07:00

Disclaimer: This analysis applies only to “single family residences” sold within the city limits of Fredericksburg, Texas from the period of Jan. 1, 2007 through June 30, 2007 vs. Jan. 1, 2008 through June 30, 2008 utilizing figures reported through the Gillespie County Board of Realtors multiple listing service.

If you had maintained any hope that the national trends concerning the strengths/weaknesses of the real estate industry have somehow bypassed the Fredericksburg, Texas real estate market, you may be interested in the following:

Overall (per the disclaimer above), the total number of listings available through June of 2008 has increased by 82%, the average time on market for any particular property has increased by approximately 9%, total sales volume ($$) has increased by 1.7%, the average sold price has also increased by 1.7% and the median sold price has increased by 10.2%.

A similar phenomenon (more on the market, longer to sell, but higher average prices) has recently been reported by Austin area realtors. The simple explanation to these seemingly incongruent statistics lies in the nebulous, but all-important, “market timing”.

Simply put, while the problems affecting much of the country have not yet slammed Fredericksburg TX real estate, we are beginning to feel the effects of damage created by the sub-prime banking fiasco and the impact this has had on broader credit markets.

The above statistics can be used both to report what has happened (ytd vs. same period last year) but they can also be used to forecast likely trends for the remainder of the year. The fact that we have (on average) 82% more in inventory is simply staggering. Couple that with lingering credit issues, projections of increases to mortgage rates, stagnant wage growth, the increasing cost of consumer staples, the weak dollar, record oil prices and a presidential election and all signs seem to point to a market that will continue to “soften” via increasing times-on-market and a significantly declining list price to sales price ratio.

Great news for buyers, not so much for sellers. This is a rather classic and routine cycle we are in the midst of and one that (hopefully) will pass in rather short order. A review of past economic “downturns” and real estate cycles show them to be happening with more frequency but with less severity and for shorter periods.

Some free advice: if you don’t have to sell right now…don’t. If you’re in the market to buy, “now” is as opportune a time as you’re likely to find in Fredericksburg, TX. Remember, Experience Matters!

Greater Fools, SUV's & Real Estate

2008-06-11T08:20:00.000-07:00

What do the “greater fool theory” and SUV’s have to do with real estate in Fredericksburg, TX? These day (unfortunately), plenty!

The greater fool theory holds that paying too much for something is o.k. as there will always be a greater fool willing to pay more. The theory manifests itself in our current market when a seller refuses to lower their price to “market” in the hope that a “greater fool” out there won’t mind overpaying for their particular home. Of course, that seller (if successful) becomes a buyer and their logic is immediately reversed when (to them) everything they see as a new purchase is “overpriced”.

Many of the properties currently on the market in Fredericksburg were purchased in the last 5-6 years when the market could be relied on to appreciate. In many ways, these folks bought at the peak. The facts and figures of current market conditions irrefutably tell us we have reached a plateau in sales, pricing, volume, inventory, etc. and some indicators are beginning to decline. As inventory builds (currently as much as a 24 month supply in some sectors of the market, equilibrium is generally agreed to be around 6 month of supply) time on market increases, list price to sales price ratios decrease and downward pressure on pricing builds.

As Fredericksburg tends to be a “discretionary market” (e.g. buyers don’t HAVE to buyer here and (most) sellers don’t HAVE to sell), we have an impasse. If history is any indication (as we all know it is), a new rule will kick in to break the stalemate…the golden rule. No, not that one, the more callous one that says “he who has the gold makes the rules”. In other words, buyers (who should already have the upper hand, but don’t) who have cash in hand and/or pre-approved financing will soon see more and more sellers willing to “blink” and accept prices more in line with market realities.

SUV’s? Soaring gas prices has a lot of folks trying to sell SUV’s to replace them with more fuel-efficient alternatives. The market for SUV’s has been flooded with inventory that very few folks are willing to buy. The “value” of SUV’s has plummeted and sales of new units are the worst they’ve been in a decade. The simple, beautiful and pure principals of supply and demand cannot be more clearly evidenced.

My advice (and it’s worth what you’re paying for it) to buyers is to be aggressive or wait it out. Things are definitely going your way. You do, however, have to actually ask (make a written offer) for what you want. All a seller can say is “no”. To seller’s I advise you to listen to your agents, read the reams of data they provide you and adjust your expectations accordingly. If you elect not to listen, don’t blame the agent for not selling your property, the problem lies much closer at hand.

Remember, Experience Matters

The New Oil

2008-05-28T09:50:00.000-07:00

It has been said by some very savvy folks that “water is the new oil”. If businessmen like T. Boone Pickens are to be believed (he’s been buying up hundreds of thousands of acre feet of water rights in west Texas for years now) the increasing scarcity of water in our state, combined with the rapid population growth will ultimately combine to make water as precious as oil is today.

As San Antonio drains the Edwards aquifer dry and DFW pipes water in from Oklahoma and Arkansas pressure will increase of municipalities to secure the future of their water resources lest they face the prospects of becoming like Atlanta . Of all the major Texas cities, only Austin (that I know of) has taken concrete steps to assure adequate water to feed its projected growth.

Water and energy production are inexorably tied together as you need tremendous amounts of water to create “energy” and that “energy” is needed to transport the water. As we move more and more towards “green solutions”, water will play an even more pivotal role in that type of production.

How does this affect Fredericksburg TX Real Estate? Simple, land with existing water (or, like oil, “proven reserves”) is likely to appreciate at a more rapid clip than will land without this valuable resource.

If you have been searching for property to purchase, you (hopefully) have been fully informed of our water “situation” and the need to assure yourself that the property in question has adequate water for your intended use(s). If you are selling a property you have (hopefully) been told of the value that “proven water” can add to your parcel. If not, please call me to discuss this in more detail. (By the way, do you know who “owns” the water in all Texas creeks, streams, rivers and lakes? Hint: it’s not the adjacent land owner.)

The Hill Country Underground Water Conservation District has actively been studying and monitoring our ground water resources for some time. Surrounding counties have their own districts that are (in most cases) not nearly as proactive as the HCUWCD. What does this mean to you? It means that very smart, very forward-thinking people (and politicians) are watching and waiting for the need to REGULATE what we so often take for granted. It’s coming folks.

There are ways to plan for the inevitable regulation of this resource and this is a tremendously complicated issue that can’t be covered completely in a simple blog posting. Be forewarned, however, that “water rights” (they are separate and distinct from mineral rights) will play an increasingly noticeable and important role in land valuation and buyer preferences into the foreseeable future. Remember, Experience Matters

Psssst...Buyers!

2008-04-15T08:32:00.001-07:00

Hey buyers, listen up. If you don’t know this already, you’re in a great position to buy Fredericksburg Texas area real estate. If you are “pre-approved” for a loan, can pay cash (or a very hefty down payment) you have negotiating leverage that simple did not exist in this market a year ago.

Old news you say. Perhaps, perhaps not. The perception being painted by the media has been (and continues to be) that the sky is falling, bankruptcies are rampant and sellers will do just about anything to dump their property. Buyer’s have been quick to take the hype to heart; however, the reality in Fredericksburg (and the Hill Country, in general) has been somewhat different than what the media would have us believe.

The Fredericksburg area has been “hot” for the last several years. Buyer were “encouraged” to make quick decisions as properties were moving fast and there weren’t a plethora or alternatives from which to choose. The roles have reversed in that there is plenty of inventory, sales volume has slowed to a trickle and the time on market for most property classes has increased dramatically. As more properties are listed, competition builds, time on market lengthens and sellers become much more reasonable in their expectations. Factor in the shortage of financing and any qualified buyer has the upper hand.

More properties to choose from, sitting longer on the market waiting for buyers with actual money equals deals that couldn’t be had until very recently. Don’t get me wrong, buyers are not “stealing” property but they are pushing that spread between “asking price” and “sales price” to new territory.

Most sellers aren’t that desperate in our fine community. There is; however, ample opportunity for a savvy buyer (with his savvy agent, of course) to make a solid investment in a stable market with healthy fundamentals and very positive prospects for continued growth. Did I mention that the population of Texas is projected to grow by 13,000,000 within the next 20 years…? Fredericksburg TX Real Estate

Affordable Housing

2008-04-03T08:35:00.000-07:00

In discussing the evermore pressing need to jump ahead of Fredericksburg’s growing affordable housing “crisis” and the ripple effect it is creating for our local economy, I came across a gentleman from a similar community that had faced similar (though much more pronounced) issues.

Telluride, CO is not terribly dissimilar to Fredericksburg, TX. Each community has a rich and colorful heritage, each have experienced tremendous growth and each are (to large degree) “tourist supported” communities.

As have many resort communities, Telluride faced the disconnect between the cost of housing and the ability of average wage earners to afford this housing. Shop owners, clerks, police officers, firemen, etc. could not afford to live in the community they were so deeply involved in. Among the solutions was the implementation of a real estate transfer tax. The revenue generated from this levy was designated to supply affordable housing to those so important to the lifeblood of the community. Guess what, it works.

While certainly not a proponent of tax increases (I already think we all pay way too much), this is a targeted solution to a very real problem and one that places the burden of a solution onto the very economic factors that are creating the underlying problem.

Many states and local communities have a real estate transfer tax of one kind or another, all of which are designed and implemented to address very specific problems. A state-wide real estate transfer tax was discussed in the 2005/2006 Texas legislative session as a way to fix the “school funding crisis” and was quickly shot down by the predictable lobbies (and, I might add, for very good reason).

As a state-wide solution to whatever problem, this tax structure has some serious problems and has created many unintended consequences. As recently proposed for Texas, it deserved to die. It is my opinion that such a targeted levy be reserved at the community level to address very specific issues.

There are ample cases of town and cities throughout the country that have made such a tax work to the benefit of the entire community. Real estate markets didn’t crash, values did not plummet and the sky did not fall. Do a Google search on “real estate transfer tax” and see what comes up. After digging through the predictable, negative, knee-jerk reactions, spend some time looking at cases where is has been successful.

Another solution to our affordability dilemma is local government incentives to developers/buyers, etc. of “affordable” housing. As governments are loath to reduce taxes, the idea of a new one might be easier for them to swallow.

In short, government intervention of some kind will be needed to allow for the creation of housing that is within the reach of more members of our community. “Market forces” cannot be relied upon to supply that which is (under current conditions) not profitable. The only way to make it profitable (and therefore attractive) is with tax payer assistance of some kind. The programs that exist on the state level take way too long to fund and inhibit a developers realistic chances of tying up a property while waiting (gambling) to be approved for subsidies. A local solution is needed for a local problem.

Pricing for Today

2008-03-24T09:34:00.000-07:00

Real estate prices in Fredericksburg, TX are being challenged. Increasingly confident buyers are now asking for (and in most cases receiving) price reductions (and other concessions) in amounts not seen in this market for quite some time. As we continue to slide into a recession (subprime fiasco, Wall Street woes, weak dollar, record oil prices, etc.) sellers of real estate face the hard question of how to price their property to sell in a (generally) downward trending market.

Past posts have touched on this subject yet it warrants a fresh look. What are the risks of overpricing your property in market where 1) qualified buyers are scarce, 2) financing is difficult, 3) prices have stabilized and 4) the spread between the asking price and the sales price is increasing?

The most common scenarios agents face in listing presentations with sellers are:

1. “Another agent said they’d listed for more.” A sellers’ mission should be to select the best agent, not the best price. A real estate agent has no control over the market, only the marketing plan. Never select an agent based on price.

2. “We can always come down.” This is true, but the reality is that a series of prolonged price reductions merely add to the important “days on market” factor. What question does a buyer ask me at the front door of every home I show? “How long has it been on the market?” They ask that because if it's been on a long time the common perception is that they can buy it for under market or that something is wrong with it. Either way, you’re losing time and (probably) money with this mind-set.

3. “Couldn’t we try my price for a few weeks?” It is well-known to agents that the majority of market activity occurs in the first two to three weeks on the market. This is absolutely the worst time to overprice since this is when the best customers will see the property.

4. “But we have made so many Improvements to it.” Most improvements are made for enjoyment, not resale. Another important point is that structures and improvements to it do not appreciate in value. It is the real estate—the ground beneath it that appreciates. Where is it said that you can buy an item, install it in your home, decorate it to your taste, use it for a few years then ask a new buyer to pay you for it? The question that determines the value of an improvement is; if the item were not there right now, how many buyers would add the same improvement and pay what you want to charge?

5. “But we paid $xxx for it.” I’ve addressed this in previous posts, but another way to look at this is that there is no relationship between cost and value. What you paid for something has nothing to do with what it's worth today. It’s all about the current market. You may not have “overpaid” at the time but as conditions have changed, you may be surprised to learn that (by today’s standards) you did, in fact, “overpay”. The converse is also true based on past market gains. If you “paid right” and have enjoyed the recent price appreciation, a “relative re-adjustment” will still likely net you a nice gain.

6. “They can always make an offer.” While it is increasingly true that buyers are emboldened by their new-found negotiating power, the only way a qualified buyer can make an offer on your real estate is if they actually see it. The problem is, most buyers look up to their price range, peek a bit over, then focus only in their price range. By overpricing, you put your property into a price bracket where they won't look.

The buyers of Fredericksburg real estate are out there. They are being smarter, more patient and more demanding. As a seller (in a challenging market) you must be smarter, more patient and more demanding of your agent. Remember, Experience Matters

So You Want to Sell?

2008-03-05T14:55:00.000-08:00

If you’ve owned real estate n Fredericksburg, TX for some time and are considering selling, you’ll probably do well. If you have purchased recently and are considering selling, you may want to wait a bit.

In addition to the old adage about location, location, location, real estate is about numbers. If you bought a property 10 years ago for $1 and the recent run-up in prices has you thinking it’s now worth $15, are you “losing money” if you sell it for $12? Would you rather sell it quickly for $12 or hold out for $15? Can you even sell it for $15 if everyone else with a similar property is trying to sell for $15?

Sure, you have to consider the cost of the sale (typically between 6%-8% of the selling price) when calculating your return and there’s always that pesky tax thingy to deal with. The question remains, however, do you want to sell or not? If so (and “price” is always the biggest issue with your buyers) doesn’t it make sense to become more “aggressive”.

You can always find an agent to list your property for whatever figure you give them (there are, frankly, way too many of us) but will it sell? Who then do you blame? (Hint: the inevitable, though incorrect, answer is your Realtor).

Please listen to your chosen market expert when pricing your property for sale. I promise you, the buyer’s agent on the other side has a very different opinion of what you’re property is worth! Who do you think they’re listening to? Remember Experience Matters

What's Happening in Fredericksburg?

2008-02-26T08:50:00.000-08:00

What’s the real estate market doing? How are things in Fredericksburg? Is it as bad there as “everywhere else”? These are the top questions on the minds of buyers and sellers interested in Fredericksburg TX real estate.

As I’ve pointed out in the past, when it comes to real estate, “everywhere else” usually has strikingly little to do with wherever you are. All real estate markets are “local”; meaning each market has it owns trends, peculiarities, strengths, weaknesses, etc. Sure, macro economic trends have an effect (e.g. the “credit crisis”, foreclosure rates, etc.) on the local economy but not to the extent the media would have us believe.

It’s too easy to believe what you see on CNN, The Today Show or Good Morning America as a reflection of the condition of our real estate market. As a result, a lot of buyers believe this is not a good time to buy and seller may not think this is a good time to sell. The reality is that the Fredericksburg market is slowly returning to something that can be considered “normal”. After years of double digit appreciation, short time-on-market and very healthy sale price to list price ratios we are experiencing more traditional (and “in balance”) market indicators…a “calming” of the recent “good times”.

Does the passing of the “good times” translate to “bad times”? Hardly. Nothing has fundamentally changed in Fredericksburg, TX. We are still a top tourist destination; we’re still are close (but not too close) to the booming cities of Austin and San Antonio, we’re still “affordable” (by most state and national standards), we still offer a lifestyle that people yearn for and we’re still the Heart of the Texas Hill Country!

