Classic Urban Homes

Our blog has moved to: Modern Dallas Home Builder

2010-11-03T10:16:00.004-05:00

We've made a few changes and moved our blog to Modern Dallas Home Builder.

Hope you all will follow us over there!

USA Today: Houses of 2020 will be all about energy (and Classic Urban Homes agrees)

2010-04-23T15:11:00.002-05:00

I think the USA today ("Houses of 2020 will be all about energy") stole the description of one of our (award winning (more on that later)) house plans.... They say

The American house of 2020 will likely be smaller, smarter, more urban and efficient.

Hmm... When I look at the description of our plans for 8427 Lakemont it reads this way:

Smaller. Efficient. Functional. Open. This new, exciting, fully customizable plan from Classic Urban Homes meets all the requirements for the discerning buyer-including high quality amenities and finishes. Home has all of what you need and none of what you don't want. Clean lines, efficient design, multi-functional spaces, and the latest in Energy Star and "green" building techniques.

Ok, so they probably didn't steal it. But we like it when we see positive affirmation of our efforts! We also don't think it's going to take until 2020 for it to happen. Well, it might for mainstream America, but for those progressive thinking folks, we think it's happening right now.

Classic Urban Homes new LEED project

2010-04-21T09:11:00.004-05:00

Classic Urban Homes is excited about our latest custom build project in the Shorecrest area of Dallas. We're working with a couple who have an exciting vision - they want to build a great modern home that qualifies for LEED! LEED for Homes is a rating system that promotes the design and construction of high-performance green homes.

While Classic Urban Homes has done several Green Built Texas homes, this will be our first LEED project. At each step along the way in building "greener", we've made a few discoveries. We first looked into building to ENERGY STAR standards and quickly realized that our homes already qualifed - we just needed to get the official rating! Soon thereafter, we explored Green Built Texas. Again, to our surprise, the building protocol that we already used also met most of the Green Built Texas requirements. We have now built several Green Built Texas homes and are excited to tackle our first LEED project. Like the two steps before, there aren't many extra requirements to get to LEED, but it does come with a whole new level of documentation. Because of our friends at Tex Energy Solutions, we are all set for this exciting project.

One fun side note - a friend of ours, Stephanie Ebbesen of Green Home Residential, will be following this house from groundbreaking to completion. She's a broker who specializes in "green" homes. She will be blogging about the construction process on her green advocate site here: Miss Green Homes. You can find the home under "Start-to-finish LEED home." We're excited about the project and excited for Stephanie as we think it will give her a unique insight that few realtors will ever get. Most realtors only see the house after it's done. Stephanie will be able to see, touch, and understand the whole process! We're excited to have her on board.

For those of you on Facebook, please connect with us here: Classic Urban Homes and Stephanie here: Green Home Residential

More than 15,000 Expected at Saturday's Live Green in Plano Expo: Green Built Texas to Participate

2010-04-14T10:51:00.002-05:00

More than 15,000 Expected at Saturday's Live Green in Plano Expo: Green Built Texas to Participate

Classic Urban Homes hopes to see you there!

Posted using ShareThis

Classic Urban Homes is sponsoring the 2010 White Rock Home Tour

2010-04-05T16:55:00.002-05:00

Classic Urban Homes is proud to be a sponsor of the 2010 White Rock Home Tour!

The area’s only all-modern home tour embarks on its fifth year of benefiting Blue Ribbon School Hexter Elementary with a wonderful display of mid-century modern homes and a sustainable home. The tour is April 24 - 25 from noon to 5pm. Tickets are $10 in advance and $15 the day of the tour.

We enjoy this tour each year and hope you have the opportunity to do so this year.

Details here: White Rock Home Tour

Well, no wonder the banks aren't lending!

2010-03-05T09:42:00.003-06:00

I have been seeing more and more evidence in the last several months of banks and their increasing unwillingness to lend or being downright slow when they will lend.

We own a small rent property with a loan of $110,000 that the current bank no longer wants on their books. Well, they would keep it, except they'd charge me a pretty penny to renew. My call to my other lender with most of my other rentals was a quick no. As in, no way, no how. It wasn't us, they said, we're just not doing any real estate loans. Wow. For a currently rented property in good shape, with a loan-to-value of 75%, no loan?

Another blogger in the real estate world has a similar experience when trying to close deals with willing sellers and willing buyers.

However, recently closings are going beyond the contracted date due to delays in funding. The mortgage companies are taking so long to approve jumbo loans that closing dates are being moved back 7 to 14 days. Sellers have their things on a moving van and the utilities off at their home waiting for the underwriters to give approval. They can't close on the next house they are buying because they don't have the current one completed. They are likely incurring additional costs for carrying the current home and delaying purchasing the next home. And no amount of begging, bribing or threatening will speed up the buyer's lender. Meanwhile, the buyer can't take possession of the property and also can't do anything to speed up the lender. via Lydia Player at North Dallas Homes: Closing delays slow home sales

So what in the world is going on? Well, it seems pretty clear to me. Why would banks lend in an environment when 1) they are uncertain of asset values, 2) they are facing increasing bankruptcies on prime loans, and 3) when they are prevented from enforcing their rights to foreclose?

You've got the administration on one hand telling the banks to lend , but the federal regulators are telling them to reduce their exposure to real estate. It's all ass backwards! Indeed, take a look at this article from the Wall Street Journal on Feb 24 Lending Falls at Epic Pace Money quote

U.S. banks posted last year their sharpest decline in lending since 1942, suggesting that the industry's continued slide is making it harder for the economy to recover.

1942??? Are you kidding me?

Well this certainly doesn't help. Here's another Wall Street Journal article from Feb 26 When It's OK to Walk Away From Your Home. Money quote:

Millions of Americans are now deeply underwater on their mortgage. If you're among them, you need to stop living in a dream world and give serious thought to walking away from the debt. No, you shouldn't feel bad about it, and you shouldn't feel guilty. The lenders would do the same to you—in a heartbeat. You need to put yourself and your family's finances first.

Great, now one of the most conservative newspapers in the country is telling people to just "walk away!"

And then, the cherry on the sundae is this Obama May Prohibit Home-Loan Foreclosures Without HAMP Review HAMP stands for Home Affordable Modification Program. It's a program with a noble goal of helping consumers who owe more than 25% more than their homes are worth to refinance with lower rates. Problem is

It was originally projected to help 4 million to 5 million homeowners with loans owned or guaranteed by Fannie Mae and Freddie Mac. So far, it has helped around 220,000, according to the Treasury Department.

Since the program clearly isn't working, the administration is considering BANNING all foreclosures unless they have been screened and rejected by HAMP! Are you kidding me?? For now, all the government is doing is extending the program through June 30, 2011, but this whole notion of banning foreclosures has got to give the bankers fits.

So, let's recap.

When It's OK to Walk Away From Your Home Public opinion is it's ok to walk away from your mortgage (since well they probably tricked you into signing it in the first place, right?)

Obama May Prohibit Home-Loan Foreclosures Without HAMP Review The banks can't foreclose on you until some government agency (which has, to-date, only helped about 5% of potential problem loans) gets to say yeah or nay

Anecdotal evidence of bankers being slow (North Dallas Homes: Closing delays slow home sales) or downright refusing to lend

All this leads to the inevitable: Lending Falls at Epic Pace

So, what we have are a growing number of Americans probably living for free in homes they could never afford, and the repercussions lie with the lender in today's populist backdrop, not the borrower.

One really has to wonder what the implications of all this will be on mortgage activity going forward. What bank will ever want to lend again without the ability for recourse?

Sold and funded!

2010-02-16T13:34:00.003-06:00

With a mix of sadness and joy - Classic Urban Homes has sold it's excellent home at 4425 Grassmere! As you may recall, this was the first Green Built Texas (tm) home in University Park and also was awarded "Best Green Built Home" by the Dallas Homebuilders Association. Needless to say, we're quite proud of this home and are happy that it's going to a nice family.

Since completion in mid-2009, we've used this house as a sort of show home and have met some great new clients because of it. In fact, we're about to break ground on a great new modern custom build in a high visibility location on Midway with one of those new clients.

Here's to a prosperous 2010!

This just in - Classic Urban Homes is a 2010 D Home Best Builder!

2010-02-11T15:14:00.004-06:00

We just got the letter in the mail - Classic Urban Homes was named as a 2010 winner of the D Home Best Builder award! We are very honored to be recognized for our efforts. The past year has been slow, but we've got several very exciting deals in the works, so stay tuned for updates.

Texas Green Building Summit

2010-02-09T15:29:00.003-06:00

Great conference today. Learned lots of new things, and heard verification that a lot of the things we are doing are being done the right way. The conference website is here: 2010 Texas Green Building Summit. I am hopeful they will put up some of the speakers' presentations that I can download and share.

Some of the most interest things I heard were:
- some details on the cost payback of various "green" technologies.
- "sensible green building is mostly building smarter and better"
- Eco-bling! Great phrase to describe high cost - low value "green" devices
- geothermal may not be all that it's touted to be
- 90% of opportunities for high performance in your homes come in the first 10% of your design process.

