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        <title>Real Estate Blog</title>
        <link>https://www.spyglassrealty.com/blog/2022-07/</link>
        <description>Spyglass Realty Blog covers news and updates about the Austin real estate market from home trends, listings, and discover tips for buyers, sellers, and realtors. Read insights from our real estate experts in our blog today.</description>
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    <link>https://www.spyglassrealty.com/blog/mid-year-austin-real-estate-market-report.html</link>
        <author>ryan@spyglassrealty.com (Ryan Rodenbeck)</author>
        <title>2022 Mid Year Austin Real Estate Market Report</title>
    <description> <![CDATA[ 



We're past the half-year mark and the Austin real estate numbers are in. I sat down with Chris Jacob of Housing Report and Christina Beitler with Loan People and went through the numbers to see where we currently stand with inventory, pendings, active listings, and what we think the market will do in the next 12 months. 


 


TABLE OF CONTENTS




The Mid-Year Austin Real Estate Market Report


Current Mortgage Environment


Jumbo Loan Rates


Realtime Statistics


What Agents Need to Know About the Mid-Year Real Estate Market Report


Why Agent Representation Matters


Timing the Austin Real Estate Market


Tax Rate Predictions




The Mid-Year Austin Real Estate Market Report


The Austin real estate market is in an interesting situation where the market is shifting back to a more normal business cycle which is something we’ve become more accustomed to in the last 10 years. We're starting to see a lot of craziness lead in the market.


We’re back to showing homes more than one time and we've got a slight decrease in incoming pendings. There’s nothing to be worried about, says Chris Jacob of the Housing Report. We’ve got good solid numbers going. There are a lot of interesting moving components in the marketplace right now that are impacting us.


Q1 and Q2 listings were up 17 from the year prior to Q1, the average value is up 22. For new listings, pending listings are down about 18 to 19. Because we’re still in a seller’s market, the average list price for a pending for Q2 was 684 which was 120.


In the count for Q2, we're down about 13 sold and the average list price was 667. The average close price was 694, which close at a 5 premium, over the list price, and the close price was a 15 quarter-over-quarter increase from last year. There are still pretty healthy numbers. Chris thinks that we’re gonna end up between eight and a half and 10 year-over-year value increases, and we’re returning to this more normal marketplace.


Current Mortgage Environment


The market is trying to figure out where it’s feeding and what’s interesting is we’ve been talking about pendings being the most important thing we have. We had been on a six-week slide in demand and what’s interesting, you can speak to this is interest rates over the last 10 days have softened a little bit, it’s like the market has found where interest rates should land.


From Freddie Mac's perspective, APR-wise, we were pricing about 5.85 as of Friday. Now, that's not today's numbers, which the marketplace is a little bit better, because we're coming off that initial shock. Chris sees that there’ll be some tapering off as inflation starts to subside. Millennials are the biggest generation that’s buying right now and they’ve never seen interest rates over 5. It’s a mind shift, so they’re holding out.


It’s a slippery slope with people who wait for rates to drop because of a layup. They wouldn’t race to drop a point but values go up. That home is a net 5 more expensive tomorrow than it is today. 


Jumbo Loan Rates


Christina Beitler, Senior Loan Officer from LoanPeople tells us about the loan rates for the mid-year real estate market report. The ARMs rate isn’t really doing that much to save a lot of money. The spread between a fix and an ARM is not far enough to really make them impactful, says Christina. Lender, the people who have backed these rates don't see the appeal in the risk that is involved. Rates are based on risk and sell ability on the back end, and ARMs are still a mentality thing. People hear the word ARM and they're like, I'll refinance my fixed rate down the line, then instead of getting into an ARM product.


We're seeing a big mind shift and a big cultural shift of this is a new norm. It's very unlikely we go back to those sub-three rates. Christina thinks that was a blip in history and doesn’t see us coming back.


Jumbo loans are priced lower than fixed ones. You’re gonna be in the low fives on a jumbo loan, says Christina. That’s because those are private lenders. They know most of the market is just now because of the average sales price.