Do we face challenges, sure we do. Top of the “challenges” list (in my humble opinion) is the lack of (and demand for) “affordable house”. I’ve put this term in quotes due to the simple fact that “affordable” is a singularly relative term. We face an increasingly acute problem of a very shallow labor pool. A town that has (in large part) saddled its economic success upon the backs of a (relatively) low wage, tourist-based economy has done shockingly little to assure that this labor pool can actually afford to live in Fredericksburg. Existing planning and zoning do little in the way of steering development into areas where affordable land can be bought to result in reasonably priced housing. Solving this challenge is the next great step in the evolution of our community and is vital to our continued “success”.

We are not the first community to face this particular challenge, nor will we be the last. I have faith that the leaders of our community will step up and create innovative ways to assure the continued vitality of what has made Fredericksburg such an attractive place to live. Visit Fredericksburg, TX

Hot or Not?

2008-02-07T08:29:00.000-08:00

Reprinted from HGTVpro.com

There's not a builder in the country who isn't trying out how to sell more houses. A big part of any sale, of course, is offering what the buyers want. Real-estate expert and author Mark Nash has released his 2008 take on trends that are hot, those that are not, and those that are cooling off. Take a serious look at them, and figure out how you can make sure your homes are hitting the sweet spot with potential buyers.

What's in Home buyers.

What goes around comes around. Relegated during the boom years to bidding wars, over-full-price offers and new-construction lotteries, buyers rule in 2008 — and they know it. With swelling inventories in the housing market, they are looking for newly updated kitchens and baths, pristine condition and a perception of value.

Destination bathrooms. The master bath has evolved into the home getaway with multiple task areas: freestanding or "throne" bathtubs in the center of a soaking room, multiple flat screens TVs and wireless Internet so you don't miss anything as you move from bathing to grooming to lounging. If the bathroom is outfitted for serving bars, wine coolers, espresso machines and grazing snacks, all the better. And there is a burgeoning need for in-home hair salons.

Short sales. Home owners who have overextended themselves financially are increasingly looking to their mortgage holders to accept less than is owed on their property. Some mortgagees will accept less than is owed through a short sale instead of foreclosing: The house is listed, ideally with an agent who agrees to a lower commission, and the seller is off the hook for the balance of the mortgage — or at least some of it.

Pet showers. The kitchen or work sink is out for the dog bath. Dedicated dog showers are an emerging trend. Be it in a mud or utility room, garage corner or basement, dog lovers want a place to clean their pooches after a visit to the neighborhood dog park. Common dog showers feature a 3' x 3' shower base, surrounded by ceramic tile 4 feet up the wall. Pet showers are all about convenience: Fido can step in, eliminating the master's need to lift.

Home elevators. The boomers want their vertical palaces with elegant min-elevators. No more unsightly and very 1970s chair-on-the-rail-system for these financially flush, forward-thinking home buyers.

Outdoor living spaces that look interior. Massive, soaring "statement" fireplaces of cut stone, heated (think bathroom floors) flooring and walkways, entertaining-sized custom kitchens and indoor-looking artwork, fabric, and finishes that can stand up to the elements.

Down payments. Sexy home mortgages are out. Those who underwrite home loans are looking for substance from potential home buyers. Substance equates into disciplined savings and credit scores.

A home's carbon footprint. Manufactured homes, reused construction materials and energy-friendly mechanical systems and appliances all reduce the need for fossil fuels. Home buyers are asking about how their potential new home can save the planet. It's more than a trend; it's a convenient truth.

Monitoring and controlling with hand-held devices. Forgot to turn off the coffee maker, close or open the blinds, turn the heat down or the air conditioning up? The latest technology lets hand-held devices open or close the blinds, turn lights on or off, or let Fido out the electronic pet door. The home owner can be around the corner or across the country and still determine what's going on at home.

Floating homes. If your 'hood has calm, protected waters, you'll soon have floating homes that look like conventional, soil-situated structures. From Louisiana to Vancouver, floating homes are at the top of must-have lists for those looking for a lifestyle-oriented primary home. Plus, watching sunsets are a more enjoyable and greener alternative to lawn mowing.

Concealed appliances. Buyers bypass matching cabinet panels that are used to disguise the ubiquitous refrigerator and dishwasher. Hinged and pocket doors are the latest way to integrate visually those boxy necessities and make the kitchen more non-traditional and less functional-looking.

Non-smoking homeowners associations. Who knew that some homeowner associations are rewriting by-laws and declarations to include those unit owners are not allowed to smoke inside their homes? Smoke-free common areas, in addition to building-code-required ventilation systems and fresh-smelling hallways, have taken precedence over individuals' rights to light up in their recliners.

Off-grid homes. Solar panels, windmills and inverters are here to stay in a big way. With brown-outs and power line-damaging storms on the increase, buyers in 2008 will look for hybrid home-energy options. Even being partially off-grid beats getting expensive power from coal-fired utilities to these eco-energy users.

What's outUnrealistic home sellers. These relics of another time and market missed the cocktail party chat and water cooler angst by the transitional sellers of 2007. Cautions included pricing their homes right, considering home-sale contingencies, and offering closing-cost givebacks. Hear-no-evil sellers were overlooked by buyers who pined for reality-minded ones. If sellers were flexible with buyers' needs, buyers bought.

Living rooms. The great room has replaced the living room in American residential culture. Informal lifestyles with combined eating, cooking and living spaces let family members and visiting friends congregate for various activities makes much more sense to buyers than the forced museum. In viewing homes with buyers, I see the ex-museum used as work-out spaces, home offices, craft or hobby places. More than once, I've seen the formerly coveted living room with nothing more than a pool table as its solitary focus.

Empty homes for sale. Buyers thought people "lived" in houses, but after seeing one-quarter of the homes they viewed empty, they wondered. Even though staging was the buzzword, getting that right is prickly in 2007. Those leftover silk flowers, the left behind mismatched furniture, and the one-off design-show decorating scheme were buyer no-nos. Neutral palettes, personal objects, thoughtful furniture rental, and something in the refrigerator says to buyers, maybe a person lives here.

Double-digit home-value appreciation. For now, the home as get-rich-quick investment is over. We're back to the pre-boom norm of housing as shelter. Expect flat or low single-digit appreciation in most markets in 2008.

"Order-taking" real estate agents. The hive during the boom years was real estate, and multitudes of the dot-com-busted became the worker-bees of real estate sales. Everyone and anyone got licensed and into the frenzy. Little did they know that seasoned (pre-boom), full-time, professional agents had ready, willing and able buyers; knew how to sooth seller's anxieties; and produced the fifth-highest year in real estate sales in 2007.

McMansions. Size doesn't matter if it's not well-finished. A voluminous home whose best attribute is the square footage is losing its appeal. Home buyers are looking for quality in 2008. After all, who has the money to replace the faux-hardwood floors, builder-grade carpet and fiberglass bathtubs?

Obese ceiling heights. It's cheaper to go up than out. At least that's been the thinking in residential design of late. Buyers have finally said enough; they prefer ceilings between nine and eleven feet. Anything more, especially in a smallish (under 10' x 12') room is waste. If you can't add a loft in a soaring room, "downsize me" height-wise, buyers say.

Pioneering locations. Buyers have moved away from take-a-chance neighborhoods. Pioneering or off-the-beaten-path areas were once the hot bed of potential appreciation. However, buyers in 2008 are returning to the tried-and-true address, keeping resale desirability firmly in mind when making a purchase.

Balconies as a marketing gimmick. Functional outdoor space, not the anorexic appendage hanging off the building, is what buyers crave in outdoor space for 2008. Real balconies have room for a grill and a comfortable table and chairs. People love the outdoors and want to use it, but not as a solo experience.

Option ARMs (adjustable rate mortgages). Buyers have heard that these loans usually have only one option: foreclosure. Originally used by the rich for short-term financing, they were re-packaged for buyers who wanted to qualify for the highest loan amount. Negative amortization is the harsh reality of option ARMS. Home buyers should run, not walk, if these words are proposed as a financing option.

Pre-construction pricing on new construction. Builders who are plunging ahead with new projects in 2008 will be better off with one pricing model from beginning to end. They are eliminating their "everything's an upgrade" mentality.

On the way out

Mosaic tile. Once deemed the ultimate in tile, now considered a very personal design commitment by the previous owner. The cost and waste to remove intricate mosaic is over-whelming to buyers, especially if it is has been recently installed. Even the most expensive but not agreeable tile could kill an otherwise acceptable property.

Retro-1970's chic. Trend-obsolescence by buyers in 2007 was rampant. Loving the retro-'70s was easy, but horror stories from would-be sellers about the market's hesitance to buy a design white-elephant made more mainstream kitchens and baths a sensible decision. As one Gen X buyer told me, "I love the dark espresso-colored shag carpeting, but I know my decorating needs will change. I want an interior that will transcend trends." I replied, "You're looking for a 'transcenditional' look." Her response: "Exactly."

Learn more about Fredericksburg Texas Real Estate

Market Musings

2008-01-30T13:56:00.000-08:00

Recent developments in the happenings of Fredericksburg, TX real estate have the tongues wagging and the rumor mill at full speed. Our local Chili’s restaurant closed last week and has stirred a hornets’ nest of speculation, rumor and innuendo. The simple explanation (usually the best one) is that they could no longer maintain targeted profitability while overspending to maintain adequate, affordable, responsible staffing.

How an experienced, publicly-traded operating entity like Brinker International with a net operating profit in excess of $200 million (‘07) can let a little thing like employee retention shut them down is a bit of a mystery.

While many Brinker outlets operate under franchise agreements, I seem to recall that the Fredericksburg location was a “company store”. If, in fact, it wasn’t, I do know that the lease was guaranteed by Brinker.

What will happen next is anyone’s guess (though there are, no doubt, folks around who will tell you “they know”), I suppose the landlord/property owner will weather the storm. Though they recently purchased the property (in large part due to the Brinker guarantee), Brinker will be obligated to “make them whole” until an acceptable replacement use is found.

The bigger picture begs the question why local merchants have such a hard time finding and keeping good, affordable employees. Any local employer will tell you that their single biggest challenge is finding and keeping employees.

This all ties in to real estate due to the fact that most service employees making between $7-$10/hour simply cannot afford housing in Fredericksburg, TX. The lack of affordable housing is threatening to strangle the life out of the very businesses that have made our growth so successful. No housing- no employees, no employees-no businesses, no businesses-no growth, etc.

Any informed source can recount a small litany of businesses that they know would like to be in Fredericksburg, TX but have delayed (or shelved) their plans due to the chronic shortage of affordable employees. This situation (among other factors) has attracted the attention of developers willing to gamble their resources on building “affordable” housing, both through private funding and/or state and federal assistance/tax credit assistance.

The combination of high land costs (and the low expected rental rates) and bureaucratic roadblocks (e.g. zoning and the “master plan”) have combined to make this a very long-term process promising minimum returns. When these factors (real or artificial) impeded the efforts of the private sector to fill a clear demand, the original problem is further exacerbated.

The real estate industry holds the key to several of Fredericksburg’s most pressing issues (affordable housing, “chains on Main”, etc.). Unless and until ALL the key players recognize the advantages to seeing “the big picture” and act together to creatively solve these “economy-stalling” problems, Fredericksburg will continue to frustrate the profitability and interest of even the most financially sound, market savvy businesses…the true life-blood of Fredericksburg TX Real Estate

A Great Time to Buy

2008-01-18T07:19:00.000-08:00

As the fundamentals for buying or selling real estate in Fredericksburg, TX continue to evolve and the economy as a whole begins to slow, the following are 10 reasons why now (and the next 6-9 months) is a great time to buy real estate!

1. Selection, selection, selection. There are about 1,200 properties on the market in the Gillespie County MLS at the time of this posting. Regardless of the price range a buyer desires, there are plenty of real estate options from which to choose. Just a couple of years ago the resale inventory dropped below 900 units. A buyer was forced to make compromises if they were going to locate the property of their dreams. Today there is a great selection of homes, acreage home sites, city lots and large and small ranches. There are plenty of options in this market.

2. No Bidding Wars. In 2005/2006 clients were often faced with making offers on more than one home. They often lost the first one to the 'feeding frenzy' that existed. Other buyers bid the properties up to substantially narrow the gap between the asking price and the eventual selling price. There is little or no competitive bidding in this buyer's market.

3. You can make an offer. A few years ago when you made an offer, the only question was how close to the list price could the buyer reach in hopes of being the best offer on the table. Today the list price vs. sold price ratio is dropping steadily in most property classes. Today, a seller will not be insulted if you 'make them an offer they can't refuse'.

4. Patience is tolerated. In the hot seller's market that existed everything was rushed. Find a house before other buyers did. Hurry up and make the offer. Today a buyer can take their time. Look at several properties and think about their decision for a few days.

5. Due diligence is welcomed. In this market a buyer is encouraged to obtain a home inspection, termite inspection, and appraisal.

6. There are plenty of specs and newer re-sales. In the not too distant past buyers had to 'play games' if they wanted a new home or lot. There were lotteries and waiting lists in order to obtain prime properties. Today, builders and other sellers have dozens of properties ready for immediate occupancy.

7. Repair requests are welcomed. After a buyer completes a home inspection, they are allowed to submit a repair request to the seller. In the past a seller might insist the home was sold 'as is'. Many times, there were back-up buyers waiting for a primary buyer to upset the seller whose home was increasing in value almost daily.

8. Few, if any investors. It is estimated that twenty five percent of all sales in 2005/2006 were to investors. These non-owner occupied buyer caused the market to inflate and affordability to decline. Mortgage fraud became commonplace on the national scene. It's a great time to buy without having to compete with hundreds of prospective landlords.

9. Location, location, location. Today's buyers can find homes closer to work. In the past buyers looked to Stonewall, Harper, Mason or Llano in order to find affordable homes. In this market, reasonably priced homes are within biking or walking distance to schools, shopping, and relatives.

10. Real Financing is available. The 'wink, wink' zero down, no doc, adjustable, sub-prime loans are gone. Fixed rates are back. FHA financing, first time homeowner bond programs, special loans for teachers, and police officers are back in business. It's a great time to buy real estate!

Visit: http://www.fredericksburgtxrealestate.com/

The "R" Word

2008-01-10T08:57:00.000-08:00

Fredericksburg Texas real estate is being increasingly buffeted by the same winds doom and gloom that are affecting other markets throughout the country (see previous post on 2007 year-end sales). The folks at Goldman Sachs are now openly predicting a mild to moderate recession (the “R” word) for the 2nd and 3rd quarters of this year. While widely whispered on “the street” for months, Goldman’s outing of the “R” word sent the financial markets into a brief tailspin and has set the media talking heads loose to further talk down consumer confidence.

Though Goldman (and their brethren) are the same geniuses that brought us the current sub-prime lending mess that is, in large part, a reason for the looming recession, I have to agree with their reasoning and outlook (oil supply/demand, weakening dollar, etc.). While these clowns make money whether the economy goes up or down (and, in fact, are increasingly important “movers” of the economy), you and I are left to figure out how best to weather the storm.

The two traditional stores of value in challenging economic times are gold and real estate. Gold has the advantage of being easy to buy, easy to sell and presents substantially lower “buy in” costs. Gold; however, is at records prices and likely to head further still so the dilemma is that you’re buying high, betting the economy will continue to struggle and hoping to time your selling before things recover (as they always do) and prices correct. Real estate (on the other hand) is well into a “buyers market”. As the cycle plays out, you’re able to buy on the downside, hold through the cycle and sell on the inevitable uptick (and enjoy tax advantages on certain asset classes in the meantime). Remember Experience Matters

Pricing in Down Markets

2007-12-06T09:40:00.000-08:00

Pricing Fredericksburg, TX real estate is always a tricky proposition, best left to careful market analysis performed by an experienced professional. That said; this article explores an alternative to pricing property to sell in a downward-trending market.