Overall, my key takeaway is that common sense still rules the day. One of the panelists (Peter Pfeiffer with Barley & Pfeiffer Architects) put up a great diagram I would like to either steal, borrow, or recreate. Essentially, it was the FDA food pyramid relabelled for "green" technologies. The bottom was Don't Use Power (or proper design). The middle was Use Power Efficiently (or use the right products). The top was Produce Your Own Power. The most expensive is the top and the least, the bottom. It was a cool way to visually represent that you can create more far more savings by proper design than you ever can by installing solar panels and geothermal wells. It's something we've also believe and tout to our customers, but I really, really like this visual tool. We'll be using it in the future that's for sure.

2010-02-09T08:26:00.001-06:00

Texas Green Buildings Summit

Mike and I are attending this conference today in Dallas. We're hoping to learn some new things on green building features.

This will be a bit of an experiment since I am blogging via my phone. We'll see if I can make the technology work!

The Residential Company

2010-01-22T14:46:00.005-06:00

Just a quick shout out to our broker - Katherine Roberts of The Residential Company. From her "About us:"

The Residential Company is a boutique real estate firm that offers premium service tailored to the specific needs of its clients. We recognize that not every listing requires the same marketing and not every client requires the same time. The Residential Company customizes all marketing plans, commission schedules, etc. for each transaction, producing results with significant savings for our clients.

She does a great job for Classic Urban Homes, and will for you as well. Whether you are buying or selling, I encourage you to give her a ring and talk to her about about how she can save you lots of money on your next real estate transaction.

In the interest of full disclosure - Katherine is related (by way of marriage) to one of the principals of Classic Urban Homes

Mixed messages from home buyers

2010-01-22T13:51:00.004-06:00

Today there's an article from the Dallas Morning News's Steve Brown titled "Builders say home sizes are shrinking" which is similar something I wrote about a month ago "Home buyers focusing on smaller homes".

Both source articles say basically the same thing -

"Downsizing continues," said Eliot Nusbaum of Better Homes and Gardens magazine, which commissioned the study. "Thirty-six percent of people told us they are planning for a smaller home – about a 12 percent increase from last year.

"The top priorities are price, energy efficiency, home organization and comfort."

As I pat myself on the back (since these are all things we focus on), I have to say though that that's not the message that buyers are telling their agents. I attended a luncheon a couple of weeks ago sponsored by my local home builder's association with a panel of very distinguished and accomplished realtors: Rogers Healy, Kay Weeks, Claire Dewar, Mary Beth Harrison and Marty Marks also attended by blogger Candy Evansof Dallas Dirt (link to her article about the event "State of the Dallas Real Estate Market: Double D’s Are History"). To a person, they said buyers want the following:

One story houses, master bedroom downstairs, a big yard, media room and at least three bedrooms, and, of course all the latest amenities in the bathroom, kitchen, etc, and a house under 3,500sf

To top it all off, they want a price under $500,000.

As all the builders at my table looked at each other, we agreed that that really can't be done anywhere in Dallas that someone would really want to live. Sure there are some lots where you could do that, but they are in poor neighborhoods or way outside the typical infill locations we like to build in.

The math just doesn't work. Using $115psf for build cost at 3,500sf, that's a cost of $402,500 for the house alone. So to get to a house with a price of $500,000 (assuming a 10% builder profit), you'd have to buy a lot for $15,000 once you account for all the closing costs, etc. If you assume I'd work for free (good luck), you could pay $57,500 for the lot. Again, that's a lot in a really bad neighborhood or a lot way, way outside of town. Not....going....to....happen. Even at $100psf cost and a profit for me, that's a lot at $70,000. Still not going to work.

So, what does this mean? It means people still want all their "stuff" but aren't willing to pay for it. How will all that work out? Beats me. We're going to keep focusing on what we do best - exceed our customers expectations and provide the best product we know how. We invite you to come check us out.

Rebates and cash back for energy efficiency for your home

2010-01-15T08:07:00.002-06:00

Good article from the New York Times "Getting the Most Cash Back From Your Green Home" on Tuesday. It does a pretty good job of discussing the various options available to current homeowners.

Most utilities, states and even some local governments offer their own programs to give homeowners a break when they buy new appliances, insulate, or install alternative energy sources like solar or wind power. The federal government also recently increased its two tax credits to help pay for more efficient heating, cooling and water-heating equipment, as well as wind, solar and geothermal systems and fuel cells.

There is also an excellent link to a site called the Database of State Incentives for Renewables & Efficiency that shows, on a state by state basis, the different incentives, rebates, and related offerings. It can be found here: DSIRE. I encourage you to take a look and see what's available in your area.

Getting on my soapbox for a moment - one thing that is NOT available is strong incentives for HOMEBUILDERS to build more energy efficiently. We get a little credit for building a home to ENERGY STAR standards, but that's it. With the market as tight as it is right now, I'm not sure we get much credit (read as higher price) for building "greener" and with more energy efficiency in mind. While I'd like to do it, I am a rational economic person. If I don't get paid for it, then I'm not likely to do it. It does cost more to add in these features - not tons, but it probably cost us close to 5% more in our latest house at 4425 Grassmere I am hoping that as energy prices start to creep back up, people will realize the value of having a truly energy efficient home and pay a few extra bucks for it.

Home buyers are focusing on smaller homes

2009-12-17T10:16:00.003-06:00

"Home buyers are focusing on smaller homes" according to the USA today. Echoing themes I discussed a month ago relating to a similar article in the Wall Street Journal "Smaller Houses The Way"

Housing size drops with each recession, but economists expect the current movement toward smaller homes to continue for some time in part because of the severity of the current housing market slump.

The McMansions will be back in time - but in the meantime, the focus will be on smaller, more efficient homes. Sounds like something I wrote...

Smaller. Efficient. Functional. Open. This new, exciting, fully customizable plan from Classic Urban Homes meets all the requirements for the discerning buyer-including high quality amenities and finishes. Home has all of what you need and none of what you don’t want. Clean lines, efficient design, multi-functional spaces, and the latest in Energy Star and "green” building techniques. Classic Urban Homes - "building for the way people really live" (tm).

See the house referenced here at ModernDallas.net

Source - USA Today: "Home buyers are focusing on smaller homes"

So sayeth Business Week: "If You Don't Buy a House Now, You're Stupid or Broke"

2009-12-11T16:43:00.002-06:00

Not sure if I totally agree, but he's got a good point - interest rates are at historic lows and aren't likely to go lower. In fact, they are likely to go higher in the coming years. One thing he doesn't mention is that the US Gov't is one of the main contributors to this low interest rate phenomenon. I wonder what's going to happen when the government gets out of being nearly the sole buyer of mortgages on the secondary market. My guess is that we get an immediate jump in rates.

His summary quote (and I think it's an important one):

What I'm trying to impress upon everyone is that if you are planning on being a homeowner now and/or in the foreseeable future, or if you are looking to move your family into a bigger home, then pay more attention to the interest rates than the price of the home. If you have a steady job, good credit, and the down payment, then you really are being offered the gift of a lifetime.

My only additional thought is: I think people should also pay more attention to your utility bills. People obsess over a 1/8 of a point change in their possible mortgage rate, but pay no attention to paying $100's of dollars extra in their utility payments. Make no sense to me. We built our latest house at 4425 Grassmere and surpassed the strict Energy Star guidelines by over 20%. Sounds like extra savings to me.... See the house here: 4425 Grassmere

Source: "Business Week: If You Don't Buy a House Now, You're Stupid or Broke"

My thoughts on the climate email fiasco and what that means for "green" building

2009-12-02T15:53:00.004-06:00

You can't turn on the TV or to a news network on the internet without seeing comments on the email fiasco with the climate change scientists. Here are several examples if you are interested:

"CLIMATE CHANGE 'FRAUD'"
"Will Climate Scandal Be a Tipping Point?"
"The Climate Science Isn't Settled "

I think this is a setback for those preaching all things "green." People are now going to start thinking a little more critically about the benefits of "green" before buying. For homebuilders building "green" building protocols this will pose an interesting dilemma. How many people want "green" and, most importantly, how many will pay for it? If the whole idea is now called into question, seems that the answer to both of those is fewer than before.

We at Classic Urban Homes have been hesitant to wholly embrace "green" in all its forms. Mainly it has been because it is way too hard for most people to grasp what "green" means (and the reason I usually put the quotes around it). "Green" incorporates so many different concepts and is too overused. What is "green" to you is not "green" to me.

Our view is that building "green" means making an economic decision on the best way to decrease a home's overall impact on both your pocketbook and the environment. As a result, what we've focused on has been those things that are most tangible and easily understood by our buyers. So far that has been energy efficiency, healthy indoor air quality, and along the way, using renewable and sustainable products as economically as possible. But, mainly, it's been the energy efficiency part that interests people the most and why all of our homes have been ENERGY STAR rated.

