If the Census Bureau’s latest numbers are any indicator, April was a wild month for new housing construction in the U.S., with building permits and housing starts rising and falling in equally dramatic fashion.

And behind the dramatic sways was a familiar culprit – the ever volatile sector of multifamily housing.

Topsy Turvydom in New Construction

First, building permits, which are sought by builders for future construction projects, rose by extravagant amounts in April, increasing 14.3 percent from March and a jaw-dropping 35.8 percent from April 2012 to an annual rate of 1.017 million; that’s the highest level for building permits in five years, and the increase was largely driven by the nation’s surging multifamily housing sector. Authorizations for multifamily units rose 32 percent from March to April, while single-family home authorizations rose a more modest 3.0 percent.

Yet, where multifamily housing was a boon for permits, it was an anchor for housing starts. Multifamily starts were down 37.8 percent from March to April, which sank overall housing starts by 16.5 percent; though housing starts were still 13.1 percent above April 2012, the monthly decline knocked them down to their lowest level since November 2012.

The Single-Family/Multifamily Divide

But still, on the single-family home side of the equation, there was much to like. As Bill McBride pointed out on Calculated Risk, single-family starts were up 20.8 percent yearly in April, and for 2013′s first quarter, they’re up 39 percent from 2012. And considering that overall housing starts were at an 853,000 annual rate – when housing starts averaged 1.5 million per year from 1959 to 2000 – there’s still plenty of room for growth.

Are there any takeaways, though, regarding multifamily housing? If anything, April’s numbers on building permits only confirm that we can expect more multifamily developments to come down the pipeline, and as the Architecture Billings Index continues to show, there are still plenty of developers out there prospecting for more condominiums and rental units.

The post Housing Starts Plunge, Building Permits Soar in New Census Bureau Data appeared first on Houston Agent Magazine.

Prospecting for new clients is among the least glamorous of real estate’s many activities, and the stereotypical image behind prospecting – endless cold calls,  drip email marketing campaigns, door-to-door canvassing – make the activity seem as much fun as pulling teeth.

Yet, beyond the stereotypes, there is a whole other world of prospecting, one that is fun, and lively, and interactive, and as is the case with so many aspects of real estate, there’s nothing stopping you from embracing such strategies. Here are three to consider:

1. Inventive Branding – Your real estate business is only as good as your brand, and it behooves any agent to make their brand as ubiquitous and recognizable as possible, without seeming intrusive or pushy. How can that balance be achieved? Consider creative, inventive places to incorporate your brand. For instance, think about unorthodox places to print your company logo and contact information, such as water bottles, which you could distribute to members of your gym, your son/daughter’s little league team. Or look into creative sponsorships, such as bowling leagues, or school field trips; when I was in high school, our marching band planned biannual trips to Disney World, and a Realtor in the area always met new clients through his sponsorships of the band’s fundraising efforts, which involved his logo appearing boldly on event banners and the like.

2. Public Events – Rather than spending a weekend going door to door, let the potential clients come to you with a fun public event! Something like a barbecue for your neighborhood/subdivision is the perfect opportunity to introduce yourself to customers, show off your impressive market knowledge and, naturally, impressive everyone with your impeccable culinary skills.

3. Make the Usual Unusual – Finally, think about ways to make the most common, boring aspects of your real estate business unique and interesting. For instance, we recently learned of a Realtor who attached sticks of gum to all of his business cards; such a strategy is not only hugely creative, but incredibly cost-effective, and it gave the Realtor an immediate edge on his competition. Think about what other aspects of your business could use a similar, refreshing approach.

The post 3 Fun Ways to Prospect For Clients appeared first on Houston Agent Magazine.

Realtors and appraisers don’t always see eye-to-eye when it comes to valuing homes. This can be especially frustrating when seemingly everything else is working well in the booming Houston market. I’ve put together some of the most common reasons homes don’t appraise and some suggestions to try and help make sure you don’t run into any problems.

With sales and prices up, everything about the real estate market seems great, but making value in an appreciating market can be tough for appraisers. This is because of an inherent flaw in appraisal methodology.

Appraisals use sales from the past to determine current market value. In a rapidly changing market, the past may not accurately depict the current market conditions. While appraisal methodology can adjust for an appreciating market, many appraisers are reluctant to do so for fear of push back from underwriters.

To combat that problem, always let the appraiser know if you have multiple offers, and be willing to accept back-up offers no matter how good the first offer is. This suggests market acceptance of the pricing of your home and not a lone rogue buyer offering too much out of ignorance or exuberance. If your market is improving, make sure the appraiser knows it.