Enough has been written about the current state of “the real estate market” so I won’t bore readers with re-hashing all of that. Suffice to say that we are certainly in a Buyer’s Market (whether sellers have yet realized that or not). I have observed that many of today’s sellers have owned their real estate for relatively short periods of time. It used to be that folks weren’t so mobile or that real estate was not looked upon as an “investment vehicle” (akin to stocks, bonds, etc.). As this has changed, so have the frequency of seller transactions and the overall average length of property ownership.

A change in ownership trends invites a fresh look at how sellers traditionally price their properties (especially in a buyer’s market). For simplicity sake, this discussion will be limited to pricing and selling single family real estate on a before-tax basis. The after-tax implications of residential sales (as well as the sale of “investment property”) should be discussed with your tax professional.

Most folks will insist than an agent price, market and sell their homes at a “market price”. “Market price” is traditionally determined by careful analysis of recently sold comparable properties. If market conditions are deteriorating (i.e. list to sale ratios, time on market and unsold inventory are increasing), this model produces a “market price” based on old prices produced when the market was in better shape. The result is likely to be pricing a home that will sit too long and be forced to endure consistent and significant price reductions.

How about this instead. Look at what you originally paid then add in the cost of any improvements made (not on a dollar for dollar basis, however). Take this number and apply an investment rate of return (determined by and acceptable to you) for each year you’ve held the property. How’s that for a price? It may not be “market” but if it provides you with an acceptable return, who cares?! If your calculated price is determined (by an experienced professional) to be “above market”, re-think your return and try again.

A simple example: Let’s say you paid $100,000 for your home 5 years ago and you decide you need to make a 15% return on the money you’ve invested in that home. Your wise use of leverage (e.g. “other people’s money) had you paying 20% down ($20,000) and financing the balance of $80,000 at 7% on a 30-year note. Your monthly payment of $532 consisted of principal and interest. Over the 5 years, you have reduced the principal owed on the loan from $80,000 to $75,305.

This mean you have “invested” another $4,695 into the home (the interest you paid to the mortgage holder is a cost to you for using their money and not considered as an “investment” to the property any more then would be your utility bills, for example).

Taking your initial out-of-pocket investment of $20,000 and adding your principal reduction investment gives us a total out-of-pocket to you of $24,695 over the 5 year period. Applying a 15% over 5 years gives us a target return of $49,670. Now add that to your mortgage balance of $75,305 and that gives you a target net price of $124,795. Add the rule-of-thumb cost of sales of 8% to that target and you get a list price of $135,842 (you can add a bit on to that for “negotiating room”).

If you are able to sell your home for a net price of $124,795 you’ve achieved a 15% return on your money. Not too bad. If you are advised that “market price” is $150,000 and you believe that can be achieved in a reasonable timeframe then go for it. At least you now know what price not to go below if you want that 15% return. If you are advised that “market price” is only $120,000, then it’s either time to revise your return expectations or wait until the market recovers sufficiently to gain your required return.

Real estate is a very complex business and you are well advised to work with a professional who can make the complex understandable, remember Experience Matters

Sensational, Yes; Accurate, No

2007-11-30T09:27:00.000-08:00

This article was published on: 12/01/2007 FRONT LINES: Economy

Sensational, Yes; Accurate,No BY LAWRENCE YUN

“How much have real estate investors lost due to the housing market bust?” That was the question posed to me by a major evening news producer, who wanted to depict the pains in the housing market during a nationally broadcast show.

Hmm. An investor who bought a property in Las Vegas five years ago would be ahead by $150,000 today. The gain would be $200,000 in Miami, and $54,000 on average in the United States as a whole.

Only people who bought in a few markets that experienced extreme overheating during the boom and who are trying to sell quickly face a potential loss. And that loss on average would be 1 percent to 2 percent.

Lenders and hedge funds with large exposure to subprime loans have lost big. Investors in homebuilder stocks also have lost. But real estate investors who plan to hold for a reasonable period of time are doing fine.

To be sure, buyers who entered the market during the height of the boom might see a modest retreat in appreciation as a loss. That’s the nature of the human mind. A gain of $190,000 in Miami will feel like a loss if two years ago their property could have fetched a gain of $200,000.

Yes, there is pain out there. Foreclosures are rising and construction workers are getting laid off. Income of the typical real estate professional has been falling as transaction volume slows.

But consumers who are in housing for the long term are poised to come out well ahead. That $10,000 they invested as a down payment on their typically priced home for the typical 5 percent annual appreciation will net them $110,000 over 10 years. That’s what the power of leveraging means to them. That same $10,000 invested in stocks appreciating 10 percent annually will return $23,600.

No wonder the Federal Reserve Board consistently finds a staggering difference in average net worth between home owners and renters: $184,400 vs. $4,000. As it has always been, housing is our bedrock investment. It will continue to generate a nest egg for us long after we’ve turned off the television and forgotten what was said in the sensation-seeking story of the moment.

Yun is chief economist and senior vice president of research for the NATIONAL ASSOCIATION OF REALTORS®.

Chugging Along

2007-10-08T13:45:00.000-07:00

The Fredericksburg Texas real estate market is still chugging along (albeit at a much slower pace than in recent years). Unimproved land still seems to be the property class showing the most resistance to the current negative market forces (i.e. interest rates, credit requirements, etc.).

Housing (most any community’s economic bellwether) remains stubbornly anemic. As sellers are slow to realize the adverse effects that macro-economic conditions are having on the local market, they are slow to accept the reality of decreasing prices and so inventory builds (increasing competition), placing additional downward pressure on prices.

As I have mentioned before, there are two types of buyers in this current real estate market, those that are content to wait until prices DO drop, and those that can’t afford the combination of current prices and current underwriting limitations. Matching buyers who either won’t buy or can’t buy with sellers that won’t adapt their pricing strategies is a formula for…say it with me people…stagnation!

The jury still seems to be out as to whether or not the current “housing crisis” (as defined by the national media with horror stories from both coasts, Las Vegas, etc.) will have as noticeable an effect on Texas, in general and Fredericksburg, in particular.

I find myself in the unenviable position of advising buyers to wait a little longer before “pulling the trigger” (as I believe things will get a bit worse before they get better) and telling sellers they’d better consider serious price reductions to “jump ahead” of the market competition. The former position costs me sales and the latter costs me listings (and the subsequent sale) but at least I can sleep at night knowing my advice is sound. Remember, Experience Matters

Confidence

2007-09-20T08:59:00.001-07:00

There is such a thing as over-thinking a problem or issue. A case in point is the current (and continuous) cacophony over the “mortgage credit crisis”. Recent action by the Fed has drawn more attention to the issue (and, not so coincidentally, excited Wall Street), but I wonder more and more if we are in a true “credit crisis” or merely a “crisis of confidence”?

Most lenders and buyers I have talked to see no evidence of a lack of liquidity for mortgage loans, rather, they see the market as being more risky and acknowledge that rates are better reflecting this risk. Is the market more risky as a result of a lack of credit, or is it more risky because supply has outpaced demand? One could argue that a “lack of credit” makes a market less risky as it prevents the type over “irrational exuberance” that we’ve seen over the last few years.

What does this mean to Fredericksburg Texas real estate? As mentioned in previous posts, we currently have an oversupply of inventory and weaken demand. This will continue to put downward pressure on prices. The fundamentals that have made Fredericksburg so popular over the last few years have not changed, the challenge is that the folks driving our demand have other things on their plate at the moment (and in many cases are just waiting for prices to fall further) and will jump back in the market as their personal financial situations settle down. Experience Matters

Discretionary Buyers

2007-08-31T09:25:00.000-07:00

While an insightful few have known it, there is a growing awareness among real estate agents that the current slowdown in Fredericksburg’s real estate market is (in part) the result of the decision of discretionary buyers to “hold tight”. Discretionary buyers are loosely defined as those that choose to buy vs. those that have to buy (the same description applies to sellers).

Fredericksburg’s recent growth has been fueled in large part by buyers liquidating in other areas of Texas (or the country) and choosing to move to (or invest in) Fredericksburg. As their ability to liquidate their holding in other assets has been challenged of late, they have been unable to choose Fredericksburg. As these buyers dry up, demand for Fredericksburg’s real estate dries up with it. As demand dries up, prices fall, homes/ranches, etc. sit on the market longer and longer.

Complicate the above with the implosion of the credit markets and see the results. Don’t be lulled into thinking that the “subprime” implosion (subprimes, generally affecting the “lower-end” buyers and properties) has no effect on the upper end of the market…far from it.
In the last few weeks, market psychology has changed much more so that the market fundamentals. All the negative articles in the press have certainly made buyers more cautious. While psychology may have an impact on high-end buyers (described as buyers seeking property above the $400,000 price range) there is more than just fear at work.

A recent spike in “jumbo mortgage” rates has raised the cost of buying expensive real estate. The combined effect of psychology and higher rates is brutal: a theoretical buyer is likely to offer you 10%-15% less than he might have just one month ago.

The jumbos are probably a bigger impediment than fear. The term refers to home loans in excess of $417,000. By rule, they cannot be guaranteed by the government sponsored Fannie Mae or Freddie Mac programs and are therefore considered to be much more risky in today’s environment (despite the underlying creditworthiness of the borrower). The rising number of defaults on subprime mortgages has spooked investors and dried up the secondary market for mortgages-even those of sterling quality- that aren’t guaranteed by Fannie or Freddie.

Unable to resell their jumbo mortgages on Wall Street, lenders are now making far fewer mega-loans, and those they are making charge much more onerous interest and fees. For years, jumbo rates were only 0.25 of a percentage point above those of “conforming loans” (e.g. guaranteed loans under $417,000). In recent weeks that spread has exploded to 0.75% or more. Increased rates on big home loans translates into a substantial decline in buying power. Explained with numbers: very recently a $2,000 monthly payment would support a $350,000, 30 year mortgage at 6%. Today that same $2,000 payment covers only a $290,000 mortgage at 7.35%.

Finally!

2007-08-30T12:22:00.001-07:00

Quick, someone wake me….! I had a dream that the Gillespie County Board of Realtors has finally begin an investigation in to the acquisition and use of lockboxes…wireless ones at that! Surely this can’t be! I guess we’ll finally be dragged kicking and screaming in to the 1990’s (though I understand there is one, none-too-surprising) holdout).

A much-belated “way to go” to the members who pushed the board to this action! Whether they know it yet or not, sellers will be safer and agents will be much more efficient if this new system is widely implemented.

A Sign of the Times

2007-08-30T12:07:00.000-07:00

There are an increasing number of signs that the real estate market in Fredericksburg Texas has cooled quite noticeably. Reading previous posts show some key statistic as evidence of this claim and any cursory exposure to the national financial media bears this out as well. While not all is doom and gloom and I by no means think our market fundamentals have changed, things are likely to get a little worse before they get better.

Yet another sign is the surprisingly poor performance (out of the gate) of the newest phase of Fredericksburg’s popular Stone Ridge neighborhood. Using the last three phases as indicators, Phase VII could easily have expected to see the sale of up to 65% of the 34 available lots within the first few hours of their release. MLS stats (as of 8/30/07) show that only 6 lots (17.5%) have accepted offers in place.

The softness of the market and credit terms available to spec builders has clearly affected what should have been a routine “home run”.

If you are a buyer or seller of Fredericksburg real estate, you’d be wise to note the trends in categories like “days on market”, “list price to sale price ratio”, “price reduction velocity” and the all-important “overall supply”. Each of these figures is important to know when setting your expectations.

Fredericksburg's Dilemma

2007-08-20T12:27:00.001-07:00

Fredericksburg Texas has what surely is one of the most schizophrenic real estate markets in the country. As evidenced in earlier posts, the market is clearly in a “correction”, yet the median home price is still on the increase. Short of a long, boring dissertation on statistical analysis and the road-blocks currently in place in the MLS reporting system that makes such accurate analysis problematic, I’ll talk about the “schizophrenia” and the challenges it presents to the future of our community.

The battle royale in Fredericksburg is raging on whether or not we want to be a tourist town, a ritzy tourist town, a retirement haven, a wealthy enclave of vacation homes or a quaint farm and ranch community. Of course, at the moment, we are all of the above.

The forces and planning that have brought us to this point are too lengthy to mention, however, they have placed us at a critical junction and are forcing us to answer the question: “What does Fredericksburg want to be when it grows up?” Until now, that question has mostly been posed as the negative “we know what we don’t want to be.”

The downside of the “ritzy tourist town” / “wealthy enclave” trend has been that “Moms and Pops” are being priced out of shop spaces downtown and the average wage workers can’t afford to live in the community. The upside is that every property owner has benefitted from substantial increases in the value of their primary asset(s).

The number one complaint of any business owner you care to question is the lack of “affordable” employees. Combine this with the fact that Gillespie has about the lowest unemployment numbers in the state and you can see the problem we face is, increasingly, the all-encompassing “affordability gap”. “Affordable” housing is non-existent if you earn the average Gillespie county wage.

Mom and Pop built this wonderful community and we sure don’t want to see them go. The recent drama of the proposed “no chains on Main” ordinance is but a symptom of the overall dilemma. You certainly can’t stop “progress” but you definitely need to know what it means to you in the long-term.

We have serious decisions to make and those decisions will set the trends for years to come. Do we want to be Aspen or Santa Fe, or Branson? Do we step back and revert more to the Mason/Llano mold? The decision/implementation process will be long and (in many respects) painful. Not everyone is going to like where we end up. Such is the price of growth and vitality.

Brief Market Update

2007-08-20T11:47:00.000-07:00

As the Fredericksburg Texas real estate market continues its rapid cool-down, here are a few more statistics to evidence the current state of the market (figures are YTD through 8/20/07 and only reflect properties sold within the city limits of Fredericksburg, TX and not the county or entire MLS):

Through 8/20/07 01/01/2006 through 8/20/06

Total Units Sold: 298 454
Total Dollars Sold: $57,574,000 $75,500,000
Average Dollars Sold: $193,200 $166,300

So, the number of units sold is DOWN 34.6% over the same time last year, total dollars sold are DOWN 23.7% and the average price of a property sold in 2007 is UP 16.2% (evidence that not everyone in the game is aware of the raw data and the trends they foretell…this will change).
There are inherent deficiencies in the way our MLS rolls-up its sale figures that can distort the information presented above; however, the trend is clear. If you read previous posts to this blog you will see that this “softening trend” has been addressed and even (if only in limited ways) explained.

Suffice to say, if you are a buyer (and not in too big a hurry) I suspect things will get a bit worse before they get better. If you are a seller, I hope the pricing strategy (devised with the factual support of an experienced agent) you settle on takes these facts into consideration.

Wall Street, Subprimes and Fredericksburg

2007-08-19T07:49:00.000-07:00

Unless you’ve been living under a rock the last several weeks, you’ve no doubt have heard something of the rollercoaster ride that “Wall Street” has been taking. If you don’t think that the Dow, NASDAQ or S&P 500 effect you (because perhaps you don’t own stocks and/or bonds)…you are dead wrong.

If you are a buyer, seller or owner of Fredericksburg real estate the current Wall Street woes are the primary reason why our local market is in such a funk (off by over 40% so far this year over last year). What do subprime mortgages, mortgage backed securities, collateralized debt obligations (CDO’s) and hedge funds have to do with Fredericksburg? Plenty!

It all has to do with liquidity and credit. Until recently, credit has been plentiful and all too readily available. Lenders (despite what they should have learned via the S&L debacle of the 80’s) have been making questionable loans to borrowers they shouldn’t lend to. A lot of these loans are known as adjustable rate mortgages (ARM’s) that feature a low initial (teaser) interest rate and monthly payment, followed periodically by “re-sets” which bump rates and payments to current market prices. These current payments rates (via re-sets) are often way more than a borrower can afford and puts them in imminent risk of foreclosure.