As this story continues to play out, the ramifications for "green" and all it stands for will be interesting to watch. Someday soon, we may get a headline like this "Australia's Parliament defeats global warming bill" here in the United States.

In the meantime, we're going to continue doing what we do best - build the best house we can, incorporate the latest building technology, and build families a better, more efficient, more durable house than the next guy. Our vision drives every decision we make - "Building for the way people really live"

Smaller houses on the way....

2009-11-13T08:54:00.002-06:00

Great article in the Wall Street Journal today - "Builders Downsize the Dream Home." The article mainly addresses larger production builders, but the point is right on. With tight credit and higher required downpayments, buyers can no longer afford just a little bit more in a house. The market is responding appropriately and offering smaller, more efficient homes.

It's a trend we recognized last year and designed a few plans around. See here for one of those plans. It's probably a little too modern for some, but we designed it for a specific neighborhood. The idea is still the same - smaller, efficient, functional, and open. The plan is for a 3 bedroom, 3 bath, 2 living area home with 2,556sf. It's all you really need for a normal family.

I think, and the article's author concurs, that we're seeing a fundamental shift in homebuilding. It's less about "keeping up with the Joneses" and more about right-sized homes.

We spend a lot of time thinking about things like this and one of the reasons I think we are ahead of the game versus most other builders. We've adopted some more "green" and energy efficient features that will be standard building code and practice in the next five years. We've also designed several of these more efficient homes. Both are examples of why we think we "Build for the way people really live(tm)"

Source: Wall Street Journal: Builders Downsize the Dream Home

Senate Approves Extended U.S. Homebuyer Tax Credit

2009-11-05T08:25:00.004-06:00

Today the Senate approved the extension and expansion of the first time homebuyer tax credit.

Most critically, the credit has been expanded to include those that have lived in their residence for at least five years. They will be able to receive a $6,500 credit. It also increases the earnings limit to $225,000 per year for couples up from $150,000. Homes priced over $800,000 wouldn't be eligible.

Appears that the House will vote on the measure as early as tomorrow and be on the President's desk soon thereafter.

Source: Senate Approves Extended U.S. Homebuyer Tax Credit

Putting "Green" Technology Into Bricks

2009-11-04T09:08:00.003-06:00

Article in today's Wall Street Journal: "Putting 'Green' Technology Into Bricks: Start-ups Seek to Use Recycled Materials, New Methods to Reinvent Building Materials

We are always on the lookout for innovative products and this one caught my eye. When evaluating "green" products, I find it important to evaluate them based on 1) cost, 2) durability, 3) perceived benefit, 4) actual benefit, and 5) my gut instinct on whether I could "sell" this product as part of new home construction.

Quick summary on the bricks - the main ingredient is made with fly ash, a byproduct of coal burning.

"It claims to use roughly 85% less energy than traditional clay brick manufacturing, with an equivalent reduction in carbon-emissions."

In Chicago, the bricks will sell for, on average, $.53 cents each vs $.55 cents for a standard clay brick. The bricks are designed to meet the industry standards for strength, durability, and water absorption.

These bricks seem to meet my my first four requirements. My only question is the durability factor. That's the one real unknown factor with "green" products. They haven't been around as long as other traditional methods and no one knows what the long-term durability will be. Indeed, the Brick Industry Association (not surprisingly) questions it as well - although their hesitation is clearly based on a competitive rationale.

So, could I sell it? That's the most important question I have and one I can't answer. It would be a fun thing to talk to people about - "Hey, let me tell you about these cool bricks we used..." But, as builders, we have a long-term warranty on our products. In fact, it extends for ten(!) years for "habitability." So, what happens in year eight when the bricks start deteriorating?

Before we'd take a leap like this, I'd want to see hard testing data and a long-term warranty from the manufacturer. Then I'd feel a little more comfortable with it.

August 2009 Case-Shiller review

2009-11-03T10:17:00.014-06:00

After reviewing last week's August Case-Shiller data, I am less focused on Dallas's relative performance (which continues to be stellar by the way) and more focused on what this means going forward.

In short, Dallas continues to be the best performing market in the country - having been ranked #1 or #2 in terms of home price appreciation for the last 18(!) months. There has been a clear upturn in all three indicators - sales, starts, and prices across the country. Does this mean we are off to the races again? Hardly.

There are several other factors to consider - foreclosure sales, the first time home buyer tax credit, and price seasonality - before one could say that some mythical bottom has been reached.

First, the charts on Dallas vs the whole market:
1) The last twelve months in table format

2) The ranking of how far each area has fallen from it's peak price. Notice that 40%(!) of the areas haven fallen by over one-third in value. Ugh.

3) For those graphically inclined - three charts with the relative price performance over three time periods as well as one with the year over year change in prices.

My first thought on the uptick in prices is that seasonality factors account for most of it. The media has trumpeted the rise as a "clear" signal that the turnaround is here. Not so fast. Take a look below:
Chart 1 - the monthly change in prices in Dallas over the past ten years. The average is the big line.
Chart 2 - Monthly change in the Composite 20 markets over the same time. The average is the big line.
Both charts clearly show what everyone already knows - the spring and summer are up markets and fall and winter are down. Chart 3 compares just the averages and the past two years (blue shades are Dallas, green shades is the Comp 20). Even the past two years, while turbulent, shows the same general seasonality. In short, seasonality probably explains a lot of the recent price increase.

I think some of the other price increases have been directly related to the first time home buyer tax credit. While philosophically I have a hard time with handing out free money, it clearly causes an impetus to buy. The question is - were these sales that were already going to happen and they just did it earlier or were these real new sales by people that were not going to buy? I think you can look at the recent evidence from Cash for Clunkers. Since that program ended, sales have been lower than normal. Looks like artificial forces vs market forces to me.

Foreclosure sales are the hardest to judge. Those sales are generally below market. This would mean downward pressure on prices. That's a little counterintuitive.

So maybe there is another force at work that counteracts this.

Maybe it's simple - maybe it's just that people psychologically believe that prices aren't going to fall much more. The most recent consumer confidence study from University of Michigan shows that there has been a steady increase in the number of people that think now is a good time to buy. Anecdotal evidence around Dallas seems to show a stabilization of prices.

I think that this winter may represent a bottom. We're going to see the normal seasonal drop in prices this winter and spring/summer will show a rebound. I don't expect wholesale price decrease going forward. I think that the overhang of inventory and general economic environment for the coming years will cause the "market" to resume what is it's real historical norm - prices of houses will increase, more or less, in line with inflation. Gone are the days of easy credit and booming prices. The house flippers are gone and will not return for some time. People will buy what they can afford and builders will no longer be building the McMansions.

For us, the key will be to selective in our market choices and to focus our efforts on profitable ventures. Along the way, we may do a little remodeling or fixing up houses to bide the time. We're in it for the long run and intend to be here while most everyone else has folded up their tents.

Google searches to now include Twitter!

2009-10-22T08:23:00.004-05:00

In an interesting, yet unsurprising bid for continued worldwide dominance, Google announced yesterday that they have

reached an agreement with Twitter to include their updates in our search results. We believe that our search results and user experience will greatly benefit from the inclusion of this up-to-the-minute data...

There are multiple ramifications of this. One of my main issues with Twitter is that there is already too much information to sort through. The search capabilities are not very robust or particularly user friendly. I personally believe that it has a lot to do with the 140 character limit that Twitter imposes on it's tweets. So, now that Google will start including tweets in search results, I think the potential for repeated tweets by users is astronomical.

Take for example of one our our open houses. If I think that I can increase my search visibility by repeatedly tweeting about it, my incentive is to do that. I can tweet about green features, energy efficiency, large open kitchen, University Park, modern, and so on and so on. In fact, I will probably do it.

But, the end result will be that your Twitter feed will be filled with (mostly) useless (except, of course for my posts) repeated tweets. Doesn't sound like that makes much sense to me.

Source: RT @google: Tweets and updates and search, oh my!

We've heard this story before - FHA in trouble

2009-10-16T14:27:00.003-05:00

As forewarned by several people (here: The FHA No Down Loan and by me here: Are you kidding me?), it appears that the Federal Housing Authority (FHA) is in trouble. Money quote:

The Federal Housing Administration, hit by increasing mortgage-related losses, is in danger of seeing its reserves fall below the level demanded by Congress, according to government officials, in a development that could raise concerns about whether the agency needs a taxpayer bailout.

Another bailout of a government controlled entity? Someone please hit the reset button.

It seems to me that the the one constant between the failures of Fannie Mae and Freddie Mac and now the FHA has been Barney Frank, the chairman of the House Financial Services Committee. He no longer has the ability to claim the Republicans were responsible since they're no longer in charge, so I wonder who he's going to blame this time.

Good article about Mr Barney here: WSJ Opinion: Barney Frank, Predatory Lender.