If you do a minimum downpayment of 5 to 10, you're right at the conforming loan limit. So the majority of your markets jumbo, they know there's that demand and appeal and so they price more competitively because people need them to have that product.


 


Realtime Statistics


The real-time data is interesting. If we go look at the last day of Q2 actives, we had 275 more home on the market priced with a very similar list price. Consumers have a chance at going and finding a home on the market today and has the chance to look at it and pricing for average list is not that far off where we were last year.


If you look at how Q3 and Q4 real-time actives did, we actually saw the average list price drop as the year finished out. That’s floundering that occur every years. People need to know that we were so used to just values always going.


On the second half of Q3 and Q4, Chris sees a great opportunity for people who’ve been sitting on the sidelines to reach in and get a home and actually look at if for more than five minutes before they have to buy it.



What Agents Need to Know About the Mid-Year Real Estate Market Report


Agents have to set realistic goals. Let the people know. Agents need to be talking to everyone that was interested in the last year and say that those who can afford the increase in rate, this is your opportunity to really get something at a fair price without the stress that you’ve had for the last two to three years. Secure this home that you want for the rest of your life of for your foreseeable future.


Real estate agents will need to prep their clients and give them more information than they have before. Let them know what we’ll be doing with pricing because things are moving really fast with interest rates going up and down. You have to let them know that this is the price that we think we need, then you’re going to have to be able to check on the price adjustments every two to three weeks.


It’s really important for agents to be able to have a time cycle where they’re working with their clients and letting them know that after two weekends in the market, you’re going to check in and going to evaluate the data with the showing and how many offers you got, a pulse check on the market. This will help set agents up for success.



Why Agent Representation Matters


It’s more important than ever to have an agent on both sides. So many people went it without any representation, without any guidance because they were just thrown at the wall and see if it would stick right.


If you had any coaching or just pulled up a contract online, you had people doing it. Today, it’s super important to have those relationships for representation because it’s a true negotiation game. We’re going back to the basics of what makes our industry important. Having those people there to guide you in the best way so you’re not getting a bad deal.



Timing the Austin Real Estate Market


The longer you wait for interest rates to change, then you’re losing that equity position. We don’t know anyone that’s ever won by waiting on the Austin market. Maybe seasonally, but if you’re looking for your dream home, that’s not going to always work out for you either. Teaming up with a good lender and getting in the market if you can afford the payment, you’re comfortable and not stretched.


Tax Rate Predictions


Some of the things people tend to forget if the mortgage amount is less than 750,000 as your primary residence, you can write 100 of that interest off your taxes. As of now, the rules change every year, every tax cycle. There are some tax benefits where you don’t read the soft benefits and don’t realize your monthly cash flow.


If we go look it back and I'm using the year the Travis County did not reassess, so the only people who paid more taxes in that year were 19 to 21. The only people who pay more taxes were those with homesteads because of the Homestead cap went up, and every investor's taxes went down.


This year with this massive bump in values at the CAD, it was 56, Travis County before the equalization process, the homesteads are gonna go up 10 in appraised value, but the free markets gonna go up to whatever market value is, except for we get this beautiful 3 ½  budget cap at our government levels. Investors are only going to go up 10 or 15.


To listen to more of our podcast episodes, visit The RealtyHack Podcast Page. The RealtyHack Podcast is also available to listen to on Spotify, Google Podcasts, Apple Music, and your other favorite podcast directories.


CLICK HERE TO SUBSCRIBE TO MY YOUTUBE CHANNEL and get updated for the next RealtyHack






 ]]> </description>
    <pubDate>Thu, 28 Jul 2022 20:21:00 -0500</pubDate>
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    <guid>https://www.spyglassrealty.com/blog/austin-zoning-affordability-issues.html</guid>
    <link>https://www.spyglassrealty.com/blog/austin-zoning-affordability-issues.html</link>
        <author>ryan@spyglassrealty.com (Ryan Rodenbeck)</author>
        <title>Austin Zoning and Affordability Issues | Spyglass Realty</title>
    <description> <![CDATA[ 



Austin has an affordability problem and there are solutions. Will our city council take the necessary steps to fix these issues? I interviewed Chris Affinito with Heartwood Real Estate and we’re going to jump into some of the big issues in Austin that we see with development and density.