As the lenders were awash in funds to lend (driven as they were by Wall Street’s insatiable demand for more mortgages to securitize), they created a demand for mortgages by making them more obtainable to folks that (probably) should not have qualified. More buyers equaled more homes being built and prices that kept rising. As real estate is an inherently ill-liquid investment (e.g. it takes longer to get your cash out of vs. say a bank CD), when credit dries up (as it certainly has), liquidity (or lack thereof) really hits home (pun intended).

TIME magazine has a great article called Real Estate's Fault Line that explains this all very well. The key thing they point out is that “At its core, the entire process is based on using borrowed money (home mortgages) as collateral to borrow more money (mortgage-backed securities) to borrow yet more money (CDO’s) and hoping the payment chain doesn’t break. Once home mortgage defaults rise, the whole system can unravel”. The current crisis was touched-off by a record $515 billion in re-sets so far in 2007. Next year, some $680 billion worth of ARM’s are due to re-set. Yikes.

What TIME and distressingly few other pundits fail to comment on is the lack of personal responsibility that we, as Americans take for creating this mess. It’s easy to blame the nameless, faceless “lenders”, “bankers” and the hard to understand “Wall Street” for this mess. What about your neighbor who borrowed that $100,000, $200,000, $300,000, etc. that had no business even trying to do that on his $40,000/year salary. Most of us (hopefully) were raised with some semblance of financial responsibility and know better than to borrow more than we can comfortably afford to pay back.

With easy-money offers bombarding your mail box from credit card providers to mortgage lenders to car dealers, it’s hard sometimes to say no. It all sounds so good, so easy. You have to always remember; however, that the buck stops with you and if it sounds too good to be true, it probably is.

While the Fed recently cut rates and has pumped more money into the markets, the credit crisis is likely to continue for some time. Qualified buyers will still have access to borrow money to buy real estate but the unqualified buyers who made up a decent percentage of the past market surge have gone bye-bye. This will result in fewer units sold, stagflation in values and increased days on market for most properties. A classic BUYERS MARKET.

Additionally, as well-known overheated markets continue to cool, folks moving to our area from those softer markets will be unable to sell and therefore be unable to relocate to Fredericksburg. As the majority of sales over the last three years have been to auslanders, this further affects us here in Fredericksburg, TX.

Market Value

2007-06-25T09:08:00.000-07:00

When buying or selling real estate in Fredericksburg, TX (or any other place for that matter) one often faces the prospect of having to deal with an appraisal. An appraisal is most common in transactions involving the use of financing from a third party source (i.e. bank, savings and loan, mortgage co., etc.) and is used to determine the “market value” of the property being purchased (sold).

While most people would agree that the “market value” is the contract price (e.g. buyer and seller have agreed on value, ergo, that is “market”) our friends at the Texas Real Estate Commission (TREC) have devised the Uniform Standards of Professional Appraisal Practice which (of course) defines “market value” somewhat differently:

“Market Value is defines as: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of the specified dated and the passing of title from seller to buyer under conditions whereby: (1) Buyer and seller are typically motivated; (2) Both parties are well informed or well advised, and acting in what he considers his own best interests; (3) A reasonable time is allowed for exposure in the open market; (4) Payment is made in cash or its equivalent; (5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”

I will spare you the real world implications of terms such as “probable”, “should bring”, “fair”, “knowledgeable”, “motivated”, etc. and instead focus solely on how an appraisal can affect a real estate transaction.

As mentioned, if you are buying a property with borrowed money, you will be asked (forced) to pay for an appraisal. The idea is that the property will appraise for the agreed upon purchase price and the bank will feel secure lending you the money knowing that, if the worst happens, it can foreclose and sell the property to recoup its loan.

The tidbit that people often overlook is that very few people borrow 100% of the purchase price from the bank. If you put, say, 20% down, shouldn’t that affect how the bank views your “market value” appraisal? For example, say you are purchasing a lot for $100,000 and you put 20% ($20,000) down and will borrow the balance of 80% ($80,000). Let’s say further that the appraisal comes in at $90,000. Should the bank loan you the money? Should you buy the property? Yes and, that depends. The banks $80,000 loan is “covered” and if you (for whatever reason) are comfortable paying $100,000 then go for it, if not, try to renegotiate based on the appraised value.

The inherent problem with appraisals is that they use old information (past comparable sales), subject to arbitrary adjustments to determine current value. Going back to the beginning, shouldn’t “market value” be determined by what the buyer and seller agreed upon? Isn’t it a remarkable coincident that appraisals almost always come in at, or slightly above, the contract price?

Key Security

2007-06-14T08:35:00.001-07:00

Issuing lockboxes for use in selling Fredericksburg Texas real estate should be a no-brainer for our local Board of Realtors. The fact that local agents aren’t calling for this important change is distressing (to say the least) and, frankly, is increasing risking for the sellers they represent. Let me explain.

The current system employed by agents has each office keeping multiple keys (usually labeled with the sellers name and address) in a (lightly-secured, if secured at all) file or keybox in their offices. When a showing is scheduled, the showing agent stops by and picks up a key and the agents name and date of showing is noted. It is not at all unusual for keys to be left for agents in designated places outside of offices (unsecured) for weekend or after-hours showings. Keys are always checked out to appraiser, inspectors, contractors, etc.

After the showing, agents are to return the keys where they are duly logged back in. It is not unusual for keys to be returned late (i.e. after two or three days of riding around in an agent/appraiser/inspectors car) and/or left in “after-hours” (unsecured) locations.

This is the reality of how we currently do things. I’m sure I’ll upset more than a few people by revealing this common practice but the good news is “there is a better way”. Surely, readers of this blog can assess the mind-boggling liability this system can create.

Now picture a system that electronically tracks and records anyone accessing a key, when they used it, how long they used it for, if they replaced it and has penalties in place for anyone abusing/misusing the system. The only argument left for no using this system might the rouge agents trying to show a listing (occupied) without an appointment. That is also handled by tracking these fools who show up “unannounced” and fining them accordingly.

Someone please show me the downside….

Flogging a Dead Horse??

2007-06-13T12:37:00.001-07:00

I’m revisiting a topic I first touched upon in September of 06 (Inefficient) because it has dawned on me (yes…very slowly) that my agent brethren either don’t have the time to ponder such issues or they don’t fully appreciate how much easier their lives would be by embracing some much need change. I am talking, of course, about the need for our Board of Realtors and MLS to join the 1990’s and step up to a lockbox system for controlled access to properties listed for sale or rent.

The systems that are out there are well documented time savers to agents in that they preclude the need to pick-up and drop-off keys and they provide a “no-brainer” tracking mechanism that allows listing agents to rapidly and accurately track and follow-up on showings (thus making them look really good to their clients).

The most common (and, frankly, lazy) argument is that the “old-timers” don’t want it. These are the same folks who said the internet and e-mail would never last. Well, they don’t have to use it…duh. Why should the rest of us waste our time because folks won’t embrace change? Anyway, I didn’t realize that our Board was run as a democracy with every member having veto power over “change”.

With improvements in technology come improvements in the way we service our clients and they way we spend our time. We’re not talking about tons of money, training, time etc. and Boards all across the country have proven that “security risks” are a non-issue.

Retirement Bargains

2007-06-05T12:11:00.000-07:00

“Best Retirement Bargains”--This story appears in the June 11, 2007 print edition of U.S. News & World Report.

President Lyndon Johnson grew up near Fredericksburg, Texas, and his widow, Lady Bird, still retains the LBJ ranch nearby. But you don't need a presidential budget to retire comfortably in this Texas hill country town.

Jim Mulvihill, 60, lived in Orange County, Calif., for 42 years, working in law enforcement in Los Angeles, before he and his wife, Carol, decided to retire five years ago. "Being big-city folks, we really weren't ready to give up a lot of the amenities," he says. So, they settled in Fredericksburg, an hour's drive from both San Antonio and Austin. "It has lots of elbow room, the property here is still reasonably priced, and folks are extremely friendly," Mulvihill says. They bought 6 acres of property and built a ranch house. "That's something that is kind of tough to do in Los Angeles," he jokes.

It also helps that there is no state income tax in Texas and the gasoline tax is lower than in Los Angeles. "A lot of people from California come here because they can get almost twice as much for the same dollar out here as they can at home," says Mayor Tim Crenwelge of Fredericksburg. Mulvihill concurs: "There's just a lot of things overall that are less expensive in everyday living that allows your dollar to go a lot further. They even let you park free."

Fredericksburg, settled by German immigrants and named for Prince Frederick of Prussia, boasts the National Museum of the Pacific War (which includes a George H. W. Bush gallery), the Lady Bird Johnson Municipal Park with an Olympic-size swimming pool open to the public for just $1 a day, a historic district with open-air pavilions, Texas Tech University at Fredericksburg, and more than a half-dozen wineries nearby. There's also an abandoned railroad tunnel—locals call it "the bat tunnel"—where aficionados of the flying mammals gather each evening from May to October to watch approximately 3 million Brazilian free-tailed bats awake from their daytime slumber and emerge from the tunnel to hunt. Prices to enter the viewing areas for seniors range from free to $3.

Maybe the only thing that isn't a good deal in Fredericksburg is the coffee. Says Mulvihill: "At Starbucks, it is $3.95 for a caramel macchiato no matter where you go."

Population: 9,504 Median home value: $118,300 Age 65 or over: 30 percent Cost of living: 21.4 percent below the U.S. average Maximum state income tax: none State sales tax: 6.25 percent.

http://www.Fredericksburg-Texas-Property-For-Sale.com

Market and Agent Trends

2007-05-31T09:00:00.000-07:00

Two decades ago, across the country, the housing market tanked. Up until this point, housing prices had seen an average and steady increase. Around the turn of the millennium, the market really cranked up and held that way for 5-6 years. Because the market was so good, new agents came in droves. (See previous post entitled “I Get It”)

Just 11 years ago (1996), there were only 408,000 real estate agents, brokers and appraisers employed full and part time nationwide. Four years later that figure had increased by more than five times to 2.1 Million agents and within a year (2001) there was a further 10% increase in agents to 2.3 Million. In California alone there are nearly half a million agents (that's a mind boggling 1 out of every 52 adults in the state!) Until recently this wasn't an issue because the market was so hot and there was enough business for everyone. We competed for listings, but didn't hold onto them for long because buyers were in abundance. No more (see previous Market Update post).

In the cyclical way of markets, the up-curve has now swung noticeably down. With more agents competing for a shrinking pie, median income, and their very survival, many will certainly be affected.

A study by the National Association of Realtors said the median income for its members fell to $49,300 in 2004, down 5.6 percent from 2002, blaming the influx of new agents for the decline. In April 2007, the NAR predicted that U.S. home prices will likely drop nationwide by 0.7% from 2006 levels. This is an unprecedented call from a group who has frequently publicized the fact that median home prices haven't declined since the Great Depression. Couple this with the current extreme caution being exercised by lenders which has resulted in a decline in eligible buyers and an increase in foreclosures, both of which are adding to the inventory of houses in an already over-stocked market.

For most agents, then, listings are easy to get, but they're not selling. As a result, the average agent is finding his or her personal listing inventory swelling. This is not a good thing. It means spending more money to sell each listing, which means, in turn, that agent's net income could drop still further.

In average times, 20% of new agents fail within their first year in business, and 80% don't make it to their fifth anniversary. These are becoming below average times, so these statistics will only get worse. The harsh reality is that there is no longer enough business to support all the agents operating in Fredericksburg, TX . Tactics are shifting and many are turning to discounting their commission to find an advantage over the dozens of other agents competing for the same clients.

Agents positioned as desperate, are desperate. The fact of the matter is, however, there is an exclusive subset of agents in Fredericksburg, TX who not only are NOT giving their time, money and pride away, they are charging and GETTING more from both buyers and sellers. Only in the absence of value does price becomes an issue. If you're agent is not showing you value, they should expect to discount their fee.

I'm Back

2007-05-29T09:22:00.000-07:00

As it has been months since my last post, some have been wondering what I’ve been up to.

Oh nothing much, just opening a new business, Rubicon Real Estate Services, (including the remodel of a long-unused/neglected office suite), revamping my website, St. Mary's School Council business, family, etc., etc.

It’s been a busy past few months. As you might note from my most recent post, it’s also been a good time to be “distracted” from the Fredericksburg real estate market. Despite current market conditions; however, I’m glad to be on my own and have been very busy.

While it may be tempting for me to recount the trial and tribulations of opening my own real estate brokerage, I will spare you the gory details and simply say…I’m Back…!

Market Update

2007-05-29T08:55:00.000-07:00

YTD SALES ANALYSIS
GILLESPIE COUNTY RESIDENTIAL (OVERALL) & STONE RIDGE (SUBMARKET)
(As of 5/15/07)

GILLESPIE COUNTY RESIDENTIAL:

SALES FIGURES:
2006 YTD total unit sales = 106;
2007 YTD total unit sales = 65 (a decrease of 38.6%);
2006 YTD sales approximately $25,000,000;
2007 YTD sales approximately $21,000,000 (a decrease of 16%);

INVENTORY:
There are currently 243 actively listed residential units;
Current sales velocity equates to a 486 day supply of homes;
Historic (mean) time on market has averaged 180 days;
This data can be interpreted to mean that a “seller’s market” exists when the supply of homes is less than 180 days and, conversely, a “buyer’s market” exists when the supply of homes exceeds 180 days.

PRICING STATISTICS:
12.3% of homes currently available are priced below $150,000 (30 units);
37.8% of homes currently available are priced between $150,000 and $299,999 (92 units);
25.9% of homes currently available are priced between $300,000 and $499,999 (63 units);
14.8% of the homes currently available are priced between $500,000 and $949,999 (36 units);
9.0% of the homes currently available are priced between $950,000 and $3,550,000 (22 units);

76.13% of all units are priced below $500,000 (185 units);
90.95% of all units are priced below $950,000 (221 units);
On average (YTD) 15 properties per week are being reduced in price.

SOLD UNITS-TIME ON MARKET SUMMARY:
The weighted average DOM for homes priced <$300,000 YTD is 131 days;
The weighted average DOM for homes priced between $300,000 and $450,000 is 97.8 days.
Weighted average is skewed by the fact that there were nearly five times the number of homes sold under $300,000 as there were in the higher range.

STONE RIDGE:

SALES FIGURES:
2006 YTD total unit sales = 5;
2007 YTD total unit sales = 3 (a decrease of 40%);
2006 YTD sales approximately $1,829,000;
2007 YTD sales approximately $1,284,900 (a decrease of 30%);
Original List Price / Sold Price ratio is averaging: 97.42%;
Final List Price / Sold Price ratio is averaging 97.88%;
Weighted average sold price per square foot is $160.00

INVENTORY:
There are currently 14 actively listed residential units (Not including FSBO’s);
YTD average DOM is 139 days;
Six of the homes listed have been on the market over 180 days (257 days on average);
Eight of the homes listed have been on the market less than 180 days (61 days on average);

PRICING STATISTICS:
21.4% of homes currently available are priced between $250,000 and $350,000 (3 units);
50% of homes currently available are priced between $350,000 and $450,000 (7 units);
28.5% of homes currently available are priced $450,000 or greater;
42.8% of the homes currently listed have had price reductions (one or more) averaging 6.12%. Of the six homes that have had price reductions, 4 have been on the market over 180 days;
Weighted average list price per square foot is $158.20

UNSOLD UNITS-TIME ON MARKET SUMMARY:
The average DOM for homes priced from $250,000 and $350,000 YTD is 143 days;
The average DOM for homes priced between $350,000 and $450,000 is 193 days.
The average DOM for homes priced over $450,000 is 64 days.
Given that only three homes have sold YTD, sold DOM is statistically irrelevant.