Another link of interest: WSJ: Loan Losses Spark Concern Over FHA

April 2009 Case-Shiller details

2009-06-30T14:32:00.007-05:00

After plowing through the stats (link here if you want the source file), I am, once again, glad to be in Dallas. The rate of annual year over year declines has slowed slightly both in Dallas and nationwide. We usually see an uptick in prices through the spring/summer months, so this is to be expected.The overall Dallas market again shows its resilience by maintaining its streak of relative out performance by being either the best or second best performing market for 14 consecutive months. I don't expect this to continue because, at some point, the most hard hit markets will see a snap back in prices. But, the good point is that we have held our relative value much better than everyone else.

In fact, since 2000 (when Dallas data was first included) Dallas has the least overall drop from peak price to current prices of 9.6%. Half of the cities tracked in the 20 city data pool have lost one-third of their value, with two over 50%!

Below are the pretty graphs for those people who like the visuals.

Here are some links to some of the pundits:
DMN: Dallas-Fort Worth home prices drop 5% in new report
WSJ: Home Prices Drop at Slower Pace
Seeking Alpha: Case-Shiller Home Price Declines Ease

I have to say that I don't buy into the argument that the declining losses signal some sort of nationwide turnaround. I think you'll get a lot of industry related pundits that will try to convince everyone that the market has bottomed. Some have pointed out that this is the third month in a row that we haven't had record losses. While mathematically true, it's form over substance. The composite 20 index has has double digit losses for 16 consecutive months, with the last 14 of those being over 15%. Trying to say that an 18.0% loss is better than 18.6% loss is just plain stupid.

Said it before - I'll say it again, thank your blessings if you are in Dallas. We've held our values will likely to continue to do so. The buyers have all the power right now. Financing is tight, but available. If you're in the market for a house and have good credit, now is a good time to buy. There is a little downside risk, but if you are planning to stay in your home for more than a year, you're probably pretty protected. If you are worried about continued losses, then you are not looking for a home - you are looking for a speculative investment. Just my 2 cents.

We made the Park Cities People for our Green Built Home!

2009-06-10T14:49:00.002-05:00

Yahoo! Our home at 4425 Grassmere made the Park Cities People!! The online article is already up and can be found here. The print article will be in the Friday, June 12th issue.

Highlights:

“I don’t think anyone has had the guts to [build green] before now,” Roberts said, citing the recent surge in environmental awareness and energy efficiency from consumers. “We are kind of testing this thing out ourselves. It’s about the feeling.”

We recently put out a press release about the home and I was hoping it would interest someone enough to pick up the story. It's rewarding when a plan comes together!

Classic Urban Homes to host realtor class on Energy Star

2009-06-09T14:59:00.002-05:00

We're going to host a realtor Energy Star MCE class at our Green Built Texas (tm) home in the Park Cities at 4425 Grassmere, 75205. Interest in healthy, energy-efficient homes is on the rise. If you are an agent, are you ready to serve as your client's educational source on energy-efficient building? This course will educate you about the strides local homebuilders are making in energy efficient residential construction. We’ll cover the science behind the walls as well as the selling points of energy-efficient homes.

Our builder is going to be present to answer any and all questions.

Link here: Energy Star MCE class on Thursday, July 2nd, 9am to 12pm

I like these kinds of headlines - Dallas homes are among most undervalued in U.S.

2009-06-04T10:39:00.002-05:00

Home prices in the Dallas area are almost 32 percent "undervalued" according to the latest measure by IHS Global Insight. The same study shows that priced here have remained virtually unchanged over the year ending with first quarter 2009.

Sounds good, right? But what about this?

Texas has traditionally had undervalued housing because of the ease of building in the state, she [Jeannine Cataldi, Global Insight's senior economist] said.

Not sure I agree with them since I haven't read the actual report. My take is that this is further reason to be thankful we are in Dallas. The market is reasonably healthy and will likely see little real further decline in prices.

Source: DMN: Report: Dallas homes are among most undervalued in U.S.

Trying out our first YouTube video

2009-06-04T08:48:00.003-05:00

While we've been under construction for our house at 4425 Grassmere- I have been taking pictures nearly every day from the same location. I thought it might be interesting to create a video showing a time lapse of the house being built. Well, I've uploaded most of the pictures and created a very simple video. No music, no voice over, just the pictures stitched together. Check it out - http://www.youtube.com/watch?v=pWJHzTtDtVo.

I rule DCAD!

2009-05-28T09:15:00.003-05:00

For the third year in a row, I have beaten down the Dallas Central Appraisal District! I think I have a perfect record so far. This year I was eight for eight in price reductions with an average decrease of 11%. It pays to be well prepared and to go down there with logical arguments.

Maybe I need to hire myself out next year... Or I could send out those letters like I keep getting from this Cecil character. I got three of those this year.

Interesting look at job losses since 2004

2009-05-27T11:12:00.002-05:00

Here is a very interesting graphical look at job losses by MSA (a census term for Metropolitan Statistical Area) by month since 2004. Clearly not all places have been treated equally.

This kind of information goes hand in hand with the Case-Shiller data. Those places with fewer job losses have experienced lower price declines. As the alt-A and prime loans start resetting, there will be a second wave of foreclosures. I think this one will be more job driven than anything else. As DFW has been able to weather the storm better than other areas, I expect to see the same. That's not to say it won't effect us - but we won't see it as badly.

March 2009 Case-Shiller

2009-05-26T11:23:00.009-05:00

Just a repeat of prior months. Summary - the rest of the country continues to see declines, Dallas is flat. In terms of overall rankings, Dallas has fallen the least from its peak of all 20 cities, and has been #1 or #2 in smallest loss of all 20 cities in the last year. Touting the smallest loss is a bit like kissing your sister I guess, but at this point, we should take anything we can get.

Pretty pictures and graphs below.

The final graphs are the ones I like to look at the most. This is the year over year changes in prices. The month to month is nice, but you don't account for the seasonality until you see how we are doing versus this time last year.
Over the past year, Dallas has been either first or second in lowest price decline of all 20 tracked cities. The figures show the prices declined by 5.6% from March 2008 to March 2009. I would be more comfortable if the rate of the decline (the percent decline year over year) would stop accelerating. We are, however, entering the spring market. Traditionally, this has been the best time of year for prices. The April, May, and June numbers should be very interesting. Here is the data in graphical form.

So, what's the key takeaway? Dallas is the place to be, that's for sure. I'd like to see the rate of decline subside, but we have a potential new wave of foreclosures in the coming years. The subprime interest rates resets are all done. What is next is the Alt-A and Prime loans. With the large nationwide job losses, I expect to see another wave of foreclosures. How this will effect Dallas is unknown.

Source: S&P/Case-Shiller Home Price Indices

Press release: first "green" registered home in University Park!

2009-05-21T13:51:00.003-05:00

After much writing and re-writing, I finally issued our press release about our "green" home in the Park Cites. Hopefully someone local will pick up the story, but who knows. Whatever happens, it's a critical step in the marketing and branding of our company. I like to think we are innovative in the way we build and also in the way we market ourselves.

This house itself is pretty cool. It's our best floor plan and our first one built in the Park Cities. It's also "green" (although I hesitate to use the word). "Green" means a lot of different things but, in this case, it means that we've built the home to a 3rd party green standard. Almost as importantly, it's been certified by a separate 3rd that we built to that standard. It's easy to say you're "green" but I like the verification step.

I won't repeat the whole release, so here's a link: Classic Urban Homes Builds First Green Built Texas(TM) Home in University Park

Residential Strategies Q1 2009 Custom Home Exec Briefing

2009-05-20T13:43:00.003-05:00

Highlights from today's lunch:
Nationwide:
- As I said previously today, nationwide new home starts are at all time (since 1959) lows
- Both existing home and new homes sales are also at lows. Interestingly enough, they have both ticked slightly up recently - probably due to foreclosure sales.
- National existing home inventory is at nearly a 10 months supply. Dallas is about 6 months. Six months is considered equilibrium.
- National new home inventory is at 11 months supply. Dallas is, again, at 6 months or equilibrium. The national inventory has, mathematically speaking, 133,000 excess homes. At the current rate of sales and starts, this represents about a four year supply on a national level.
Locally:
- Foreclosure postings are rising due to bank activity after waiting for clarity on the gov't intervention process.
- Foreclosures should level out in 2009. Sub prime resets have been replaced by job loss as the primary foreclosure cause.
- Q4 2008 and Q1 2009 saw an accumulation of unsold inventory. Builders have been focused on selling their finished inventory. Local starts have probably bottomed out and will remain low for another quarter.
- Total starts in DFW was 17,019 for Q1 2009 - the lowest since 1992.
- Builders have closed more units than they have started for 11 consecutive quarters - all the way back to Q3 2006. Peak inventory in Q3 2006 was about 28,000, now it stands at 11,500.
- There is about a 70 month supply of lots in the DFW area. About 30% of them are in good infill locations and have not seen, and are not expected to see, much more price decline. They have probably fallen in price by 5 to 10% or so. The other lots have seen price reductions from 15 to 60%. Ouch.
Economics:
- Look for recovery latter part of this year, but there are plenty of headwinds. Buyers should expect to face tighter credit going forward.
- The U.S. recession began December 2006; Texas's began October 2008.
- Jumbo loans are become more affordable again. They used to be only priced by .25% higher than non-conforming, but now its 1.5% higher.
- Texas will likely see continued job loss this year. The revised numbers for 2008 show Texas eeked out a job gain of 2,500. 2009 should see a loss of 80,000. This would be similar to the last numbers from the 2001-2002 recession.
Final thoughts:
- Home resale listings are at a 6.3 month supply - 6 months is equilibrium.
- Real recovery in the DFW market will likely be next spring. This spring is going well, and builders continue to keep starts low. By next year, starts will start climbing again.
- Market will gradually shift away from "who has the best price" to "who has the best product"

Housing starts are at a historical low - and that's good news

2009-05-20T08:20:00.004-05:00

The Commerce Department released its April data for new home construction and the numbers were staggering. The previous low (in recorded data back to 1959) for housing starts was an annualized rate of 798,000 in January of 1991. The data yesterday was 458,000 - 43% below the all time low!