One way show this is by use of the statistical features in the Tempo MLS. If the average neighborhood sales price for the past 12 months is more than 3 percent higher than the prior 12 months, it’s a pretty good argument that the market is appreciating. In some cases, the prices don’t yet reflect the increases but the leading indicators; marketing times, supply of homes, sales volume and list to sales ratios indicate an imbalance in supply and demand that precedes an appreciating market. Given an appreciating market or multiple offers, an appraiser may be able to make market condition adjustments and justify a higher value.

Appraisers rely more on sales than active listings or pending sales because a closed sale is evidence of how much a buyer was willing to pay and when they paid it. A listing may never sell, and if it does, we don’t know when or at what price. Always consider the competing listings when marketing a home, but be aware of the sales when accepting an offer.

Appraisers have guidelines when selecting comparables. Fannie, Freddie, FHA, etc., have guidelines for what is considered comparable. Individual lenders may have additional restrictions as well. In general, comparables that require adjustments of more than 10 percent for any individual characteristic (size, quality, view, etc.), 15 percent for the net adjustments and 25 percent for the gross (sum of all) adjustments suggest a lower level of confidence and therefore higher risk.

As such, a 3,000 square foot home would not likely meet these criteria when appraising a 2,000 square foot home. Similarly, a $200,000 home is a poor comparable for a $300,000 home, regardless of what adjustments you feel are warranted. The thinking is if a comparable needs that much adjustment, it is not really comparable. When selecting comparable sales, the fewer the adjustments, the better.

By far the most common reason some homes fail to appraise is because of price per square foot ($psf) valuation. The $psf is the fastest and easiest way to value a home, but because it is so simplistic, it is the most wrought with error. $psf assumes that the entire value of a home is based on the number of square feet it contains. It fails to distinguish between fixed costs and variable costs.

Fixed costs (lot, appliances, site improvements, garage) remain roughly the same regardless of the size of the home, and may make up 30 to 40 percent of value in a suburban location and even more in areas with high land values (The Heights, Memorial Villages). $psf becomes most problematic when comparing two different size homes. In theory, if two homes have similar fixed costs of $50,000, a 1,000 square foot home should cost $25 per square foot more than a 2,000 square foot home, because the fixed costs are divided by a smaller number. This is why larger homes typically have lower $psf cost than similar smaller ones.

To find out how much buyers really pay for each additional square foot of home, compare two homes of different size that are similar in all other aspects. Both are two-story, don’t have a pool, no view premiums, the same number of baths, etc. Subtract the lower sales price and divide that by the difference in square feet. Typically that number amounts to 25 to 50 percent of the sales price per square foot. So when pricing a home, $psf is okay to use when making an apples to apples comparison. Short of that however, keep in mind that smaller homes typically have a higher $psf than larger ones, and one-story homes typically have a higher $psf than two-story homes.

Steve Kahane is the owner of Greater Houston Area Appraisals and a certified residential appraiser. He can be reached at:

Phone: 832-875-6090
Email: steve@ghaa.net
Fax: 832-550-2070
Website: www.ghaa.net

The post Why Homes Don’t Always Appraise appeared first on Houston Agent Magazine.

“Housing affordability” is a term that gets thrown around quite a bit nowadays, and for good reason; with mortgage rates at all time lows, homeownership is a possibility in even the priciest of housing markets, and owning a home is often a more cost-effective option to renting (though to be fair, such a scenario depends upon securing a mortgage amidst tight lending standards).

Yet, though homes may be relatively affordable, how much income must a homebuyer have to afford a mortgage? And how do those income levels differ across the U.S.’ many metropolitan markets? Those two questions were at the heart of a new study by HSH.com, which took median home price data from the National Association of Realtors and the average first quarter interest rate for 30-year FRMs and, assuming a 20 percent downpayment (and discounting any complementary, adjustable costs, such as taxes and insurance), calculated what kind of income a homebuyer would need to purchase a median property in that area.

So, what did HSH.com find out? What income level should you have in mind when consulting with potential clients? And how much can you brag to current clients about how affordable our housing market is? See our infographic below to find out:

The post What Income Does Your Client Need to Buy a Home in Houston? appeared first on Houston Agent Magazine.

A development has been approved for Galveston.

Marquette Company has had two 15-story hotels and nearly 4,000 homes approved for development in Galveston, according to a new report from the Houston Chronicle.

It will be the biggest development project in the town’s history, and though it had proven controversial with town residents, it is poised to reshape the area. On Thursday, the Galveston council approved a five-year permit extension that authorizes the construction of two 15-story hotels, in addition to the 3.948 dwellings already authorized.

The vote ensures that Marquette Company, along with the Texas Land School Board, can proceed with the 1,000 acre Preserve at West Beach development.

Opposition initially came in 2007 from residents who feared that the hotels and new residences would destroy the remaining freshwater wetlands, coastal prairie and wildlife habitats. In 2008, Hurricane Ike and the recession sidelonged the project, and in 2011 Marquette defaulted on the 35 million dollar  loan used to purchase the property.