INVENTORY PIPELINE:
There are currently six (6) unsold lots available in various Stone Ridge phases;
Phase VII of Stone Ridge will bring an additional thirty-five (35) lots to the market within the next 4-6 weeks.

Disgusting But Necessary

2006-11-30T09:30:00.000-08:00

The septic tank serves as a settling basin where solids accumulate and gradually get broken down by bacterial action.

Some of the solid waste is actually liquefied by this 'natural bacterial decomposition," however the rest of the waste accumulates in the bottom as a layer of sludge. Additionally, a small percentage of this, waste (mostly fats and oils) float to the top of the tank to form a layer of semi-solid scum.

Those of you living within the city limits of Fredericksburg, Texas who have never had the pleasure of maintaining a septic system, or who have never experienced waddling in their leachfield, or even had the experience of pumping out their systems simply flush your toilets and "away go troubles down the drain."

Those living in the county have been forced to learn about the maintenance and working of the sewerage treatment facility attached to our home, "the septic system." Usually a septic tank is connected to a drainage field or seepage pit of some kind. If properly maintained, a well-designed system will last almost indefinitely. However, if it is neglected for too long a time, it can back up and clog the drainage field. This neglect can result in an expensive excavation and even a replacement of the drainpipes that could cost thousands of dollars.

Although designs vary, most septic tanks consist of a watertight, below ground, tank that has one or two manhole covers (buried a few inches below ground) to provide access for cleaning and inspection. Effluent from the house flows into the tank through an inlet pipe near the top on one side. It flows out through a discharge or overflow pipe at the other side. The pipe may end in a large t-fitting or into a baffle (wall) preventing the effluent from flowing straight across from one pipe to the other.

The incoming effluent will be diverted downward with a minimum of splashing, allowing the solids to sink to the bottom.

Outgoing effluent is drawn from several feet below the top layer of the floating waste (grease, oil, scum) so that only liquid waste or solids that have been liquefied by the BACTERIAL ACTION going on at the bottom of the septic tank (which we will come back to this point later) are discharged out into the drainage field.

A typical household sewage treatment system consists of a house sewer, septic tank, distribution box and absorption field or seepage pit.

House Sewer - The pipeline connecting the house and drain and the septic tank.

Septic Tank - Untreated liquid household wastes (sewage) will quickly clog your absorption field if not properly treated. The septic tank provides this needed treatment. When sewage enters the septic tank, the heavy solids settle to the bottom of the tank; the lighter solids, fats and greases partially decompose and rise to the surface and form a layer of scum. The solids that have settled to the bottom are attacked by bacteria and form sludge. Septic tanks do not remove bacteria and, therefore, what is discharged cannot be considered safe.

Distribution Box - Serves to distribute the flow from the septic tank evenly to the absorption field or seepage pits. It is important that each trench or pit receive an equal amount of flow. This prevents overloading of one part of the system.

Absorption Field - A system of narrow trenches partially filled with a bed of washed gravel or crushed stone into which perforated or open joint pipe is placed. The discharge from the septic tank is distributed through these pipes into trenches and surrounding soil. The subsurface absorption field must be properly sized and constructed. While seepage pits normally require less land area to install, they should be used only where absorption fields are not suitable and well-water supplies are not endangered.

Cesspools - Work in a similar manner to septic systems. Sewage water usually seeps through the open bottom and portholes in the sides of the walls. These can also clog up with overuse and the introduction of detergents and other material which slow up the bacterial action.

When the sewage backup occurs, homeowners usually have the system pumped out. Pumping out will only relieve the system temporarily. The clogged pores in the ground remain and eventually the system will have to be pumped again and again.

Since solids will continue to build up at the bottom of the tank, it is imperative that the "septic tank be pumped out periodically." Remember, sludge is not biodegradable, if it's not pumped out, sludge will accumulate until it overflows.

The frequency of pumping out will depend primarily on the amount of wastewater that goes through the system each day. The frequency also depends on how careful you are about not throwing excess fats, rinds and other similar garbage down the drains. The more solid waste thrown in the system, the quicker the tank will fill up. Heavy flows of water also tend to make the tank fill up more quickly. That is why it is best not to use a garbage disposal in the system when you have a septic tank, and why water should not be left running indiscriminately in sinks or toilets. It is important to get the septic tank cleaned before the sludge level gets high enough so that any of the solid material at the bottom, or the semi-solid scum at the top can flow out into the drainage field. This will quickly clog the drainage pipes and the soil into which they drain.

Make certain there are live bacteria in your system at all times. The bacteria's job is to digest all organic waste matter in the system. If there are no bacteria in your system it will simply act as a holding tank for your waste. It becomes full, and natural digestion will not occur. That is when the system backs up.

Bacteria are killed off or overrun because of:
• excessive quantities of detergents, laundry waste, bleach, household chemicals, and caustic drain openers.
• garbage disposal grinds which substantially increase the accumulation of solids.
• disposal of items not biodegradable in the system (plastics etc.).
• disposal of excessive amounts of grease and fats, which are biodegradable but need particular types of bacteria to digest them.
• disposal of cigarette butts, sanitary napkins which are also biodegradable but are not readily decomposable.
• too many people using a smaller/inadequate or failing system.

If you have no bacteria in your system and you add enzymes to the system, it simply will not help and your system will still not work. Enzymes are simply a catalyst for bacteria. If there are no bacteria in your system, why use enzymes?

From time to time, you should add "l00% Natural LIVE ADULT BACTERIA" to your system.
Do not add just any kind of bacteria. Call your septic professional. He can add adult live bacteria that are "FACULTATIVE," which will work with or without oxygen.

A facultative bacteria is one that would be useful in situations that have air and in situations where there is no air (anaerobic situations). The bottom of the septic tank has no oxygen and therefore needs anaerobic bacteria.

As communities grow more crowded and awareness of the impact of one home upon another, regulatory authorities have begun to pay more attention to proper maintenance of each individual property.

One factor under scrutiny is the septic system. Rather than leave it up to the home owner to decide how often to clean and pump a system, a growing number of municipalities are imposing requirements. In addition, state laws are becoming more stringent. If an existing system fails, or in the building of new homes, some states have begun imposing tighter regulations on the types of systems allowed.

Nationwide about 25% of all homes rely on a septic system. With so many systems in constant use and most of them older models of inferior design, fear has been mounting that improperly maintained systems will pollute ground-water supplies or that the health of ones family could be jeopardized.

THE BEST WAY TO AVOID major repairs or replacement, or to avoid being fined for operating a substandard system. is to call in your local SEPTIC PROFESSIONAL.
• He can coach you on all local laws and regulations.
• He can check out your system.
• He can coach you on the proper maintenance of your system.
• He can save you money by pumping out your system before it fails.

PLEASE NOTE...
Your septic system does have potential health concerns for you and your family. Accidents due to noxious gases have occurred. Other than the routine maintenance that is described to you by your septic professional, all your additional septic system needs should be discussed with him before you attempt to perform them yourself.

Important Tax Considerations

2006-11-22T09:09:00.000-08:00

Gaining or maintaining an Agricultural Use Tax Exemption (Ag) on a property in Gillespie County is a critical consideration for anyone seeking to buy farm, ranch or recreational real estate in the Fredericksburg area. The following information is a summary of what it takes to receive an exemption but by no means is it intended to be a primary source of information on this subject. For a complete understanding of this important tax issue, contact the Gillespie Central Appraisal District (830-997-9807).

The main reason for getting this exemption, of course, is that it qualifies a landowner to be taxed at a rate that is roughly equal to $1/acre (e.g. is someone owns 100 acres, non-exempt, and the land is worth $100,000, the taxes due would be approx. $297 vs. $100 if the property qualifies as “Ag”).

A property owner must file an application for a 1-d-1 (Open-Space) Agricultural Appraisal between January 1 and April 30 of the tax year (there are provisions for late filings). Once the application is submitted to the Appraisal District and approved, the land continues to receive agricultural appraisal until ownership of the land changes, the land’s eligibility changes, or the Chief Appraiser requests a new application (i.e. the valuation is challenged).

Agricultural appraisal applies only to land. Improvements (such as buildings, barns, silos, homes, etc.) are appraised separately at their market value (as are minerals). Agricultural products (livestock, fruit, vegetables, grains, etc.) in the hands of the producer are generally exempt from taxation.

In addition to having qualified land receive agricultural valuation, the agricultural operation must pass four separate tests. These include primary use, current use, intensity and time period tests. All tests must be passed to qualify. The time test is particularly important as the land must have been used principally for an agricultural use for any five of the preceding seven years. If an owner shows the required five-year history through previous applications and supporting documentation, they would be eligible for Ag use in the sixth year.

Another exemption gaining favor is the Wildlife Management (WM) exemption. The first criterion of WM use is the land must currently be under Ag valuation. Second, the landowner must be actively using the land at the time the WM began was appraised as qualified open space land in at least three of the following ways to propagate a sustaining breeding, migrating, or wintering population of indigenous wild animals for human use: habitat control, erosion control, predator control, supplying supplemental water or food, providing shelter and making census counts to determine populations.

Leases are an acceptable agricultural use for the owner of the property provided the lessee is using the land to the standards of agricultural use for Gillespie County.
Landowners need to be aware that if land receiving Ag valuation changes use to a non-Ag use then a “roll-back” tax may be imposed. The roll-back tax is a penalty for taking the Ag land out of production. Roll-back taxes will be assessed for the previous five years (if the land received Ag use for the previous five years). The roll-back tax is the difference in actual taxes paid based on productivity value and taxes that would have been paid at market value. There is also a 7% annual interest penalty added to each of the five years!

Selling Season

2006-10-17T15:10:00.000-07:00

It appears as if sellers of real estate in Fredericksburg, Texas are gathering for a mini-stampede to reduce the prices on their property. This could be a combination of the bad press real estate has received in the national media as of late and the realization that buyers have grown more cautious and (most importantly) more informed.

I will step out here an opine that sellers (along with and at the advice of their agents) are realizing that the days of tossing a property on the market at above-market prices hoping to get lucky are ever-increasingly a thing of the past. While the perception may be that the market has cooled a bit, the reality is that there are still buyers out looking but they are no longer willing to be lead around by the nose.

Buyers today are savvy, connected, informed and experienced. Most sellers in this market are in their second, maybe third real estate transaction whereas most buyers seem to be very adept at “playing the game”. The scale may finally be tipping to the buyer’s side of the equation.

As the length of time that properties stay on the market increases and price reductions become the norm rather than the exception, buyers will gain leverage. In the last 9 days alone, 49 new properties were listed for sale and 40 others were reduced in price, some significantly.

Sellers need not despair and buyer’s need not gloat. It is my humble opinion that the “correction” in the wind at the moment is seasonal. It should come as no surprise that the inventory of listings get weaker and weaker at this time of year. Seller psychology assumes that the “prime selling season” is behind us and it’s time to prep for the holidays.

Buyers keep coming and seeing few interesting properties they assume the market is not what it has been. My advice to sellers is to list at this time of year (at sensible prices) because the buyers are out there. Sometimes, running contrary to the “norm” is the best way to reach you goal. http://www.fredericksburg-texas-property-for-sale.com

Opining Opinions

2006-10-17T14:41:00.000-07:00

I have heard some round-a-bout criticism of opinions expressed in this harmless thing called a blog. Let me just say that the opinions expressed herein are mine and mine alone. If you don’t care for what I have to say, don’t read it.

TMI

2006-10-10T09:49:00.000-07:00

As a professional who makes a living dispensing advice to buyers and sellers of real estate in Fredericksburg, Texas, I walk a fine line between giving (or receiving) too much information (TMI).

A lot of folks make the assumption that the more information you have the better decisions you can make. While this may be true in many instances, real estate brokers should be careful about what information they receive (or collect) as they are bound by various agreements (Code of Ethics, Listing Agreements, etc.) to use that information to the absolute benefit of the people they represent.

For example, if I am representing a buyer whose loan commitment expires on a certain date (necessitating that a sale closes by a certain date or risking a higher interest rate or more fees) I have information that would be useful for a seller to know. Obviously, I don’t want a seller to know that. The intricacies of agency relationships dictate what I can, can’t, and should, shouldn’t do with this information. It’s tricky.

Should I even know about the “rate lock”? It depends on who I represent and under what agreements I am bound. I try very hard to operate with a black and white moral compass when it comes to “doing the right thing”; unfortunately, the world (and real estate transactions) has been diluted to a point where many shades of gray present themselves. A lot of the fun is being sucked out of this business.

The bottom line is that everyone involved in a real estate transaction must be cognizant of the fact that anything they say can and will be used. Whether or not it’s use for them or against them depends on circumstances only an experienced professional can advise them on. http://www.fredericksburg-texas-property-for-sale.com

Inefficient

2006-09-27T08:05:00.000-07:00

Gross inefficiencies within inherently efficient systems. Sounds like an intriguing title to a PhD dissertation rather than a blog about Fredericksburg Texas real estate, but the “inherently efficient system” I’m referring to is what is commonly known as the real estate marketplace. The push and pull between buyers and sellers results in the balance of supply and demand (equilibrium). When factors conspire to shift that balance one way or the other (e.g. interest rates, macroeconomics, natural disasters, etc.) the marketplace corrects itself with higher or lower prices, changes in days-on-market and increases or decreases in inventory. It’s the perfect capitalist system.

Leave it to “local business practices” to take a smooth running, time-tested model and throw a monkey wrench into it. The inefficiency to which I refer is the system to which we all must adhere to show properties listed in our local MLS. Every property with improvements has locks that must be opened to allow access for showing. To show a variety of properties listed by a variety of offices, each agent must call those offices for appointments to show and then go by those offices to pick up keys (they also have to return them when finished). This is hugely unnecessary waste of time and effort.

The vast majority of real estate markets have figured out how to cure this inefficiency, we know how to fix it but we stupidly refuse to act. I’m sure most of you reading this blog have heard the term “lockbox”. It’s what most market use to allow access and track showings. It is a simple way both to save time and to accurately track who is showing what property (and when). In this day and age, the tools are there, they are affordable and they are simple to use. Why don’t we use them? I don’t know, ask the MLS board. This has been on the radar screen for years yet nothing every gets done.

Rather than looking for reasons to say “no” or “that won’t work here” we should be looking for ways to improve the efficiency of our services to our clients. Working smarter is the way to the future. This community is being dragged into the future kicking and screaming. Wouldn’t it make more sense to accept that the future is now and embrace the inevitability of progress? http://www.fredericksburg-texas-property-for-sale.com

How Far

2006-09-26T07:55:00.000-07:00

How far should an agent (representing a buyer or seller) go in negotiating and then closing a real estate transaction? No, this is not going to be a discussion of realtor ethics or a “tell all” of ethical lapses that have occurred in Fredericksburg Texas real estate sales. My goal in this post is to contain my comments to ways in which agents can (using logic, common sense, creativity and experience) best represent the interests of their clients.

To take a tiny step backwards, let me first state that a successful negotiation is one that produces a “win-win”. In buying land, ranches, homes, etc. that “win-win” is evidenced when both parties execute a legally binding contract. If either party is feeling slighted in the negotiations, there will be no contract and, therefore, no “win-win”.

If I represent the seller in a deal, the “win” I am trying to negotiate is based solely upon their goals, wants, needs, etc. If I represent the buyer, my goals are (obviously) somewhat different. Without the “win-win” the seller doesn’t sell, the buyer doesn’t buy and I don’t eat!

There are many schools of thought as to how to best serve these competing goals. When negotiations come to loggerheads, it is often left to the agents involved to step up and create solutions. Examples include the all-too-common commission-ectomy, agents paying for surveys, home warranties, inspections, etc., etc. I could spend a lot of time and effort debating the pros and cons of these approaches and whether or not it is “fair” for principals to expect their agents to sacrifice where they are not willing to, but I won’t.