So, why is this good? Simple - we have a nationwide oversupply of housing. This exists in both finished vacant homes and foreclosed homes. The only way this works itself out is if we stop building new homes in areas that don't need them. Over time, that inventory gets bought up and a more normalized market reappears.

Unfortunately, this data does not drill down to city specific info. I'd love to see starts and permits for the Dallas area. Maybe I'll get that info later today at Residential Strategies. More to come...

Dallas-Fort Worth is No. 2 in new-home sales

2009-05-20T08:01:00.002-05:00

More proof that the Dallas real estate market is holding steady - Dallas-Fort Worth is No. 2 in new-home sales, starts, Metrostudy says.

"I expect the D-FW area and Houston to continue to lead the nation in new-home starts and closings," said David Brown, who heads Metrostudy's Dallas office. "Even though activity has fallen off dramatically, the slowdown in Dallas-Fort Worth and other Texas markets is not nearly as severe as other markets around the country.

"Dallas-Fort Worth and Texas have not been as severely affected by the recession as other regions of the country," he said. "Consequently, consumer confidence is much stronger in our region than any other area in the country."

I am going to the other Dallas area residential market tracking company (Residential Strategies) today for lunch. It will be interesting to see if they concur.

Are you kidding me? FHA nothing down loans are back?

2009-05-13T09:23:00.003-05:00

I am speechless. See here: The FHA No Down Loan.

In short, the FHA wants to allow first time homebuyers to monetize their tax credit and use it as a downpayment!

Didn't we learn this lesson already?? No downpayment loans encourages people to buy houses they can't afford and lead to the problems we already know.

Unbelievable.

Other sources: HUD Secretary Announces Monetization of Tax Credit at NAR Real Estate Summit

NAHB Green Building convention

2009-05-11T10:51:00.003-05:00

I attending the NAHB Green Building convention this weekend. All in all, it was a good event. I found a few things interesting:

1) Not sure it was really well attended. Is that due to the economy or that builders have all crawled under a rock? Or is it because the building business not believe in "green?" Or is it because we're not sure that buyers will pay for green?

I think it's a little of each. New technologies always have a learning curve and mistakes get made until we've figured it out. I'm not convinced we get our real value from putting in "green" products. When the buyer starts comparing the prices of one house verse another - it's a hard decision. I've said before on here (Classic Urban Homes: How many people really buy "green?") that the energy savings and health aspects of building green are still pretty nebulous to buyers. I think they have a hard time paying extra for things they can't touch and feel.

2) The people that were there were all very excited and enthused. For people like us, being on the forefront of this game changing technology is a great opportunity. We can educate ourselves and take that info to teach our buyers, agents, and maybe even the appraisers!

3) The key with building green is that we are doing it by building to a nationally recognized standard. Whether that's through Green Built Texas or the NAHB's own program NAHB Green, the important thing is that this is a standardized program. Maybe more importantly, we have third-party verification that we are following that standard.

Texas Economic Review - April 2009

2009-04-30T10:14:00.005-05:00

From the Real Estate Center at Texas A&M

The national recession is beginning to have a deeper impact on the Texas economy, which lost 113,600 jobs or 1.1 percent of its labor force from March 2008 to March 2009. Over the same period, the U.S. economy lost more than 4.8 million jobs or 3.6 percent of its labor force.

The state’s seasonally adjusted unemployment rate rose from 4.6 percent in March 2008to 6.7 percent in March 2009. The U.S. rate rose from 5.1 percent to 8.5 percent during the same period.

Only three Texas industries — education and health services, natural resources and mining, and leisure and hospitality — plus the government sector had more jobs in March 2009 than in March 2008. Eight industries in the state’s economy lost jobs over the same period.

Graphs of interest:
Texas vs U.S. unemployment

Employment growth rates for Dallas MSA

Source: Monthly Review of the Texas Economy
April 2009

Feb 2009 Case-Shiller (Dallas outperforms yet again...)

2009-04-28T14:46:00.007-05:00

Well, outperforms may not be the right term. Is it outperforming when you lose less than everyone else?

Lots of data if you want to play with Excel here, or I'll do my best to summarize.

Since January 2000 (the first time the Dallas MSA (metropolitan statistical area - a census region) was included in the Case-Shiller data), Dallas has missed out on the huge run-up and the subsequent huge loss. Over this time frame, prices in Dallas have risen by 12.4%. Bet you'd be shocked to learn that the Composite 20 (the 20 city total) is UP by over 40% in that same time. Thought so. Below are some tables and graphs showing the total growth (and loss) from 2000 to now, 2006 to now, and 2008 to now.

It (almost) goes without saying - glad to be in Dallas.

The fall of some of these areas is shocking - Phoenix has dropped over 50% since its peak! Dallas, however, has the lowest loss from its peak of only 11%. Wish my retirement accounts only had that little of a loss.

I also like to look at year over year changes (or this month vs same month last year). That way you can account for the seasonality in the market. Looking this month to last month really makes little sense. Over the past 12 months, Dallas has had the lowest or nearly lowest loss year over year as compared to the data set. Here's the data going back to the beginning in graphical form.

The pundits always have lots to say when the Case-Shiller numbers come out: WSJ: A Look at Case-Shiller Numbers, by Metro Area, DMN: Dallas-area home prices slide 4.5% in S&P/Case-Shiller report, Case-Shiller Housing Numbers: The Rate of Decline Is Decreasing

Source: S&P/Case-Shiller Home Price Indices

First quarter 2009 foreclosure data (with map)

2009-04-27T13:51:00.004-05:00

Foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 803,489 properties in the first quarter, a 9 percent increase from the previous quarter and an increase of nearly 24 percent from Q1 2008. One in every 159 U.S. housing units received a foreclosure filing during the quarter.

It seems as though the banks are restarting the foreclosure process. I've been reading that they had slowed due to uncertainty about what the government would due to assist homeowners in distress.

What is interesting is that nearly 60% of the foreclosures are concentrated in California, Florida, Arizona, Nevada and Illinois. Below is the map. Once again, Texas shows its relative strength. We are 29th on the list in terms of total foreclosure notices for the 1st quarter. Compared to our population, that's pretty low.

Source: Foreclosure Activity Increases 9% in first quarter

Map - check out Q1 2009 area home sales

2009-04-24T13:31:00.003-05:00

Dallas - Fort Worth Area Home Sales 1Q 2009

Sales were way, way down across the board in most locations. Not sure if you can pinpoint a reason. Historically low mortgage rates and the first time home buyer tax credit didn't appear to help. I think the continued belief that we are going to see further price reductions plus the return to the "normal" lending practices and conservative appraisal standards were the prime culprits. Based on my previous posts, I'm not convinced there are massive price reductions on the horizon, but I could well be wrong. Only time will tell.

How Texas Avoided a Housing Bubble

2009-04-21T13:37:00.003-05:00

Did you know that Texas:

Banned its mortgage lenders from imposing prepayment penalties

Banned balloon repayments

Banned negative amortization mortgages

Banned loans based only on collateral value without regard to the borrower’s ability to repay the loan

Banned lenders from charging for services the borrower didn’t receive

Source: Ban Mortgage Prepayment Penalties at the Federal Level, 1: Texas

So what you say?

Here's the result:

This is more support of my theory that Texas will be one of the first to lead out of this recession. Many pundits believe Dallas will be one of the early rebounders. Which housing markets will bounce back first? Today's Dallas Morning News had an article on Best Places for Jobs, and the Dallas and Ft Worth areas were numbers 4 and 5. Texas cities dominate Forbes list of best places for jobs

Meanwhile, the Risk of drastic home price drop is still 'minimal' in Dallas-Fort Worth while Dallas home prices faring well

Mortgage broker followup

2009-04-17T08:40:00.003-05:00

Quick follow-up to my mortgage broker post - saw this in the Morning News yesterday

In recent months, some of the biggest companies in real estate have decided to stop working with brokers. Chase won't lend to brokers' clients anymore. The PMI Group, one of the biggest companies in the mortgage insurance business, flat out refuses to underwrite any policies on loans that started with a broker.