Two weeks before the property was to be sold at auction, the Texas Land School Board, in agreement with Marquette Company, purchased the development for 10 million dollars.

Despite heavy protesting in 2007,  only two residents spoke out against it on Thursday. According to the Houston Chronicle, Councilwoman Elizabeth Beeton expressed concern that concessions in the original agreement would put the city at a disadvantage. She also expressed concern about putting the hotel towers in the same place where many homes were removed after Hurricane Ike struck in September of 2008.

Construction will begin depending on market conditions. The permit allows construction with or without a golf course. If a golf course is built, the number of allowed dwellings will be reduced to 3,471.

The post 16-Story Hotel and Nearly 4,000 Homes Approved for Galveston appeared first on Houston Agent Magazine.

The Leland Woods subdivision is celebrating the “rebirth” of their community, after receiving assistance from the city of Houston.

The Leland Woods subdivision is celebrating the “rebirth” of the community after receiving assistance from the city of Houston. According to Mayor Annise Parker, the development almost “crashed and burned” because of the economy.

City officials confirmed this construction project began eight years ago, but builders stopped construction on the development due to the economic downturn and plummeting housing market.

“They didn’t have the resources to complete their commitment of building houses, and mortgages dried up so both sides were out of whack,” Parker said, in an interview with MyFox Houston.

Contempo Builders resumes work on Leland Woods

Since then, the city stepped in and hired Contempo Builders to resume work on Leland Woods. So far, they have developed 41 homes as part of phase one. Phases two and three will eventually develop 373 properties, and the builders work with potential buyers who qualify for a special assistance program.

“You have to have a particular income under law in order to get the $30 thousand,” Alfredo Rodriguez, Vice President of Marketing at Contempo Builders, said.

14 of the homes have been sold (or are currently in the process of being sold). Anyone can buy any of the homes in the Leland Woods subdivision, but only people with a specific income can qualify for the assistance program.

“We’re not just building homes,” Parker said. “We are building the city of Houston.”

The post Leland Woods Community is Revived, Thanks to Houston’s Help appeared first on Houston Agent Magazine.

Builder confidence at all levels of the homebuilding industry showed some of its strongest numbers in years in May, with both the Housing Market Index and the 55+ single-family Housing Market Index increasing.

The indices, both of which are measured and released by the National Association of Home Builders (NAHB), reflected new levels of homebuilder optimism and greater interest from homebuyers.

Homebuyer Urgency in the Housing Market Index

For the more general Housing Market Index, builder confidence for newly built, single-family homes rose three points to 44, with all three main components of the index showing improvement as well.

The index gauging current sales conditions increased four points to 48, while the index gauging expectations for future sales edged up a single point to 53, which is its highest level since February of 2007. Finally, the index gauging traffic of prospective buyers gained three points to 33.

Rick Judson, the chairman of the NAHB, said that low housing inventory has inspired a new level of urgency for potential homebuyers.

“Builders are noting an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale, continuing affordable mortgage rates and strengthening local economies,” Judson said. “This is definitely an encouraging sign even amidst rising challenges with regard to the cost and availability of building materials, lots and labor.”

Soaring Confidence in 55+ Market

As promising as the Housing Market Index was, though, it paled in comparison to the gains seen from the 55+ single-family Housing Market Index, which increased 19 points in the first quarter to reach 46; that’s the highest reading since the NAHB launched the index in 2008, and the sixth straight quarter of increases.

With numerous Baby Boomers retiring and seeking new housing options, the 55+ market will be an important one for the housing market, and the individual components of NAHB’s measure of the market left much to smile about: the present sales marker rose 19 points to 46; expected sales rose 21 points to 53; and traffic of prospective buyers rose 15 points to 41.

Also, the 55+ Housing Market Index for condos showed strong numbers. Overall, the index rose 23 points to 38, its highest first-quarter reading in the index’s history, while present sales rose 23 points to 37, expected sales for the next six months climbed 23 points to 43 and traffic of prospective buyers rose 23 points to 38.

“We are seeing an increase in consumer demand for homes and communities that are designed to address the specific needs of the mature homebuyer,” said Robert Karen, chairman of NAHB’s 50+ Housing Council and managing member of the Symphony Development Group.

The post Builder Confidence Surges in May appeared first on Houston Agent Magazine.

The average Realtor is 57 years old, and only 2 percent of the entire Realtor class is younger than 30.

Those were just two of the many interesting facts found in the National Association of Realtors’ 2012 Member Profile, a wide-ranging study of the businesses and demographics of Realtors. In our first story on the profile, we specifically looked at how Realtor incomes and transactions changed from 2011 to 2012, but now, for our second story, we’re looking at what the profile found regarding the characteristics of today’s Realtors.