About Chris Affinito


Obtaining Building Permits in Austin, Texas


Proposed Changes to Austin Zoning


Vertical Mixed Use Development


Compatibility Setbacks


No-brainer Ways to Solve Affordability in Austin


The Reyna


Affordability Waivers


Final Thoughts on Affordability


Connect With Chris




About Chris Affinito


Chris grew up in New Jersey, about 45 minutes from New York City. He went to school for undergrad at Villanova, in the suburbs of Philadelphia. When Chris graduated with a finance and real estate major, he returned to New York and worked for KPMG. KPMG is a big accounting firm, but Chris did commercial real estate valuations for them, basically appraisals.


He then moved over to real estate development where he ended up working as an office developer. Chris was in charge of finding new clients, finding a capital partner for deals, and doing all the financial analytics. After being there for a year and a half, Chris moved to Austin for a lifestyle change.


Chris’ wife, Isabel, started working for CBRE, a prominent commercial real estate company. She ended up moving over to residential real estate and did really well where she had a lot more freedom and the confluence of that freedom, income, and desire just to get out of the Northeast.


Chris and Isabel joined Spyglass Realty in 2019, prior to that in 2018, he developed his own company and building in about one month. Chris started Urban ATX, a luxury home building company. By the time they came over to Spyglass Urban ATX had grown quickly where they had a good listing inventory.


Obtaining Building Permits in Austin, Texas


There’s a big dividing line between single-family and multi-family, the complexities of construction and project management, and the capital required to do it. However, from an entitlement standpoint, if you wanted to flip or if you want to rebuild a house on an existing residential lot, you just apply for a building permit.


This sounds flippant according to Chris because a lot of people in Austin are very unhappy with how difficult it is to obtain a building permit. Relatively speaking, that’s a straightforward several-month process. When you go beyond that, this would be basically anything more than a single house or a duplex, all of a sudden, you need a site plan, which is a building permit to develop the site infrastructure and all of the utilities and everything.


It will then require heavy work from a civil engineer where the minimum would take a year to 18 months. It’s a long pipeline for someone who’s been an infill builder relying on hard money to fund these projects. The longer you hold, the longer you pay.


Entitlement is something that a lot of big developers with all the capital in the world don’t necessarily want to take on if they don’t have to. One of the reasons for that according to Chris is the primary objective is putting money to work. 


If they can take something, everybody’s got to go through the site plan. It’s rare that you can pick up something midway through the site plan or after the site plan, but that is not what they’re calling entitlement risk.


Entitlement risk is more about changing the zoning or getting approval to do what you need to be able to as opposed to just running through the site plan to do what the zoning code currently allows you. 


That ladder thing is not really the entitlement risk that they shy away from, says Chris. It’s that they don’t want to mess around with having to figure out how to rezone a property that will remove other developing restrictions so that they can deploy capital quickly.


Proposed Changes to Austin Zoning


When it comes to the proposed code changes, Chris thinks it’s not going anywhere. It was shut down again at the appellate level. It was designed in 1984 when the city of Austin looked so much different than it does now and the prevailing political sentiment at the time was slow growth. 


It is still somewhat pervasive in the face of the fact that it’s undeniable at this point that we’re in a serious housing crisis and that’s why we’re just seeing some momentum appear now.


In 2012, the City Council passed an initiative to direct staff to rewrite the zoning code and give it back to the City Council to debate it and pass it. It took all the way from 2012 to 2019 to get something that they can agree on.


It passed and was immediately taken to court and the basis of that lawsuit is a state law that basically says, imagine a 200-foot-deep doughnut around your site, and if you take up the square footage of that doughnut, and you add up all of the neighbors, obviously if the city owns half of that, because it's a road, that's one thing.


However, the neighbors behind you, the neighbors on the sides of you, if 20 of the square footage of that doughnut is represented or owned by people who sign up petition against you or rezone, it becomes what's called a valid petition, which triggers, and this is state-level laws.