I find that very interesting - and a bit over reactive. This is another example of how conservative the banks have become. TARP or no TARP, getting a loan is tough. It's up to you as the prospective buyer to take matters into your own hands. The process may seem daunting, but it's not that hard.

Source:Whom do you trust?

Big Changes Coming to ENERGY STAR

2009-04-10T09:52:00.003-05:00

We have recently made the choice to build 100% Energy Star Homes. What does this mean? Well, simply put, to have a certified Energy Star house, you must meet the EPA's (Environmental Protection Agency) strict guidelines for energy efficiency. Energy Star homes do this through six primary areas:

Effective Insulation

High-Performance Windows

Tight Construction and Ducts

Efficient Heating and Cooling Equipment

Lighting and Appliances

Third-Party Verification

Source:ENERGY STAR - Energy Efficient Home Features

I think the most important thing in the above list is that last item - Third-Party Verification. Most home buyers have no idea what is behind the walls. And if you told them, they still wouldn't get it. We try to educate our buyers as much as possible, but is a poor substitute for a third-party verification. We use a third-party energy rating company who independently checks that we meet the Energy Star guidelines. In fact, they are the ones responsible for adding us to the list of homes - we aren't even allowed to do it.

So, what's the "big change?" Well, Energy Star is raising the bar - significantly. Starting in 2011, there will be more stringent tests, benchmarks, and requirements to meet Energy Star Guidelines. Currently, Energy Star homes are typically 20% to 30% more energy efficient than non-Energy Star Homes. [Our most recent home - 4425 Grassmere in University Park- is rated at a 70 HERS Index which means it is 30% more efficient than code.] These new standards are anticipated to be roughly 30% more stringent than today's codes. A tough bar indeed!

Shocker - mortgage brokers aren't always on your side

2009-04-06T13:31:00.003-05:00

This just in - mortgage brokers don't always have their clients' best interest at heart. Well, no kidding. According this article NY Times article, "When to Use a Mortgage Broker", buyers paid about $300 to $400 more in fees than when dealing directly with the banks themselves.

Buyers should not believe that mortgage brokers have all the right answers or even the best rates. In fact, I believe that mortgage brokers end up being detrimental to the home buying process. Most buyers don't realize that the brokers do not hold these mortgages and are acting simply a proxies for non-local banks. This is bad because the non-local banks don't understand Dallas real estate and probably hold defaulted or nearly-defaulted loans from other cities. Add to this the new appraisal standards and you get the double whammy. You now have a bank that doesn't want to loan expect at a higher rate and an appraiser who has no incentive to price your house at a realistic price.

We have been preaching to our buyers and interested parties - start with your local, independent banks first when discussing a mortgage. If you personally bank with one now, go there first. Be prepared to have good credit and 20% to put down (I know, the horror!). This also helps the appraisal process because the local bank understands the local market and can direct the appraiser to use some more realistic comps. I heard some recent stories of requiring sales within 60 days and homes currently on the market. There are a bunch of areas in town that haven't had a sale in well over 60 days.

That's not to say that all mortgage brokers are bad. I know several I like, I even have one listed on the right side of this page. But, do your own due diligence - shop around to find the best deal. Rates are at generational lows. If you are willing and able to buying, now is a good time.

Source:NY Times: When to Use a Mortgage Broker

How many people really buy "green?"

2009-03-11T12:31:00.003-05:00

Interesting results from a consumer research firm.

The number of Americans who say they "almost always" or "regularly" buy eco-friendly products has stalled at 36 percent, the same as last year, according to a survey from Mintel, a Chicago-based consumer research firm. That follows a leap in green shoppers to that 36 percent from 12 percent in 2007, the firm said.

I've wondered about that. With all the "green" talk, the fact is that (most) consumers are short-term, price driven creatures. A large portion of "green" products are more expensive or, in the case of building products, have a long, long payback period to make sense. Consumers are also rational economic beings. It's hard to justify paying more for a product that supposedly gives you a benefit at some undefined future point. It's too nebulous a concept to grasp at the time of purchase.

There's always the people that will buy "green" because it makes them feel better (kind of like buying Starbucks coffee vs 7-11 coffee), but the current economic situation has put a lid on that. In fact, I think the recession will seriously hamper the market for "green," despite the government's best efforts. When money is tight, the rational consumer really doesn't care about long-term, they care about what's right now in my checking account.

For us, our "green" involves material selection and building processes that don't cost a whole lot more. Most of it really is energy efficiency and proper techniques. We'd love to build a really "green" house, but no one is knocking down our doors yet.

Note: I put "green" in quotes because no one really knows what it means. Is it energy efficiency? Healthy indoor air quality? Recycled material use? Geothermal? Rain water catchment? Proper site planning? Some? All? None? More? "Green" means different things to different people.

Source:Green Product Sales Stagnating, Survey Finds

Texas Economic Review - January 2009

2009-03-10T14:30:00.005-05:00

From our friends at the Texas A&M Real Estate Center:

The Texas economy is cooling but continues to create more jobs. Texas gained 154,600 jobs from December 2007 to December 2008, while the U.S. economy lost more than 2.8 million jobs over the same period. The state's seasonally adjusted unemployment rate rose from 4.2 percent in December 2007 to 6 percent in December 2008; the U.S. rate rose from 4.9 percent to 7.2 percent during the same period.

Here's a couple of graphs of interest:
Texas vs the whole US

Dallas area growth rates

Source:Monthly Review of the Texas Economy January 2009

How to know when the upturn's here

2009-03-10T11:07:00.004-05:00

Interesting article in the Dallas Morning News yesterday on the economy. In our cyclical economy, there are certain clues to look for that will point to a recovery. The article reviews three main components hardest hit - jobs, housing, stocks - and provides its signs to watch for.

On Jobs:

Economist Sophia Koropeckyj, a managing director at Moody's Economy.com, is keeping an eye out for two signs – a slow rise in companies hiring temporary workers and an increase in the number of hours worked by those still employed. When conditions improve, employers hire temporary workers first, she said, and a pickup in permanent hiring wouldn't be far behind. Koropeckyj estimated that could come in mid-2010.

On Housing:

Susan Wachter, a professor of real estate at the University of Pennsylvania, is watching the backlog of unsold homes. At January's sales pace, it would take about 10 months to rid the market of all those properties. A more normal pace would be six months.

Once foreclosures level off and the backlog is cleared, Wachter says, the housing market can begin to recover. Most economists don't expect home prices to bottom out before the first quarter of 2010.

Interesting side note - the Dallas market has already reached this six month equilibrium.

On Stocks:

In downturns over the past 60 years, the S&P 500 has hit bottom an average of four months before a recession ended and about nine months before unemployment hit its peak.

Investors will be looking for turnarounds in housing, lending and employment, as well as signs that consumer spending has picked up.

Many market experts say the bottom of the stock market could come in the second or third quarter of this year.

Source:Clues to when recession will end lurk in economists' data

Dallas job growth and future outlook

2009-03-05T14:16:00.003-06:00

Good recap by the Dallas Business Journal in their Feb 27-Mar 5, 2009 issue. Headline "N. Texas added more than 91,100 jobs in '08."

Bolstering the local job outlook last year was the health services industry, which had a net gain of 28,400 jobs, or 4.4%. Seemingly recession-resistant, the number of people employed locally by hospitals, doctors offices and related enterprises rose from 649,600 in December 2007 to 678,000 a year later, Workforce Commission numbers show.

Future outlook is not rosy, but could be worse.

She [Lyssa Jenkens, chief economist at the Dallas Regional Chamber] adds that the first quarter of this year will be the worst for the Metroplex. “I think Texas really, as a whole, and Dallas-Fort Worth being a function of Texas will see a lack of job creation more than job losses in the first quarter of 2009.”

So, we we'll see more payroll freezes and non-hiring than actual layoffs. This is good as it is more evidence that Dallas has been less effected and will likely rebounded quicker than the rest of the nation. When's that going to be? Not sure - I leave predictions to those smarter than I...

Bernard Weinstein, director of the Center for Economic Development and Research at the University of North Texas in Denton, says that despite the awful headlines about the economy, he believes the Metroplex is still the spot to be to ride out the recession.

“We will see the first signs of recovery in 2010, though it may be 2011 before we feel better,” he says.

And once the recovery is under way, “we still see a string of businesses relocating to the Dallas-Fort Worth area,” he says. “After every downturn, there’s a pickup in the number of people who relocate to North Texas and the number of businesses that expand to North Texas. For all the reasons that have attracted people to North Texas before, they will come again.”

Source:North Texas added more than 91,100 jobs in ’08

The Healthiest Housing Markets for 2009 (Dallas is #5!)