As with all negotiations, the bottom line rules. As an agent, would I rather pay for a home warranty out of my pocket or not have a deal? Duh! You do what you gotta do.

It’s not about an agent winning or losing, it’s about the person you represent getting the best deal possible (within the confines of a “win-win”). Agents who “take it personally” lose sight of who really matters in the deal and fail in their fiduciary responsibility to their client. As an agent, it is never about me, it’s about the client and representing/protecting them to the best of my ability. Much more often than not, this produces the desired “win-win”.

Builders

2006-09-20T14:48:00.000-07:00

Choosing a builder is the single most important thing anyone building their home will do. You can have the best location and the coolest design and none of it will matter if your builder messes things up.

All the moving parts that make up a residential construction project should only be entrusted to a builder that has a proven track record of success and has a long history of successful sub-contractor relationships. Most importantly, your builder should be bonded and should be licensed with the Texas Residential Construction Commission .

“Quality” is a very subjective term. Chose a builder whose idea and examples of “quality” matches your own. More than anything else remember, Experience Matters

What Will You Do About It

2006-08-29T08:25:00.000-07:00

I’m “fixin’ ta be” politically incorrect. If you are an agent in Fredericksburg, Texas and a member of the Gillespie County Board of Realtors, you may want to stop here. You have been warned!

What the hell is wrong with us? As a group, presumably formed to further our collective business interests, we are giving away the store. I could go on and name many, many ways in which (in the guise of serving the “public interest”) we are shooting ourselves in the foot, but instead, I’ll focus on two issues that I see as major contributors to our collective stupidity. The first issue that sticks in my craw can loosely defined as “membership”, the second are the “other brokers”. (Disclosure, I am the chairman of the Membership Committee).

If you have read this blog in the past (or checked the archived articles) you will have seen previous reference to the ease at which a person can become a “Realtor” (e.g. “free entry”) and the fact that we (the local Board of Realtors) have to approve anyone who wants to join (short of felons, child molesters and folks with suspended licenses) and can pay the nominal fees.

Forgetting for a moment how allowing marginal agents membership “serves the public interest”, let’s focus on the effect this has on full-time, dedicated and experienced practitioners of “the art of the deal”.

By filtering out Board members categorized as appraisers, non-MLS, other, tax user, non-realtor and secondary members, we have a total of approximately 219 active agents and brokers serving the buying and selling public.

Now let’s look at the numbers as of 8/29/06. Only 65% of the active members have sold anything this year (meaning 35% haven’t). Of the 65% that have sold something, 4.5% have sale of less than $100K, 14% have sales of between $100K-$500K, 11% have sales of between $500K-$1M, 12.7% have sales between $1M-$2M, 8.6% have sales between $2M-$3M, 6.4% have sales between $3M-$4M, 2.3% have sales between $4M-$5M, 2.7% have sales between $5M-$6M and 2.3% have sales of over $6M for the year.

There are two very important facts revealed by these figures: 1) fully 78% of the people in our Board do not earn a “living wage” via their endeavors in real estate, and 2) the award to the top grossing agent goes to… “Other Broker”. “Other Broker” has out sold the top agent by almost 19% so far this year. That’s money out of your pocket and out of our community!

This brings me to my second beef, the number of sales that go to agents that are not members of our Board and (in most cases) don’t live in the Fredericksburg area. How, I ask, can we be letting this happen? How can a buyer or seller of real estate believe that someone who doesn’t live here or know the market adequately represents their interests? It’s mind-boggling.

I can’t address the last question above. It’s a mystery to me. The forms we use, promulgated by the Texas Real Estate Commission, give us handy tools; however, to minimize the impact that “other brokers” can have on our business. When we deal with “other brokers” we (local agents) inevitably bear the burden of the work due to the “other brokers” lack of familiarity with the market. This being the case, why then should we share equally in the rewards?

Agents, you know what I’m talking about, the tools are there, USE THEM! This is our last line of defense against the invasion of carpetbaggers, auslanders, friends and brother-in-laws that think Gillespie County and Fredericksburg, Texas real estate is “easy pickins”. A new poll shows the low regard with which we are held to the public. It’s self-inflicted crap like this that feeds that image!

It’s time we looked up from our desks and faced the fact that our house is in disarray. I know many of you know exactly what I’m talking about. You get it. If you haven’t thought about these things, it’s time you did. It does affect you and your pocketbook. What are you going to do about it…?

I Get It

2006-08-28T14:05:00.000-07:00

I get it.

I get that buyers want a “steal”;
I get that seller’s want to maximize their value;
Most importantly, I get how to bridge these competing goals.

How you ask?
Well, it depends on who I represent.

There are very different approaches that agents should take if representing a buyer vs. those taken when representing a seller.

If you think I’m going to “give away the store” and freely dispense knowledge gained through years of experience, education and personal financial risk…you’re mistaken.

If you want insight in to how to get the best deal in a real estate transaction, call me and we’ll talk about it.

Just Business

2006-08-08T12:40:00.000-07:00

“Don’t take it personally”, “It just business” and the infamous Texas saying “Bidness is Bidness” are comments frequently heard by agents dealing with Fredericksburg Texas real estate transactions. Frequently condescending, always offensive, these phrases are most often uttered by parties that are “in the wrong” and are refusing to take responsibility.

Buyers and sellers of real estate, land, ranches, homes, etc. are always personally vested in the property. It is often a persons most valuable and hard-won possession that is the subject of a purchase or sale and, as such, “it is personal” and “it’s not just business”.

An experienced agent can spot one of these cavalier buyers or sellers to whom the whole process is a game. The problem is how to either deal with them or avoid them altogether. The best way I have found to handle “them” (whether I represent “them” or the “others”) is to ensure that a large enough amount of earnest money is placed on deposit in the hope that the “money on the table” is something they will not readily walk away from.

Real estate agents are bound to treat both parties to the transaction fairly and honestly, how do you do this when you know (or suspect) someone is not being honest? Disclosure, disclosure, disclosure! Remember Experience Matters

Land Lovers

2006-08-01T07:25:00.000-07:00

I was showing some land and ranches in the Fredericksburg Texas area to some folks from Houston this past weekend. Driving from place to place gives you ample time to get to know each other and get a good sense of how “informed” people shopping for real estate really are. They, in turn, have the opportunity to see if I know what the heck I’m talking about. Usually, this works to everyone’s advantage and the relationship move forward to the point that the client ends up buying something.

As we were focused on “land” the subject of land as an investment (asset class) naturally came up. I provided these folks with a copy of an article I mentioned in my last post Jumpin' on the Land Wagon . They then discussed an article in a recent Wall Street Journal that, basically, said the same thing. On Sunday, I came across and article in Austin’s American Statesman that quoted both the “Land Wagon” story and the Journal story (title: “Undeveloped tracts draw land lover as housing slows down”).

The Statesman story talks about some of the basics to look for (or watch out for) when buying land. Among the potential problems are: availability of electricity and water and the need for septic systems, legal access to the property and mineral rights. I would add to the list gaining (or maintaining) agricultural exemptions to minimize taxes and water rights, a growing issue in more arid parts of the state.

These can be very complicated issues and are ones that are best investigated, revealed and resolved with the help of an experienced agent. Remember, Experience Matters

When You're Right...

2006-07-26T08:28:00.000-07:00

In the previous post, I stated my opinion that “land” was the hot mover in Fredericksburg Texas real estate. I love being right! Tierra Grande Journal of the Real Estate Center at Texas A&M University recently published an article entitled “Jumpin’ on the Land Wagon”. As soon as they post the edition to their website, I will provide a link for you to read the full text and see all the pretty graphics. In the meantime, exerts include:

“Texas land markets are exceptionally robust. The accelerating market of the past five years has driven return to levels approaching the historic highs of the 1970s.” Notice they said “returns”, not “prices”, there is a difference!
“In this environment, demand has become an investment-based driving force for a market teeming with buyers. Tax advantages gained from reinvestment in a 1031 exchange reduces effective prices for those cashing out of investments in other properties.”
“The current market is characterized by a prevalence of cash investments, which was not the case in the 1980s. Most landowners will not face the prospect of loan default in the event of an economic turndown.”
“without a cataclysmic shock to the economy, continued income growth along with reduced federal taxation point to a ready supply of cash seeking an investment home. Nothing currently on the horizon signals a 1980s style crash or even a marked slowdown in land price appreciation. Prospects in the near future seem to favor strong performance.”
“Since 2001, Texas land markets have provided increasingly generous returns. A brief bout of weak price growth immediately after the 9-11 attack was followed by a pronounced rebound that continues today. Price growth has ranged sharply higher than the previous five years, with returns consistently outpacing both inflation and the performance of treasury securities.”

I couldn’t have said it better myself! Buy Land in Fredericksburg Texas

What's Hot, What's Not

2006-07-25T07:39:00.000-07:00

The hot thing going (at the moment) seems to be “land”. The fewer improvements the better. I’ve been fielding a lot of inquiries from folks looking for 50-100 acres, with views and access to good water within 10 miles of town. Of course, there is very little (to nothing) available that meets this description so if any potential sellers of this property type are reading this, please call me!

New homes continue to move well. The hot area continues to be Stone Ridge with Cross Mountain West following a distant second.

Residential lots continue to sell very well. The 6th phase of Stone Ridge sold about 80% of the lots within the first week of their offering. Cool Water Ranch (an “acreage” subdivision just outside of town) has seen good activity as well.

Slow sellers continue to be homes in need of substantial remodeling and “over-improved” ranch property. Prices from homes in need of repair are such that buyers are unable to justify the high buy-in price added to the increasing cost of remodeling. An “over-improved” ranch is a subjective animal that is best described as a ranch with game fencing, paved roads, barns, corrals, pens, multiple wells, dams, landingstrips and enormous haciendas. Today’s ranch buyers seem to be seeking a blank canvas.

Do I have statistics to back up the above? No, these comments are merely reflect my current activity and my observations of the MLS (what’s for sale, what’s under contract or pending, what’s selling and the days on market). In the recent re-design of our MLS, our illustrious leaders changed how the data is tracked. Statistics are no longer broken down to the detail they once were (e.g. areas C-1, C-2, C-3, etc. and R-1, R-2, etc) and are, instead, placed into generic categories such as “City-Southwest”, City-Northwest”, “County-Northwest”, etc.

The dumbing-down of our business continues unabated! How are we to speak with any authority on market conditions when the very systems that were supposed to allow data tracking no longer do so in any meaningful way? Oh well, Onward through the fog!Fredericksburg Texas Land For Sale

Buyers vs. Sellers

2006-07-21T13:56:00.000-07:00

Do you prefer Buyer or Sellers? It’s a question often asked of agents selling real estate in Fredericksburg Texas. The PC answer is “I love working with all people!”. The real answer is somewhat more complicated and very much dependent on personalities, experience and (to some degree) resource.

I’ve heard agents say that you have to “list to last”. This is based on the assumption that a steady inventory of items offered for sale assures you of a steady income. After all, the listing agreement guarantees an agent payment when the house sells. Throw into the mix the cost of marketing a listing (ads, signs, flyers, internet, etc.) and the uncertainty that the property will actually sell and things don’t look quite so “guaranteed”.

Concentrating on Buyers of real estate in Fredericksburg Texas has its own set of risks. First and foremost is the common saying among agents that “buyers are liars”. You can spend a huge amount of time and resources playing the Chamber of Commerce tour guide to buyers that are either unable to buy (anytime soon) or have no intention of buying. Worse still are the buyers that you spend time showing around who then drop the “my brother-in-law is an agent” bomb on you.

I suppose the bottom line is that you have to find a happy medium of both Buyers and Sellers to make a decent living selling real estate. My preferences lean towards buyers. The reality is that I am “selling” Fredericksburg first, homes (land, ranches, etc.) second and myself as a knowledgeable, likeable guy third. If done right, I get a sale, a new neighbor and a new friend!
Buy Fredericksburg Texas Real Estate

It's Hot!

2006-07-19T14:46:00.000-07:00

Wow is it hot here in Fredericksburg Texas! Duh, it July in Texas! More to the point, the real estate market in Fredericksburg Texas continues its steady growth at rates that seem to be sustainable for the foreseeable future.

Don’t ask me how global current events are going to affect the market because I don’t know. I will; however, refer you to previous posts where I argue (rather persuasively, I think) that real estate “is local”. Sure, national and global economic and financial trends affect interest rates, money supply, etc. and those things can affect demand and therefore sales, but local factors tend to lessen the impact of these uncontrollable events.

The latest example I can site revolves around the ever-increasing price of gasoline. While this phenomenon has dampened consumer confidence and affects how we travel, it has benefited Fredericksburg Texas in that travelers are tending to stay closer to home. Folks in Austin, San Antonio, Dallas and Houston that may previously have traveled to the east or west coasts on the traditional great American summer road trip are instead discovering (re-discovering) the charms of Fredericksburg and the Hill Country. More visitors make the local merchants happy and leads to potential new residents for the area.

Only time will tell how long the good times continue to roll, but I’m willing to bet that we are still on the “upswing”.

Quotes

2006-07-08T07:18:00.000-07:00

I love quotes. Referring to the wisdom of others and learning from the past are two of the great things that I “get” out of quotes. There is a great on-line resource for quotes called Wikiquote , check it out.

While browsing one day for quotes that might relate to real estate sale (in general) and Fredericksburg, Texas (in particular), I came across one that says “Real estate agents are God’s plague upon mankind when locusts are out of season”. True pearls of wisdom! The unsolicited calls, the refrigerator magnets, postcards, etc. are tools of annoyance and (frankly) inexperience.

Why, you might ask, am I dissing my fellow real estate “professionals”? Unfortunately, I have come to realize that a growing majority of agents are not “professional” in any way, shape or form. Sadly, agents today have a mind-set that the money is easy and the clients are stupid. Nothing could be further from the truth. Clients today are smarter, savvier and better informed than at any time in the past. Armed with knowledge (and in most cases, experience) clients are increasingly seeking out representatives that exhibit professionalism and experience. Culling through the masses of agents hawking their wares like used car salesmen, however, can be a trying and frustrating experience.

So what’s a buyer or seller of real estate in Fredericksburg Texas to do? Seek out knowledge, seek experience, seek out an agent who has a “dog in the hunt” and remember, Experience Matters

Thank You

2006-07-05T07:21:00.000-07:00

I was tempted to begin this post with a rip against those who have failed to heed the call to help out a fellow citizen and dedicated public servant (see previous post Officer Needs Assistance) but instead I choose to pay my respect to those that did take the time and effort to help.

With the publicity we’ve managed to generate for the cause of helping the wife of police officer Sgt. Brian Haley (newspaper articles, e-mail campaign, etc.) I estimate that word of our efforts to raise funds to offset the cost of Melissa’s heart surgery has reached no fewer than 9,000 people and an untold number of businesses and other organizations.

As a seller of real estate in Fredericksburg Texas, I was particularly focused on the realtor community in my personal efforts to help Brian and Melissa. Of the 9,000 or so reached by various methods, a small handful (6 at last count) have given of their hearts, of the 200 or so realtors who were reached repeatedly via e-mail 11 were generous with their support. To these 17, I say THANK YOU. Your efforts and contributions have, literally, saved Melissa’s life. Your donations allowed the life-giving surgery to proceed and succeed. THANK YOU!

Think about it. 17 out of 9,000. You guys are the 2/10 of 1% of the population who are selfless enough to consider the needs of another human being and act accordingly. The key word here is “act”. Lots of others probably “feel her pain” but lacked the will, resources or compassion to follow up with action. You 2/10 of 15 should be proud of yourselves, you are truly remarkable and (as the numbers suggest) rare! THANK YOU!