Vertical Mixed Use Development


The Vertical Mixed Use has been around since the early 2000s and it’s a zoning overlay which means you've got your base zoning that says it's commercial. There are rules about how high you can build and how many square feet you can build that use floor area ratio right for most people in real estate are familiar with. That is the ratio of square feet of your building to the square feet of your land and it limits the size of your building.


There are a couple of restrictions. What Vertical Mixed Use does is in exchange for making a couple of things, making 10 of your units affordable to people who earn 60 or 80 of median income.  In addition to making like an attractive street front, retail commercial space, you get a waiver from some of the restrictions like building setbacks.


VMU 2 is the idea that in exchange for a little more affordability of around 12, you can now go from whatever your initial height was. 


The idea would apply to anything that was zoned in VMU and there was a question of whether you inherit the right to choose VMU original or VMU 2 or if it becomes like a different zoning overlay where you would have to rezone from the regular VMU 2 right to VMU. 


About the larger and the medium corridors, it was prompted by a debate over the fact that we have something in Austin called Compatibility Setbacks and this is the single biggest obstacle to developing more dense housing in the city of Austin.


 


Compatibility Setbacks


Compatibility setbacks are the concept that you may be allowed to build up to 60 feet. If you're right next door to a residential structure, then there's an additional limit on your height. 


Chris says that it’s interesting when you look at other comparable cities that have this such as, San Antonio, Dallas, and Houston, obviously, and you want to look at Denver, Portland, Seattle, and Atlanta, to the extent that these cities also have compatibility setbacks, if you looked at that graphical representation of it, it's like vertical. The idea is that you can be much closer to this house and still have your height.


Vertical mixed-use properties whose maximum heights are 60 feet, can't actually achieve 60 feet because of compatibility setbacks. 34 of current VMU properties can get up to 60 feet and some smaller amounts would be able to get up to 90 feet. So what we're doing thing is we're taking on the housing crisis by passing an ordinance that functionally does very little.


No-brainer Ways to Solve Affordability in Austin


The single biggest obstacle is compatibility in terms of what the city can do to help development easier for developers and bring more affordable housing to the market.


The Reyna


Chris was written up in the Austin Business Journal about The Reyna. Reyna is an upcoming 16-unit townhome development. Chris has other projects that they would love to talk about that are much bigger and affordable.


The Reyna is a very large piece of residentially zoned property on the right off the South Congress. They saw an opportunity, got an acre and a half of single-family zoning, and landed on the idea of multifamily zoning.


Affordability Waivers


Chris had other projects on the horizon. 1200 Springdale and 1418 Frontier Valley. Both are apartment buildings which they’re utilizing a development bonus called affordability unlocked. Affordability unlocked is one tool that really applies city-wide as opposed to being in downtown Austin where you get a waiver from compatibility setbacks. You also get a height bonus and a waiver from all kinds of things.


50 of these have to be affordable. It is a sledgehammer of a development bonus and an affordability component. 50 affordable at 60 of median income. It’s great for a number of reasons, but it doesn’t work in a lot of cases.


What affordability unlocked allows you to do among all these other things is putting apartment buildings on pieces of property that aren’t necessarily already zoned for apartments. We have dirt cheap land. We have the opportunity to get a property tax abatement, and when you combine those two things together, we have a viable deal. It's financed, by the way, all with private funding. There are no federal tax credits or local government bond money being used. 


Final Thoughts on Affordability


Affordability is not going to get better if it is in a recession, it’s going to just continue to get worse when the economy comes out of a recession. It’s going to get more expensive because of an imbalance of supply and demand. It’s hard to imagine that we already haven’t reached the point where it’s just unconscionable not to do enough.


To listen to more of our podcast episodes, visit The RealtyHack Podcast Page. The RealtyHack Podcast is also available to listen to on Spotify, Google Podcasts, Apple Music, and your other favorite podcast directories.


CLICK HERE TO SUBSCRIBE TO MY YOUTUBE CHANNEL and get updated for the next RealtyHack






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    <pubDate>Mon, 18 Jul 2022 18:34:00 -0500</pubDate>
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