2009-03-03T09:31:00.002-06:00

According to research done by Builder Magazine, Dallas is the 5th healthiest housing market in the country. Per the magazine,

To compile these lists, we analyzed the top 75 housing markets in the country. We ranked them based on population trends and job growth, perennial drivers of housing demand. We also examined what’s happened with home prices; many of the healthiest markets have managed to hold the line on home values. And finally, we considered the rate building permits, which may be the single best ongoing indicator of builder confidence in a market. We combined all these metrics to produce a score for each market.Link

For Dallas in particular,

In a year when permits declined 35 percent nationally, Dallas only experienced a 9 percent fall-off. With a population of 4.2 million, Dallas was the third largest home building market last year, as measured in permits pulled. Employers in Dallas, a popular place for corporate relocation and expansion, added 42,000 jobs last year, a growth rate of 2 percent. Existing home prices have held steady, falling a paltry 2.3 percent in the last year.Link

Thankfully we are not here: Weakest Housing Markets for 2009

Wish I could forward this information along to our potential buyers...Maybe we'd stop getting such lowball offers!

Source:
Builder Magazine Online

Map of 2008 Dallas Foreclosures

2009-02-27T16:36:00.003-06:00

Here's a very interesting Google mashup that shows all the Dallas area foreclosures by address. Simply pick the zip code of choice and it will show you all the dirty details.

Enjoy!

Link: Sources:
2008 Dallas-Fort Worth Foreclosure Map

Builders and financial stability

2009-01-26T17:10:00.005-06:00

There have been several recent stories in the local news about builders filing for bankruptcy. While a natural part of the cyclical nature of our business, it certainly doesn't give any comfort to potential home buyers. I have seen builders small and large forced to close their doors. In the rapidly rising market of the last several years, smart financial planning was likely far from top of mind. For small builders like us, the thought was to get as many lots as you could before they continued to rise in price. With the market collapse, a lot of these guys (and now their bankers) own impaired property with no immediate hope for real price appreciation.

Why do I bring all this up? Well, for our potential (and current clients), I think it is important to know that we are financially stable. We have no lines of credit that can get pulled, and no large multi-lot developments in far away areas. All of our properties were purchased with sizable equity down payments - no zero down loans for us! - and we maintain good working relationships with all of our banks. Our goal has been to build a small company without overextending ourselves. We target infill neighborhoods where people want to live and build a superior product for them to make a home.

So far, we have accomplished this goal. We continue to be focused and maintain our discipline in these uncertain times. We hope that, if you are in the market for a new home, you will take the time to see what we can do for you.

Sources:
Dallas-area homebuilders suspend operations, leave buyers in the lurch
Mercedes Homes files for bankruptcy

Local Dallas foreclosure data

2009-01-23T16:27:00.004-06:00

Don't know how I missed this article.

Postings for the February auction are down 8 percent compared with a year ago, Addison-based Foreclosure Listing Service Inc. said Thursday.

That's the first yearly decline for February postings in nine years, said George Roddy, president of Foreclosure Listing Service.

"While this is one piece of good news, foreclosure postings still remain at the high end of the scale," he said.

Dallas-Fort Worth foreclosure postings fall 8%

So, down, but still too high. I have read some data that said that a lot of the Alt-A ("liar loans") are rolling over this year. It will be interesting to see what happens with those.

Housing starts are way, way down...

2009-01-23T15:51:00.005-06:00

...and this is a good thing. It's a sign of the cyclical nature of our business. From an article in the Wall Street Journal comes data from the Commerce Department.

Construction of new single- and multifamily homes sank 15.5% in December from the previous month to a seasonally adjusted annual rate of 550,000 units -- the slowest pace since monthly records began in 1959.Link

As I mentioned about a month ago, with starts at all time lows and sales still continuing (albeit at a slower rate), there is the chance we could see a shortage sometime in the future.

The bright spot in this report is that there is now so little new homebuilding in the pipeline that the inventory of new homes available for sale is declining rapidly. If sales stabilize over the near term — which we believe is likely given the recent plunge in mortgage rates — then we should reach a normal level of new home inventory by mid-2009. Of course, the overall stockpile of homes available for sale will continue to be bloated by foreclosure activity, which should continue to exert some downward pressure on home prices over the near term. –David Greenlaw, Morgan Stanley. Link

The perception of all these foreclosures out there is something of a concern. As Dallas never had the speculative run up that other cities had (see earlier posts), my suspicion is that the foreclosure rates around here are also much less than the national average. Local area statistics of this nature appear to be hard to come by (for free at least), but I was able to glean some info from Realty Trac, an online listing and gatherer of foreclosure info. Below is a chart of Dallas and Collin county foreclosures vs Texas and the nation. As best I can tell, this data is from October 2008 (the best I can do for free).

So, what does all this mean? As I mentioned earlier, this is a cyclical business. It is also local. My goal is to find better stats for local foreclosures, local starts, and local sales and put them together in a coherent data set. As a builder, I am looking for sales to even out and starts to flatten or tick up. In some sub markets, I think we're not too far away from this happening. In the more sought after neighborhoods (Park Cities, and other interior places like Devonshire and Briarwood), this might even be this summer. Only time will tell...

Sources:
Home Construction at Record Slow Pace
Economists React: Worst Conditions for Construction Since 1930s
Realty Trac

Texas future job outlook

2009-01-13T16:45:00.005-06:00

Well, just to show that I am not a complete Pollyanna (Wikipedia: Pollyanna), here's some information I have been dreading (but thinking it might be coming):

The national recession is about to catch up with Texas, costing the state 111,000 jobs in the next six months, the state comptroller warned legislators in Austin on Monday.

The new forecast is a sharp turnaround for Texas, which for months continued to prosper even as the economy crumbled in most of the rest of the U.S. While most states were shedding jobs in the 12 months ended in November, Texas added 221,000.

As always in Texas, oil and gas prices played a leading role in the economy's boom, and now are contributing to the bust.

While I do believe the return of $3/gallon gas will be by 2010, this news isn't great. The one thing I will be focused on is where these job losses are occuring. Are they manufacturing or professional jobs? Where are they occuring in the state?

North Texas has certainly seen a boom from the Barnett Shale (Wikipedia: Barnett Shale), but that boom is over with natural gas prices having gone from $14 to $6.

As it relates to real estate,

Texas hasn't been immune to the real-estate slowdown. Both building permits and existing-home sales have fallen by a third in the past 12 months.

But unlike in cities such as Phoenix, Las Vegas and San Francisco -- where home prices have fallen more than 30% from their peak -- home values in Texas have held relatively firm. Prices fell an average of 5.5% in the 12 months ended in November, according to data from the Real Estate Center at Texas A&M University.

As soon as the report is listed, I'll post the results. I would think the losses would be hardest felt in Houston and Dallas. The most important thing for us in North Texas is what types of jobs are being lost. I have read reports about Neiman Marcus, Ashford Hospitality(disclosure: I used to work for Ashford's affiliated company, Remington Hotels), AT&T, FedEx, and Blockbuster, but none have been really major layoffs. I suspect that the commercial and residential construction business (Construction industry braces for layoffs) will be second only to the oil and gas industry.

Stay tuned for the actual numbers.

Source:Wall Street Journal: Job Losses Loom as the Recession Arrives in Texas

Texas Economic Review - November 2008

2009-01-13T09:08:00.004-06:00

The U.S. economy lost more than two million jobs or 1.5 percent of its labor force from November 2007 to November 2008. Over the same period, the Texas economy gained 222,900 jobs or 2.1 percent of its labor force. The state’s seasonally adjusted unemployment rate rose from 4.2 percent in November 2007 to 5.7 percent in November 2008. The U.S. seasonally adjusted unemployment rate rose from 4.7 percent to 6.7 percent during the same period.

The annual employment growth rate for the Dallas-Plano-Irving metro area from November 2007 to November 2008 was 1.5 percent; the area ranked 15th in job creation.

I also like to see that the Professional and Business Services employment was up by 4.3% year over year. As these are my potential clients, that means there are more of them moving to town!

The complete economic review is available on the Texas A&M Real Estate Center's website.

Newsflash - it's not all bad!

2009-01-12T16:05:00.008-06:00

After a brief hiatus (thanks Google for repeatedly resetting my password), there are so many interesting articles online to discuss.

I continue to believe that, for multiple reasons, the DFW market in general, and certain sub-markets, in particular, do not face the same sort of doom and gloom facing the rest of the nation. How's that? Well, if you take the time to read whole articles and skip the headline, you'll see the facts. 1) Housing prices in DFW are in pretty good shape - if you look at the appropriate time horizon, 2) Supply levels of houses on the market are at what are considered "normal" inventory levels, and 3) people are still moving to DFW.

1) Dallas area prices are just fine . As I've said before, you can't trade a house in Phoenix for a house here - so why does the price decline there have anything to do with a price decline here? It doesn't. Houses are not mass produced widgets (well, the ones we build aren't), they aren't transferrable, and they aren't commodities. The economic forces of supply and demand are totally irrelevant from one city to another? No one is out there thinking, hmm, should I move to Dallas or Phoenix. Which has the better house price?

