Rumors and News from Austin and Dripping Springs

Austin area homebuilders increased the start rate of new homes in the second quarter, while the number of new homes closings fell compared with the first quarter of 2009, according to research from Residential Strategies Inc.

"The start rate for the second quarter totaled 1,861 units, a 52 percent increase compared with the first quarter of this year. The annual start rate in Austin from the third quarter of 2008 to the second quarter of this year was 6,949.“The second quarter period historically marks a time of increased start activity, based on increased buyer traffic and sales during the spring selling season,” said Mark Sprague, Austin partner with RSI. “Homebuilders

had very few backlog orders to fulfill during the first quarter and no need to begin any speculative construction, but buyer traffic and sales have increased, marking the need for additional starts during the second quarter of 2009.”

The overall annual level of new home starts is still about 41 percent below the third quarter 2007 to second quarter 2008 annual rate.

New home closings for the second quarter of this year totaled 1,786 homes, a 17 percent decrease compared with the previous quarter. Annually, the Austin area has seen about 8,900 home closings.

New-home sales in the U.S. increased dramatically from May to June, offering some evidence that the housing market is recovering, according to an U.S. Commerce Department.

Sales of single-family homes increased 11 percent to a seasonally adjusted annual rate of 384,000, compared to a revised May rate of 346,000. The jump marks the third consecutive increase in as many months and eclipses predictions by economists recently surveyed by Dow Jones Newswires, who expected June sales to climb 2.3 percent to 350,000.

The last time sales rose so dramatically was in December 2000, nearly nine years ago.

The report is a sign that the housing sector could be rallying. Last week, the National Association of Realtors reported that home resales posted a monthly increase of 3.6 percent in June.

Construction employment in the Austin-Round Rock metro area declined by just over 7 percent in June, compared with the same month last year, according to data from the Associated General Contractors of America.

Austin is by no means alone. Of the 352 metro areas included in the data, only 19 saw construction employment either hold steady or increase.

“Construction workers remain, unfortunately, on the leading edge of job losses during this recession,” said Ken Simonson, chief economist for the contractor's association. “While other sectors of the economy have been hit hard, construction employment has been devastated.”

The Austin area’s construction jobs dipped to 45,100 this June from 48,700 in June 2008. The area is ranked 100 out of the 352 metro areas in the analysis.

The worst-hit metro areas were Pascagoula, Miss. and Reno-Sparks, Nev., which both lost one out of every three construction jobs over the past year. More than 200 metro areas had double-digit percentage declines in construction employment in the past 12 months, Simonson added.

The 10 cities that saw increases in construction employment included Columbus, Ind. and the Weirton-Steubenville area along the West Virginia-Ohio border.

“This recession won’t be over for most communities until we find a way to get construction workers across the country back on the job,” said Stephen Sandherr, the association’s CEO. “That’s why we need to act now to ensure the stimulus’ sequel isn’t idle cranes and empty work boots.”

Entrepreneur magazine’s August issue ranks Austin the tenth-best start-up city in America.

The magazine’s look at new business-friendly cities addresses issues such as government incentives, population growth, affordability of commercial rents, and openness to new ideas.

Entrepreneur calls Austin the “cross-pollinator” among the top 10 cities. The magazine cites the multiple "scenes" that shape Austin, from music to tech, and how they feed off of one another.

"Theoretically, people here are competing, but the opposite is happening,” Bijoy Goswami, founder of Bootstrap Austin told Entrepreneur. “Part of that Texas ethos has percolated into the entrepreneur scene: People in Austin just treat each other well.”

The magazine also highlighted Sweet Leaf Tea Co-founder Clayton Christopher as an example of one of Austin's brightest business minds. “There’s a cachet attached to Austin," Christopher said. "It’s the live-music capital of the world; it has good Texas values. Having Austin on our bottles has been a huge benefit."

The top ten cities in order are Las Vegas, Portland, Ore., Orlando, Fla., San Diego, Phoenix, Chapel Hill, N.C., Atlanta, Madison, Wis., Youngstown, Ohio, and Austin, Texas.

Just over 2,100 single-family homes sold last month in the Austin area, down 4 percent from June 2008. But the year-over-year sales volume gap is shrinking each month, according to a report from the Austin Board of Realtors.

The median price for a single-family home is just under $200,000--unchanged from a year ago. Prices have actually gone up since the beginning of this year.

Sales volume has also improved since the beginning of the year. Last month's sales were up 61 percent from January and there are 14 percent more active listings, according to the report.

“This signifies a healthy Central Texas real estate market and good news for both local home buyers and sellers,” argues Jay Gohil, chairman of ABoR.

Foreclosure postings filed on commercial real estate for January through July foreclosure auctions in the Austin metro area jumped 139 percent over the same time period last year, according to data from Addison-based Foreclosure Listing Service Inc.

The postings included a range of commercial properties, including retail centers, retail buildings, office and industrial buildings, apartment complexes and unimproved commercial land.

Year-to-date foreclosure postings of commercial real estate climbed at a far steeper pace than residential postings in the two-county Austin area,” said George Roddy, Sr., president of FLS. “Foreclosure notices filed on commercial real estate climbed at the brisk pace of 139 percent compared to a 38 percent gain on the residential side of the market.”

But, Roddy said, the vast majority of commercial properties posted for foreclosure recently have been Class C or D properties and small, miscellaneous buildings, whereas in the real estate crash of the 1980’s a significant number of signature, Class A properties were posted for foreclosure.

“So far this year, postings of miscellaneous commercial buildings account for 53 percent of the total commercial property postings filed in the Austin market,” Roddy said.

The largest gain in postings came - a 850 percent increase compared with the same time period last year - came from industrial buildings in the Austin area. So far this year there have been 19 postings filed on industrial buildings, compared with two postings filed this time last year.

Retail centers and buildings also saw a surge in foreclosure postings, seven postings this year, or a 600 percent increase compared with the same months last year.

Foreclosure activity did decline for one type of Austin-area commercial property, though, office buildings. That property type saw seven notices filed, or a 36 percent decrease in foreclosure notices compared with the same seven months last year.

Vacant commercial land postings totaled 94, or a 169 percent jump over the same time period in 2008. Foreclosure postings for apartment properties climbed 127 percent over last year, with 118 postings. And miscelleneous commercial building foreclosure postings totaled 278, or a 136 percent hike above postings filed in the same period last year.