Poaching

2006-06-28T08:16:00.000-07:00

There are certain things that agents representing buyers or sellers of real estate in Fredericksburg Texas should and should not do (in my humble opinion). We live in a small community, our kids go to school together, we see each other at the grocery store and at little league and we know a lot of the same people. It can get tricky knowing where to draw the line between competition and stupidity. Luckily, you have me to help!

Real estate offices espouse client acquisition policies that vary slightly but they all seem to employ a common sense approach to how to get a client, how to keep a client and how not to poach other people’s clients. It is on this last topic (poaching) that agents seems to have the most trouble (new agents especially).

Poaching, loosely defined, is the act of soliciting a client known to be working with (to known to have worked with) a competing agent (whether in the same office or a competing office). Every agent is taught to work their “sphere of influence” (SOI) for leads. The nature of a small town is that SOI’s will inevitably overlap. What then?

The application of common sense can resolve most dilemmas, short of that, here are some rules-of-thumb:

If you’re an agent and meet a person at your neighbors house and you know (or suspect) them to be a good friend and/or a past buyer of real estate from you neighbor (also an agent), DO NOT call them later in the week and try to sell them something.
If you’re in your office and someone comes in specifically asking for another agent, DO NOT sweet talk them into dealing with you if the other agent is not available.
If you’re in the office and a caller specifically asks for another agent, DO NOT work them with the intention of having them become your client thinking no one will know the difference.
DO NOT operate with the philosophy that “if Betty agent took better care of her client, the client wouldn’t be taking my calls”.

Now that you know what NOT TO DO, what should you DO when faced with the above?

DO thank your neighbor for dinner and then mind your own business.
DO offer to assist a walk-in in the absence of the agent they are looking for and then turn them over to the agent when that agent is available. Expect nothing but a “thank you” in return.
DO offer callers assistance then relate the call to the requested agent. Expect nothing but a “thank you” in return.
DO make the assumption that the agent/client relationship is one that is earned and DO assume that if a client is unhappy they will call you. Leave them alone!

We’ve all heard that “what goes around comes around”. This is especially true in the highly competitive world of Fredericksburg real estate sales. Add to that the whole “small town thing” and you really have to watch yourself or you’ll end up with a reputation that will ruin you in the long run. Experience Matters

Impressions

2006-06-27T14:17:00.000-07:00

You never get a second chance to make a first impression. This is as true for buyers and sellers of real estate in Fredericksburg Texas as it is for their chosen agent.

Buyer’s should strive to put a good foot forward when making an offer and should always disclose their true financial situation to their agents. Sellers should only present their homes for sale when spotlessly clean and well maintained. Agents should wear their knowledge and experience on their sleeve so that buyers and sellers are comfortable with their choices and with that agents counsel.

While first impressions are critical (whether we like it or not), when is it appropriate to begin placing more emphasis on substance than initial impressions? Is what an agent drives or wears as important as what they know about real estate (in general) or the Fredericksburg Texas market (in particular)? Probably not. Flashy new cars and expensive clothes can be as deceiving as an old clunker (e.g. Sam Walton and Warren Buffet) and blue jeans (e.g. Bill Gates and the Google Guys). If you judge a book by its cover, you’re likely to either be surprised or disappointed.

Our business culture has slowly begun to recognize that it’s not what you wear but how you do your job. Casual Friday’s, once an anomaly are now the norm. The explosion of high-tech employment has given rise to casual “everydays” and bringing you dog to work. Common sense is beginning to take hold. When it’s 100° in the Texas heat, why wear a suit…duh! Comfort leads to creativity, creativity lead to innovation, innovation leads to discovery, discovery leads to knowledge, knowledge leads to success.

I’m more impressed with a well-spoken buyer (or seller) who is clearly comfortable in their own skin than I am one who is obviously trying to impress those around them with the “stuff” they have acquired. It’s not about what you have…

The Appraisal Dilemma

2006-05-31T07:20:00.000-07:00

Those of you familiar with this blog on Fredericksburg Texas Real Estate know that I often use this forum to vent my frustration about various aspects of my chosen profession. Well, here we go again.

Buyers of real estate often take advantage of a concept know as leverage. I won’t bore you with the pros and cons of using other people’s money to make yourself rich, rather I want to take a moment to describe how the act of borrowing money to pay for property in a market where property is rapidly appreciating can be problematic.

When a buyer contracts to buy property and decides to (or has to) go to a lender for a portion of the funds, the lender inevitably requires that the property be appraised to determine its “market value”.

“Market value” is defined as follows (prepare to be bored):
“The most probable price which a property should bring in a comparative and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."

In other words, the "value" is equal to the price at which a seller will sell and a buyer will buy.

The fundamental problem is that appraisers rely on historical data (i.e. past sales) to estimate present market value. In the Fredericksburg, Texas market, where various property types (lots, ranches, homes, homes on acreage, etc.) are appreciating at rates ranging from 8% to 25% per annum, last year’s sales do not reflect this year’s prices. Appraisers have their hands tied in that they have to support their opinions with outdated information!

What this means to buyers and lenders is that “appraised value” does not always equal “market value” and the result can be that the lenders will not lend as much as buyers would like (leaving buyers to pay more cash out of pocket). Sellers may be frustrated by this dilemma as buyers will likely try to re-negotiate the contract price based on the “appraised value”.

The best way for buyers and sellers to steer through these rocky issues is with an agent experienced in appraisal theory, lending practices and market economics. Remember, Experience Matters

Can We Talk?

2006-05-26T11:03:00.000-07:00

A famous speech from Shakespeare’s Julius Caesar begins “Friends, Romans, countrymen, lend me your ears; I come to bury Caesar, not to praise him.” If you know the story, you know that the speaker goes on to praise Brutus (one of the conspirators who killed Caesar) as being an ambitious and noble man, but not ambitious to the point of wanting to rule in the stead of the corrupt and brutal Caesar.

Where am I going with this? What does this have to do with real estate in Fredericksburg Texas? Look at the current number of marginal agents in our market as Caesar to my Brutus. I am about to “murder” them with facts, figures and a plea to the real performers to assert our ambition with sterner stuff.

Before anyone goes postal on my “marginal agents” wording, know that by “marginal” I simply mean that in terms of earnings. This is not personal! Sales statistics show that since 1/1/2004 only 46 agents have sold in excess of $5,000,000, 22 have sold in excess of $7,000,000 and 13 have sold in excess of $10,000,000. Remember we are talking about a board membership of 200+ agents.

Applying previous lessons of what these figures mean in terms of “take home”, this translates to the fact that 46 agents are taking home a minimum of $30,000 per year before expenses (based on an average 3% fee, split 50/50 with a broker over 2 ½ years). The reality is that these 46 probably made more than the $30K minimum (commissions for both sides, variable brokerage splits, off MLS sales, etc.) but we have to have a place to start, right?

What the heck are the other 150 agents doing? They’re taking market share (to the tune of over $130,000,000 in sales over this period) from those of us who are dedicated to making a living in this trade, that’s what. Then we have the “other broker” category in our sales stats. These guys have pirated over $54,000,000 in sales from the local experts over this same time period! We’re letting this happen!

How do the real performers (you know who you are) deal with over $180,000,000 in “lost sales”? (1) Fight to raise the entry standards for new agents and impose performance standards on those that want to remain. (2) Our listing agreements provide us the tools to deal with the “other brokers”. Paragraph 8 allows us (with the agreement, understanding and approval of our sellers) to institute “variable rates” for non-MLS participants for whom we invariably end up doing all the work. Those “other brokers” who have been prescient enough to join our board to circumvent paragraph 8 can also be challenged via the subagent provisions in the listings. Make them obtain and show you their BA agreements to get the full split!

This is not the politically correct position…sorry. Our current system is “corrupt” and must be dealt with if we ever hope to raise our profession above the level of “used car salesman” in the eyes of the public. Remember Experience Matters

Home Valuation Tools

2006-05-24T07:55:00.000-07:00

A very interesting article recently appeared in MSN’s MoneyCentral. It discusses the pros, cons and accuracy of Automated Valuation Models (AVM’s) such as Zillow, RealtyTrac, Domania, etc. It makes for an interesting read Putting home-value tools to the test.

For background, refer to my post titled “Zillow Schmillow” in the archives…I love being right! Visit Fredericksburg Texas Real Estate

Fees and Representation

2006-05-23T07:45:00.000-07:00

A previous post wherein I attempted to explain/justify the commissions we, as Realtors, earn was met with a few comments along the lines of “if you have to justify it you’ve already lost the battle”. While this may be true, I remain committed to getting the word out that we deserve what we earn (and probably more). The best way I can think of to do that is to continue to clarify the role we play in very large financial transactions and the cost we incur to do so for YOUR BENEFIT! Granted, we benefit also, but certainly less so than do buyers and sellers of real estate in Fredericksburg Texas.

Before I start, I’d like to refer you to an earlier post in July of 2005, titled “200 Reason” and ask that you click on this link to refresh yourself on Agency Information. These two resources capture the essence of what we do and illustrate the liability we expose ourselves to on behalf of our clients.

As buyers in Fredericksburg Texas become more sophisticated, we have seen a few folks attempt to buy property directly through the listing agent, specifically stating that “they don’t want representation”. The next thought they convey is that they expect an “automatic” price discount equal to the amount an agent representing them might be expected to earn.

If you’ve followed my thoughts on these pages, you’ll know that I believe that everyone should have representation in a transaction as large and as complicated as buying real estate. Remember, the listing agent is contractually obligated to work for the best interests of the seller. When you buy from the listing agent (or a subagent) you are on your own. It may not feel like that, but trust me, you are.

A buyer expecting a price reduction based on lack of representation has a gross misunderstanding of both agency law and listing contracts. Remember my comments above about who works for who (also see previous posts). A seller is contractually obligated to pay a specific percentage to their agent. Asking the sellers agent to “automatically” discount a home based on lack of representation is certainly not something that is in the sellers best interest and, if agreed to, exposes the listing agent to untold liability.

This kind of uninformed garbage will not fly with an experienced agent. If you find yourself making progress with this kind of ploy, I feel sorry for both you and the agent you are suckering. Do you really want to gamble that you know the market better than an experienced agent does? Do you want to gamble that you’re getting the best deal you can? Don’t try the argument that the more the property costs they more we make, so where’s our incentive to get a lower price. The bottom line is if we don’t get you the best deal we can, you don’t have to sign the contract. If you don’t sign, we don’t get paid! Visit Fredericksburg Texas

To Counter or Not

2006-05-22T08:17:00.000-07:00

As I am one to maintain that we are still in a “seller’s market” in Fredericksburg, Texas, I’d like to address whether nor not offers received from a potential buyer should be considered and then “countered”.

Recall, that a “seller’s market” is loosely defined as one where a seller has a perceived advantage over potential buyers. This advantage usually takes the shape of a lack of inventory from which the buyers can choose or in the fact that prices are rising rapidly, forcing buyers to act more quickly than they otherwise might.

Regardless of market conditions, some buyers are “lowballers” who adopt the strategy of making offers well below the asking (market) price in the hopes of obtaining a good deal. In a “seller’s market” this almost never works. In fact, it often backfires in that “lowballers” risk offending sellers to the point that sellers won’t even consider a more reasonable offer from the same buyer at a later date.

Rather than be offended by (and therefore not reply to) a lowball offer, I counsel my clients to respond with terms that would be acceptable. I don’t believe it is good business to ignore any offer, no matter how silly. I have seen many instances where a “lowball” offer has been made by buyers more than qualified and more than willing to pay a higher price. This being the case why alienate them (and possibly lose a sale) by ignoring their offer.

I try to remind all parties that we are dealing with perception and negotiating strategies, not emotions. It’s easy for buyers and sellers to get emotional about the process of buying or selling real estate in Fredericksburg, Texas and it’s the job of their representatives (agents) to counsel sound business practice. What the parties do with that advice is anyone’s guess. Visit Fredericksburg Texas

The Power of Blogs

2006-05-15T13:23:00.000-07:00

Ah, the power of the Blog! In two past articles (“Market Update”, May 2006, and “Inventory Blues”, January of 2005) I’ve bemoaned the lack of quality inventory currently available in Fredericksburg, Texas. The last two weeks has seen a burst of listing activity that is a direct result of my complaints in the blogosphere. O.K., maybe not but it’s fun to think so.

While inventory is still what I consider to be “light”, it’s getting better. The backlog of buyers; however, will buy up these new listings and return the inventory to a weaker level. Bottom line, keep ‘em coming Sellers!

Visit Fredericksburg Texas Real Estate

Market Update

2006-05-09T09:01:00.000-07:00

And now for a brief market update…Things continue to pop here in Fredericksburg Texas. No, not “the bubble” but sales. Sales are finally hitting their stride as evidenced by the number of closings over the past several weeks. While most agents and offices agree that inventory is still lacking, buyer are apparently beginning to accept that what is “out there” is the best that can be had (at the moment).

Most of the folks I talk to in the biz are still lamenting the sorry state of our current inventory. This is still a SELLER”S MARKET. If you are reading this and considering selling your home in Fredericksburg, Texas (to borrow a phrase), just do it! We (meaning myself as lots of other agents) have buyers circling the market ready to pounce.

As of the end of March, sales totaled nearly $39,500,000, an increase of over 50% from the same time last year while the total number of transactions has increased by 33% over the same period. Interestingly, the number of licensed agents has increased by 16% also.

Visit Fredericksburg Texas Real Estate

Anatomy of a Remodel X

2006-04-28T11:46:00.000-07:00

I’ve been patient. I’ve been more than patient. Now it’s time to blow off some frustration about the worker dudes at the Austin Street remodel in Fredericksburg Texas.

If you have been patiently following this process, you’ll note 1 or 2 times when I’ve expressed mild frustration or dismay with the worker dudes and their quality, attention to detail and thought processes. Anyone who has ever attempted new construction or remodeling know what I’m talking about.

We are down to the nitty-gritty now, the small stuff the punch list. We are also down to the end of the budget and there appears to be a growing gap in the correlation between work remaining and funds remaining. Did I mention we are leased with a move-in of 5/15? I am hearing things like “I got to get my guys out of here and on to the next job”, “you’re getting a real good deal on this” and (my personal favorite) “this is costing me more than I thought it would” from Mr. Contractor.

Yesterday was the final straw and is going to result in one of those “come to Jesus” talks that everyone eventually has with their contractor. I went over with the wife to check things out (the worker dudes only worked a half day and are off today for a “retreat”) and we really gave the place the once over. Examples of what we found include trim on newly installed window frames that looked like they were painted by my 4 yr. old (including the obvious paint slopped all over the screen material), the metal screen material is dented, the wood floors show wide swaths where the various coats of sealer were not applied, the screens and shutters on the small house were in the trash pile (they were to be painted and replaced), the window glass in all the windows on the small house have been sprayed over with primer, I could go on and on.

I’m psyching myself up to hold my temper when on Monday I will surely here excuse after excuse about how they’ve bent over backwards and are not making money, blah, blah, blah. My responses will be along the lines of “you bid it, you deal with it”, “if your guys had not done “blank” then we wouldn’t be having this conversation”, etc. Wish me luck! Visit Fredericksburg Texas

Gas and Fredericksburg Texas Real Estate

2006-04-24T13:08:00.000-07:00

Check back a few posts where I detail the real truth about what we, as realtors in Fredericksburg Texas, take home out of those lofty commissions we all are swimming in.

Now multiply the number of miles we drive in a year by the record gas prices and I think we’d have a strong case to make for a fuel surcharge (like the plumbers, electricians, airlines and delivery services are doing). Bottom line, the cost of every phase of our business is increasing while commissions (and the subsequent splits) stay the same. Sure, sure prices are rising so the commissions are too, right? Wrong. Too many agents! Free entry…ring a bell? Don’t worry, if we (as a profession) don’t have the spine to raise our professional standards, we sure as heck won’t have the spine to have consumers help us offset our costs.

Visit Fredericksburg Texas

Proof It!