Demographics, Compensation and Politics

The typical Realtor has 13 years of experience and works 40 hours a week, with 57 percent of them being women. Other key characteristics NAR uncovered include:

• Again, Realtors remain a predominantly older group, with the average age in 2012 being 57 years; only 2 percent of Realtors are under the age of 30, and only 4 percent are between 30 and 34.
• Split commissions maintained their dominance, with 68 percent of Realtors being compensated through that method; 18 percent received the entire commission. Also, 83 percent of Realtors worked as independent contractors, and the vast majority received no fringe benefits for their work.
• And finally, Realtors remain a politically active bunch! Ninety-four percent of Realtors participated in the last national election, and 86 percent their last local election.
• Also, Realtors are very well educated, with 50 percent holding at least a bachelor’s degree.

Business for Today’s Realtors

NAR’s report also featured unique insights into how Realtors run their businesses. Sixty-four percent of Realtors, for instance, have their own personal website; 56 percent use social networking sites; and most interestingly, 92 percent prefer using email to communicate with clients and customers – that’s a greater percentage than those who prefer using the phone!

Also worth noting: 14 percent of Realtors have a personal assistant, and only 6 percent chose real estate as their very first career, with 19 percent leap-frogging from business careers, 15 percent from sales/retail and 7 percent from education.

The post Only 2 Percent of Realtors are Younger than 30 appeared first on Houston Agent Magazine.

It’s the question on everyone’s mind, now that the housing market is on a slow, sustainable path to recovery – when will private lenders return to the mortgage landscape?

Lending has certainly been tight in recent years, as a recent speech by Federal Reserve Governor Elizabeth Duke highlighted. One of the more vocal champions of lending reforms, Duke said in her speech that originations for borrowers with credit scores between 620 and 680 fell an astounding 90 percent from 2007 to 2012, while originations for borrowers with credit scores above 780 fell by 30 percent.

Demand for mortgages, though, has been on the upswing, particularly from prospective homebuyers looking to capitalize on record low interest. Are lenders responding in kind? Well, yes and no.

Our infographic below collects research by the Federal Reserve, which tracked demand for loans and compared it to the flow of credit from banks. The conclusion? That lending standards are much more reasonable than they were at the height of the downturn, but they still have some way to go to catch up to demand.

And that’s certainly the case in some of Houston’s market. Christi Borden of Better Homes and Gardens Real Estate Gary Greene works in Katy, arguably the hottest of Houston’s many positive housing markets, but she said the lending process remains complicated and drawn out.

“Nobody is coming away unscathed,” she said. “It’s so much harder than it used to be.”

The post How Hard is it, Really, to Get a Mortgage? appeared first on Houston Agent Magazine.

Mortgage rates for 15- and 30-year mortgage in the first week of May, according to the latest Primary Mortgage Market Survey from Freddie Mac, were just 2.61 and 3.44 percent, respectively. Though those numbers were slightly higher than the week before, they are still more than 10 percent below last year’s already record-setting levels.

Though analysts expect mortgage rates to increase by the end of the year, why are current rates so darn low? Here are three of the more interesting reasons to consider:

1. The Demand Paradox – Only in this housing market would such a situation arise. Mortgage rates typically fall when demand for mortgages is less-than-stellar, and for good reason – banks hope the low rates will attract potential homebuyers to get off the fence, and in any other housing market, our explanation would stop here. Yet, demand for mortgages is at a three-year high, and the housing market is recovering, so what gives?

The answer is actually a simple one – the Federal Reserve, though its quantitative easing and the strangely named “Operation Twist” monetary policies, has unleashed a bazooka of cash into the economy, and with so much cheap money flying around, rates have had nowhere to go but down, regardless of mortgage demand.

2. Low Inflation – Inflation is one of those wonky terms that can quickly grow irritating, but in the case of mortgage rates, it actually makes perfect sense. Rates rise when inflation rises, because when inflation is high, investments (such as mortgages) are not as valuable, so banks increase their rates to cover their profit margins. Currently, though, inflation is all but non-existent, so banks can keep rates low and, in the case of Wells Fargo and JPMorgan Chase, report record profits.

3. Foreign Conflicts – Perhaps the most intriguing cause for today’s record low interest rates is foreign conflicts, particularly the stalemate between the U.S. and North Korea and the civil war in Syria. Though those conflicts could not seem further removed from, say, someone buying a two-bedroom condo in West Town, we’re living in a global economy that ebbs and flows based on international developments, and in countries such as North Korea and Syria, which impact dozens of the world’s most powerful nations, market unrest often leads to lower mortgage rates here at home.

The post 3 Intriguing Reasons for Today’s Low Mortgage Rates appeared first on Houston Agent Magazine.