Here's a price graph comparing the Dallas MSA to the Case-Shiller data for the 10-city composite and 20-city composite. The first graph is for all the periods data for Dallas is available (January 2000) to now. The other is from January 2006 to now. I picked Jan 2006 because it's more or less the top of the housing market prices nationwide. I don't see anything resembling a "bubble" in the Dallas prices.

If you look at the data from the precipice, Dallas is sitting pretty. The nationwide market is off 20 to 25% and Dallas is down by less than one half of one percent . In this economic environment, that sounds pretty good to me.

2) Dallas area supply has reached "normal" historical levels . While I believe that these numbers are probably low because people aren't putting their houses on the market, the reality is that supply has been shrinking due to sales (yes, people are buying) and people taking houses out of inventory. It is likely that we will see the supply number dip below six months, but it's still a good sign.

A bright spot in the local monthly home resale report is that the number of houses on the market in the 26-county North Texas region continues to fall. At the end of 2008, 35,999 pre-owned single-family homes were for sale in the area – near the lowest number in more than three years.

That works out to less than a six-month supply of houses on the market, which is considered a healthy inventory. Nationwide, the inventory is more than 10 months.

However, not all homes for sale in the area – including some foreclosed properties – are included in the figures.

Still, Dallas has one of the lowest home inventories of any big-city market, according to a report Wednesday by Altos Research and Real IQ. The same survey says that Dallas ranks among the five U.S. cities with the shortest average time to sell a home. Link

3) People are still moving to Dallas .

The Dallas-Fort Worth-Arlington metro area reported the second largest year-over-year employment gain nationally in November 2008 by adding 46,900 jobs. The Dallas-Fort Worth-Arlington area trailed only the Houston-Sugar Land-Baytown area, which reported a non-farm employment gain of 54,300 jobs.Link

More people means more demand.

Hmmm, prices in Dallas are holding strong, supply is shrinking, people are still moving to Dallas. When this market turns and the consumer feels safe enough to buy again, I don't know. But I will predict that when it happens, there might even be a bit of a shortage of housing. This is the nature of cycles.

Sources:
S&P/Case-Shiller Home Price Indices
Dallas-Fort Worth home sales fall 18%
D-FW reports 2nd largest employment gain

Housing Economics 101

2008-12-17T11:01:00.007-06:00

Since I am somewhat of a numbers junkie, I wanted to review a few data points I find interesting.

1) A house value is not related to national trends, they are regional, and I would further argue that they are really neighborhood driven. This is the recent Case-Schiller data: Point: ignore home value numbers if they aren't, at the very least, regional.

2) Supply is also regional. A house in Dallas cannot be substituted for a house in Phoenix. While national trends show a huge overhang of homes (new and existing), Dallas is pretty close to normal trends. Point: see #1 above, supply statistics, like prices, are regional. Ignore them if they do not apply to where you are looking to buy.

3) The local market will bottom when supply and demand reach equilibrium. Starts, both nationally and locally, have been falling for two years.In fact, national starts are at historic lows

Home builders started 18.9 percent fewer homes in November, down to an annualized rate of just 625,000 units from October's rate of 771,000, the lowest level since record-keeping began in 1959. On a year-over-year basis, housing starts are down 47 percent. Link

Point: from an economic point of view, things are happening as they should. Starts are down, starts are less than closings, inventory is being whittled down.

4) Going forward, the key is to look for a flattening or increases in regional starts. For us, this is the million dollar question - when will this occur? Guys smarter than I predict the middle of 2009 (on a regional basis). Probably not a bad bet. All time lows in the fed fund rate, stock market turmoil seems to be lessening, new presidency and tons of stimulus packages - all of which take time to hit main street. I won't hold my breath, but it's not inconceivable to think that in mid-2009 we will see signs of life again.

5) There's a chance, if you stick to the numbers, that we might even run into a housing shortage in 2010. Multiple years of historically low starts, coupled with increasing local population, and a long lead time for to build houses all mean that demand will likely outstrip supply again.

Sources:
November Housing Starts: All-Time Low
Energy Prices, Housing Starts Plunge
U.S. Census - November Residential Construction

This makes too much sense (which is why it will never happen)

2008-12-16T16:08:00.006-06:00

Here's a dead simple way to help our new home buyers and those who want to refinance - us the 30-year Treasury Bond as a baseline.

The US Treasury offers loans to banks at 50 basis points above the 30 year at issuance to those who are willing to make mortgage loans. That would now be 3.43%. Then the banks would lend to qualified – that is, qualified in the traditional sense and not by the 2005, 2006 or 2007 definition – borrowers at 100 basis points over the fixed rate loan from the Treasury. The banks would then pledge the mortgages back to the Treasury as collateral for the loans.

Let's Use the 30-Year Treasury Mortgage Bond to Reignite the Mortgage Market

More news, more noise...you must read between the lines

2008-12-16T15:24:00.007-06:00

Once again the Dallas Morning News has a doomsday article about residential real estate in Dallas. This time, it's an article about Dallas's increased risk of foreclosures (as measured by a research group out of San Fransisco). Dallas is 174th out of 376 metropolitan areas in terms of risk. To come up with the rankings, researchers use factors including expectations for the local economy and home price declines.

Now, given that the MSA (Metropolitan Statistical Area - it's a term defined by the census) of Dallas is something like the 7th or 8th largest in the U.S., it seems to me that being 174th out of 376 isn't so bad. 45% of the MSAs are worse off than we are. Still, it doesn't make people feel any better. In fact, I think it just confuses them. Buried in the latter part of the story is a telling comment:

But Texas A&M University economist Mark Dotzour says he's not impressed with such forecasts.

"These studies, from my perspective, add absolutely nothing to the body of knowledge that will help Texas consumers make good decisions for their families," said Dr. Dotzour, of A&M's Real Estate Center. "If you have a good job, now is a great time to buy a house.

"We are going to come out of this housing downturn much earlier than the rest of the country."

It's this kind of noise that really confuses people. We had a relocating client look at our houses a week or so ago that thought Dallas real estate was going to continue to go down in value. His broker asked us "how aggressive we would be" on our prices. Given that we have already dropped it by 10% and are near the bottom on a per square foot basis to comparable houses in the neighborhood, I'd say we were already aggressive. The followed up the question with an inquiry about a two year lease. This just proves to me that the market perception is that we will still see deteriorating prices. Qualified buyers with a need to buy are going to look back on this time period and kick themselves for not pulling the trigger.

Forecast raises Dallas risk of mortgage defaults to moderate

Texas Economic Review - October 2008

2008-12-15T17:00:00.006-06:00

The Texas economy is relentlessly adding jobs despite more job losses for the nation. Texas’ nonfarm employment rose 2.2 percent from October 2007 to October 2008 compared with a decrease of 0.9 percent for the United States. The state’s seasonally adjusted unemployment rate rose from 4.3 percent in October 2007 to 5.6 percent in October 2008. Over the same period, the U.S. seasonally adjusted unemployment rate rose from 4.8 percent to 6.5 percent.

The Dallas-Plano-Irving area employment grew at 1.7% from October 2007 to October 2008. Dallas area unemployment is at 5.6% as compared to the nation at 6.5%

The complete economic review is available on the Texas A&M Real Estate Center's website.

There are encouraging signs if you stick to the facts

2008-12-12T08:57:00.009-06:00

Despite the doom and gloom scenarios painted everywhere, there are some encouraging signs. The housing market is, as we frequently forget, all about location, location, location. The same market does not exist in far north Dallas (Frisco) as it does in a central location like the Park Cities or Bluffview. The houses are different, the lots are different, and the prices are different. But, in the end, the housing market is still subject to the economic constraints of supply and demand.

I've been to several recent presentations by Residential Strategies and Metro Study. The key to the bottom of this market will be when supply and demand reach equilibrium. The current news is totally dominated by the demand side of the equation. What we need to look for is that the supply has also fallen. Supply will shrink by: houses selling, builders not building, and people removing their house from being for sale.

Money quote here:

The one bit of positive news in the latest local housing report is that there was a significant decline in the number of homes listed for sale. A total of 39,255 single-family homes are on the market in North Texas. That's a decline of 14 percent from November 2007 and the lowest total in more than three years.

Is this the bottom? Unlikely, but as the supply continues to fall we will see prices begin to normalize. DFW was late coming into this housing downturn, and has several strong economic forces behind it that will make it early to exit the downturn. If I had to make a prediction, I'd look for a late spring/summer time market recovery. In the meantime, there are deals to be had out there. Find your location, get your finances in order, and make an offer. You'd probably be surprised at the deals you can get these days!

Dallas-Fort Worth home sales drop 33%

Solve the Housing Crisis by Rewarding the Prudent

2008-11-20T18:26:00.004-06:00

Just a quick entry to start things off...

Money quote "Reward the 93% of the US population who have been prudent and still have (rapidly disappearing) equity in their houses, have good jobs, have low debts and savings."

Link