2006-04-20T12:27:00.000-07:00

Wow. Is it just me or has the level of professionalism in marketing and presentation materials slipped? In the last week, I’ve seen two promotional pieces, reportedly prepared by “professionals” in Fredericksburg Texas that are sure to cause embarrassment for the firms they were intended to benefit.

Who prepares this trash? Doesn’t anyone proofread it? If they did proofread it and didn’t catch the problems, what does that say? Even scarier, will anyone but me notice?

It seems to me that any promo or advertising piece should (at a minimum) create a logical flow of ideas or information and exhibit proper grammar, punctuation and diction (defined in the Wiktionary as “The effectiveness and degree of clarity of word choice and presentation”).

While I stand behind my high expectations for printed materials, I’ll be the first to admit that English and grammer were not my strong suits in school. It has; however, been encumbant upon me to build my strengths in these area if I wanted to truly portray myself as a real estate professional. The learning never ends. Granted, everyone makes mistakes but as a group, real estate agents in Fredericksburg Texas must strive to do a better job of presentation and communication.

This all goes back to my previous rants about “free entry” into our profession. Setting low standards for experience and licensure inevitably reflects poorly on all of us. I am proud of what I do and I am proud of what I have accomplished in my career. Many participants in the realm of residential realty hold their opinion of agents right up there with used car salesman. That’s too bad (but not unexpected when you see what I’ve seen). Visit Fredericksburg Texas

Anatomy of a remodel IX

2006-04-14T12:15:00.000-07:00

We’re about two weeks out from completion of our remodel in Fredericksburg Texas. The “For Lease” sign is up and the calls are coming in. FYI, we’re asking $975/month for a 12 month lease with a 1 month deposit. Pets are not an option as I have removed the old and tired fencing to improve the exterior look of the home. I will attempt to re-use some of that old “loop” fencing to create a perimeter around the smaller home once we start on it.

Since the last installment, the guys have finished the bathroom (trim etc.), laid the “retro” vinyl tile in the bathroom and kitchen, replaced and re-glazed all the windows, installed and painted the two new front doors (with new hardware and locksets), replaced all the cabinet hardware and created the “cut-out” for the refrigerator. The items remaining include staining and sealing the wood floors, hanging the exterior window screens and screen doors, misc. trim clean-up and a few other “punch list” items too small to mention here.

As promised, I’ll post some before and after photos either here in the body of the blog or in an album.

To buy or sell property in Fredericksburg Texas visit Fredericksburg Texas

The Herd Mentality

2006-04-11T14:27:00.000-07:00

In a post on March 8, 2006 titled “Geeze Louise!” I referenced an article in the NY Times called “Endangered Species”. Among other things, the post relates:

“As it turns out, however, most agents don't make very much money during a boom, because of one simple fact: the boom attracts way too many of them. Over the past 10 years, membership in the N.A.R. has risen by more than 75 percent. And why not? Compared with most professions, becoming a real-estate agent is quick, cheap and relatively painless. In economics, this phenomenon is known as free entry.

The N.A.R.'s own figures show the same dynamic at work today, nationwide. From 2002 to 2004, during one of the hottest real-estate markets in American history, the median income for Realtors actually fell — to $49,300 from $52,200. This is not to say that some agents haven't become rich. As in most sales professions, whether the product is diamond rings or crack cocaine, the people at the top of the pyramid make an awful lot more money than those down below. It's just that the base of the real-estate agent pyramid grows significantly during a boom. And because hungry new Realtors are discouraged from undercutting their competitors by lowering their commission, they compete instead by frantically trying to obtain new listings. This would explain why your mailbox is jammed with postcards from Realtors exhorting you to sell. Most real-estate agents seem to spend 95 percent of their energy chasing clients (for which they are paid nothing) and 5 percent actually serving them (for which they are paid way too much).”

Re-reading that post, I realized that I lost focus and rather than illustrate how this trend is affecting us here in little old Fredericksburg, I ranted against the idea that we may soon be “extinct”.

Well, I’m back on task! You may be interested to know that in March of 2004, we had 56 brokers as members of the Gillespie County Board of Realtors and 150 total agents. By March of 2005, that number had grown to 74 brokers and 187 agents and in March of 2006 we have 86 brokers and 225 agents. I’ll spare you the math and share that we have “enjoyed” an increase in membership of 50% since 2004.

Granted, the dollar value of all transaction has increased in a similar manner due to property appreciation, low interest rates, market efficiencies, etc. but have the number of transactions increased similarly? Nope. The key to remember when you’re thinking all agents are getting rich is to look at the total number of transactions as it relates to the increased number of agents. Agents up by 50%, total number of transaction up by 10%.

“Free entry’” may increase competition and lead to some short-term benefits for sellers (i.e. more choices, discounted commissions) but I would argue that this leaves Buyers and Sellers with a conundrum. Who to chose, why, is cheaper better…, etc. DO YOUR HOMEWORK! And remember that EXPERIENCE MATTERS

Anatomy of a Remodel VIII

2006-04-04T08:26:00.000-07:00

The latest.

The interior painting is complete and they are in the touch-up phase. The floor in the bathroom has been repaired, the old tub has been replaced with a more modern (and usable) tub/shower combo and the fixtures have been re-plumbed. All the floors (except for the kitchen) have been stripped and sanded and should be ready to stain this week. The kitchen floor will be topped with vinyl tile laid in an interesting pattern.

All the electrical work is complete. All switches, plates, fixtures and fans have been installed.

We’re getting down to the “nitty-gritty”! Items to complete include (in no particular order): stain and urethane the floors, install new front doors and locksets on all three exterior doors, carve out niche in kitchen for refrigerator, purchase and install appliances (frig and stove only), lay floors in kitchen and bath, install metal awning over back door, fix broken window glass, install exterior window screens, remove existing yard fencing, etc. etc.

Believe it or not, I think we’re only about two weeks out from completion. I’ll probably get the “For Lease” sign up later this week and start fielding calls. Once this house is done, the guys will move over to the exterior of the smaller house and begin work on its exterior. They’ll work there til we run out of $$. I promise pictures in the next update!

Fredericksburg Texas Real Estate

Zillow Schmillo

2006-03-29T12:15:00.000-08:00

Many of you have heard of a new website called Zillow.com. It’s a place that promises “Free, Instant Valuations and Data for 60,000,000+ Homes” as well as tools for Buyers, Sellers and Owners. Many agents are in a panic because they fear Zillow will make available one tool that they have to use with the public…comps.

The data Zillow provides is nothing new. The way they interpret and present the data is new, but the data itself has always been publicly available. Zillow has just simplified the data acquisition process and created clever phrases like the "Zestimate," fancy talk for their own best guess.

They say it themselves on their website: "We've done the legwork by getting huge amounts of data...and creating something unique that the public sources don't provide - a Zestimate..."
I found a website once where I could enter a description of car trouble I was having: engine lags when accelerating, blue smoke comes from exhaust pipes, etc.

That website gave me a rough idea of what the problem was. It even gave me detailed instructions on repairing these problems, and an estimate of how long it might take. But it didn’t make me a mechanic. And it didn’t make me any more inclined to perform the repairs myself. That's what a professional mechanic is for.

Sure, I took this diagnosis to a mechanic and said "Here's what I think the problem is." But I'll still needed the mechanic's help.

Now consider the fact that houses cost 10, 20, or 30 times more than a car (Rolls Royce aside), and you'll see my point.

Just because I know how much a house might be worth doesn't mean I'm ready to write up a contract and steer the sales process myself. That's a big undertaking that requires professional help. Zillow will not make professional agents out of your clients any more than Weather.com will turn me into a meteorologist.

Zillow is a number cruncher. It can't listen to clients. It can't look out for their interests and respect their needs. It can't offer them unique advice for unique situations. And it can't help them adapt to unforeseen challenges.

In short, it's no replacement for a real estate agent. Fredericksburg Texas Real Estate

Tax Bite(s)

2006-03-29T08:23:00.000-08:00

Allow me, for a moment, to be blunt…TAXES SUCK!

Yes, it’s that time of the year again. The time when we all are reminded of just how oppressive and complicated our system of “revenue collection” is in this country. I will admit (grudgingly) that taxes are a necessary evil. How else can we afford for our government to subsidize farmers to not grow crops, build bridges to nowhere and create a whole generation of people that are dependent on “government cheese”! I digress…

Sales tax, property tax, death tax, self-employment tax, capital gains, ordinary income, alternative minimum tax, adjusted gross income, blah, blah, blah! What ever happened to the idea of a flat tax! I guess too many lawyers and accountants would be put out of work to make that idea practical. By the way, for those of you who think all realtors make a ton of money, please revisit my post titles “Ah the Life..” in the May archives of this blog.

I’m venting because I just found out how much I owe for 2005. No, I’m not going to post it. Suffice to say, TAXES SUCK and I figure all my income from 1/1/06 to about June will all be owed to Uncle Sam. That’s gives me about a ½ a years worth of income to live off of. I bet if you do a little figuring, you’re probably in a similar situation…TAXES SUCK don’t they?

Fredericksburg Texas Property For Sale

Follow the Bouncing Bubble

2006-03-23T12:56:00.000-08:00

In the news today…”The pace of home resales in the United States picked up by 5.2% in February, defying forecasts for a slowdown, as warm weather boosted single-family and condo sales, according to trade group data on Thursday that showed a pause in the market‘s cool-down.”

After all the gloomy forecasts of a housing slowdown, bursting bubble, etc. we see that the housing market has, yet again, defied forecasts.

What will it take for economists (not to mention the National Association of Realtors-NAR) to realize that you cannot forecast something in macro (i.e. “national”) terms that does not exist or function in or upon macro terms? NAR does all of its members a disservice by playing the media game and refuting stories that are wholly based on a false premise—that being that the real estate market is “national”. Take a moment to scan the archives of this blog for a more detailed take on the issue.

Real estate in Fredericksburg, Texas has not experienced a “slowdown”. Check out newspaper headlines in Austin, San Antonio, etc. and then show me a “slowdown”.

Followers of this blog will see that this is clearly one of my hot buttons. The media would appear to like nothing more than for the market to go “splat”. Luckily, buyers and sellers listen to more than what the NY Times or Washington Post has to say on the matter. Again, all real estate, like all politics “is local”.

To the axiom of “Location, Location, Location” we should add “Local, Local, Local”

Fredericksburg Texas Real Estate

Spring Break Blahs

2006-03-21T08:06:00.000-08:00

The relative slow-down in my blogging activity is directly related to the relative slow-down in sales activity due to the fact that there is still a shortage of “good product” on the market. I’ve been using the down time to beat the bushes harder than usual to find some very specific property for a couple of clients of mine and to convince a couple of folks with some very interesting property to list them for sale with me. More importantly, it’s been SPRING BREAK!

I was able to manage a few days off since the kids were out of school. We went with some other couple and their kids (there were 18 of us in all) to an area resort call Mo Ranch. I highly recommend this place for anyone looking for a laid-back, water-oriented respite. I also took some time off to help my wife with some projects around the house and a final day to take the kids to Fiesta Texas. It was a bit crowded for my taste, but we bought season passes and will go back when it’s less infested with spring breakers.

Getting back into the swing of things I’ve found that not much has changed as far as the quality of listing that are coming out. Numerous agents share my view that we have lots of buyers and not much to buy!

This morning I received a gmail allowing me access to Google’s latest chapter in their world domination handbook…Googlepages. It’s actually a really simple webpage creation tool but I’m not sure I understand the point as all pages are published under an existing gmail account. Check out my results at Fredericksburg Texas Real Estate

Lastly, the Austin Street remodel is still moving along. They’ve finished sanding the floors back to the original long-leaf pine, covered them and are almost finished with the interior painting. The plumber is there re-working some of the bathroom piping and the floor in the bathroom has been repaired. Things are starting to move a bit more quickly now!

Visit Fredericksburg Texas Property For Sale

Geeze Louise!

2006-03-08T12:59:00.000-08:00

Endangered Species

By STEPHEN J. DUBNER and STEVEN D. LEVITT
Published: March 5, 2006 in The New York Times Magazine (This is a partial re-print w/commentary)

It would seem obvious that being an agent during a real-estate boom is a great way to earn a good living.

As it turns out, however, most agents don't make very much money during a boom, because of one simple fact: the boom attracts way too many of them. Over the past 10 years, membership in the N.A.R. has risen by more than 75 percent. And why not? Compared with most professions, becoming a real-estate agent is quick, cheap and relatively painless. In economics, this phenomenon is known as free entry.

The N.A.R.'s own figures show the same dynamic at work today, nationwide. From 2002 to 2004, during one of the hottest real-estate markets in American history, the median income for Realtors actually fell — to $49,300 from $52,200. This is not to say that some agents haven't become rich. As in most sales professions, whether the product is diamond rings or crack cocaine, the people at the top of the pyramid make an awful lot more money than those down below. It's just that the base of the real-estate agent pyramid grows significantly during a boom.
And because hungry new Realtors are discouraged from undercutting their competitors by lowering their commission, they compete instead by frantically trying to obtain new listings. This would explain why your mailbox is jammed with postcards from Realtors exhorting you to sell. Most real-estate agents seem to spend 95 percent of their energy chasing clients (for which they are paid nothing) and 5 percent actually serving them (for which they are paid way too much).

This article goes on to predict the ultimate demise of my kind due to the increasing efficiencies of the internet and the public’s ever-growing awareness of the role technology can play in helping them buy or sell property.

Let me tell you folks, technology will never replace the invaluable role experienced and successful agent can play in what is likely to be the largest single purchase we as consumers make. Technology can be a valuable tool, yes, but it can’t tell you why two nearly identical homes sold for different amounts, it can’t tell you why one part of town is perceived as being better or worse than another (and on and on). In short, technology will never replace the “gut feeling” that is so necessary to a transaction that is so large and so intensely personal.

Let them say we’re going the way of the stockbroker or the travel agent, perhaps that will offset some of the dilemma our profession faces due to its spineless policies allowing “free entry”. Yes folks the dumbing down of America is alive and well in the policy rooms of the NAR, TAR, etc.

Do you want to be served, advised, whatever by an agent that the previous week was tending bar or styling hair? Think about this folks….

Fredericksburg Texas Property For Sale

Anatomy of a Remodel VII

2006-03-06T09:23:00.000-08:00

The guys have finally moved inside the big house and are working to “git er done”. A few small details on the exterior remain but I guess I’ll let those slide to the punch list. We’re still waiting for the newly built window screens to be painted and hung. That will complete the exterior makeover and I’ll post some pictures when that happens.

We have experienced (apparently) a remodeling phenomenon known as “brittle glass syndrome” (BGS). This is a little-known plague that haunts older homes that have had the exterior windows taped-off for painting. Upon removing the paper about half a dozen window and door panes of glass have broken! Is it the tape, the paint, the contractor? No, its “old glass” according to the contractor dude. Puleeeaze! Not buying it! One more (or ½ doz.) thing to add to the repair list.

The central AC/heat unit went in over the weekend. The contractor dude found a buddy who is the facilities/mechanical guys at a nearby college to do it “on the side” over the weekend. The cost differential is pretty substantial over local firms we had bid the installation. I know, I know, “you get what you pay for”, but as a former property manager for large commercial properties, I know it is common for the maintenance guys to do side jobs to supplement their income. These guys work on multi-million dollar pieces of equipment all day long and can do small residential jobs in their sleep. I met the guy on Saturday and am comfortable that he knew what he was doing.

We had to make a serious trip to Lowe’s this weekend to pick out and purchase lighting, ceiling fans, flooring (kitchen and bath), bathroom fixtures (faucets, towel bars, etc.). Three hours and $1,300 later, we’re done with most of that BS. We still have to get the mini-blinds arranged but that can wait a bit. At least we didn’t have to drag the kids along!

Invest Wisely, Buy Real Estate

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