No matter which side of the political aisle you hang your hat on, the recent economic stimulus package has left many still wondering, ”How will this help me?”

If you plan to buy or sell your primary residence this year, then look no further than page 202 of the 407 page American Recovery and Reinvestment Act of 2009. In order to encourage consumer demand in the housing market, a small portion of the $787 billion total–approximately $6 billion–will make it’s way to the pockets of home buyers in the form of a tax credit. 

Among many other things,  Congress approved some key changes to the First-Time Home Buyer Credit, which was initially authorized under the Housing and Economic Recovery Act of 2008.  And in record fashion, the IRS has already updated the tax Form 5405for you to take full advantage by filing for 2008 or 2009. Please consult with your CPA, tax attorney or other financial advisor to discuss your specific qualifications.

Who May Be Eligible:

You purchased a primary residence (main home) after April 8, 2008 and did not own a home for three years prior.

You purchase a primary residence before December 1, 2009 and do not own for three years prior to the purchase date.

Your modified adjusted gross income is $75,000 or less ($150,000 if married, filing jointly).

One of the most notable changes to the initial tax credit passed in 2008 is the waiver of the repayment schedule for homes that were purchased in 2009. Many have concluded, the whole notion of repayment was counterproductive for a demand-side incentive to stimulate home sales. Unfortunately, Congress didn’t retroactively extend the perk to all of those who made a qualified purchase in 2008.

For those looking to buy in 2009, the tax credit no longer works like an interest free loan, but rather potentially as an outright refund. Of course, as is often the case with U.S. tax law, one caveat remains: You must retain the home as your primary residence for 3 years, otherwise you’ll be required to repay the credit.

So technically, the expanded provision does more to loosen the attached string, but doesn’t sever it entirely. Regardless, I expect this to help many renters who have been positioning themselves to enter the market and find a great deal on their first home. And assuming they keep the home for three years or more, they’ll receive a nice gift from their Uncle Sam.

Below is a comparison of the modifications made to the previous tax credit…

Chart source: National Association of Realtors, 2009.

When you obtain a loan to purchase a home, you’re required to prepay any interest that will accrue from the date of closing until the end of the month. So, in theory, the closer your closing is to the end of the month, the less you have to pay in closing costs.

This portion of interest is charged to the buyer at closing because mortgage payments are made in arrears. Unlike paying a rent, a monthly mortgage payment actually covers the previous month. For example, if you were to purchase a home and close in January, your first mortgage payment would not be due until March 1. The payment on March 1 would cover the principal and interest owed to the lender for the month of February. For a visual illustration, take a look at the sketch above.

Regarding the prepaid interest, assume your actual closing date is January 15th. Your prepaid interest charge is as follows:

Mortgage amount:    $175,000
Annual (fixed) interest rate: 6%
Daily interest charge:    $28.68

Now compare the potential savings in prepaid interest when closing on the 31st vs. 15th.

January 15th → 17 days of interest (17 x $28.68) = $487.56
January 31st → 1 day of interest (1 x $28.68) = $28.68

By closing later in the month it’s possible to reduce your closing costs by hundreds of dollars. However, closing at the end of the month could cost you more than expected if there are any delays prior to closing. For instance, if you initially intend to close on January 31st, but are delayed until February 1st or later, you will be charged interest from closing to the end of February. So instead of paying 1 day ($28.68) of interest you may end up paying for 28 days ($803.04). 

Ultimately, your time-line for moving should determine whether you negotiate to close early or later in the month. While it is possible to save a few hundred dollars in prepaid interest charges by closing later in the month, I recommend closing earlier to avoid the risk of any last minute surprises concerning prepaid interest charges.

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Perhaps you’ve heard this before: Buy a home in a good school district even if you don’t have kids.  There’s no doubt those who choose to live in a good school district pay a premium in the form higher property taxes. So, is it really a good strategy to follow?

YES, so long as you can afford the higher taxes. Even if living near exemplary schools is not a priority for you, still consider the strength of the schools in the area in which you are searching. Generally, homes in a good school district, enjoy the benefit of healthier appreciation and less time on the market when it’s time to sell (assuming the price and condition are not more than the market will bear).

On the other hand, by purchasing in a less-reputable school district, it’s likely you will have reduced the pool of buyers down the road, namely, families searching for a home near quality schools.  

WHERE TO FIND THE BEST SCHOOLS IN AUSTIN

Great Schools is an excellent place to start. There you can browse the top-rated public and private schools in Austin, as well as, compare schools near a particular address or school district. In addition, you can find the most recent Accountability Ratings, which measure how well schools and districts within Austin are performing. Lastly, the site provides a useful platform for parents to hear what other parents have to say about their child’s experience in a particular school or district.

Here are the  Top-Rated Elementary Schools in the Austin Independent School District  for 2007.

• Mills Elementary

• Casis Elementary

• Highland Park Elementary

• Baranoff Elementary

• Hill Elementary

• Gullett Elementary

• Kiker Elementary

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Recently, Texas Realtor magazine highlighted a few of these rules of thumb:

• “Don’t buy the most expensive house on the block.”

• “Location, location, location are the 3 most important things.”

• “Buy in a good school district even if you don’t have kids.”

TRUE OR FALSE: DON’T BUY THE MOST EXPENSIVE HOUSE ON THE BLOCK

“True. Generally speaking, lower-priced properties tend to pull down the value of higher-priced properties, and more-expensive properties pull up the value of lower-priced properties.”

Mark Dotzour, chief economist at The Real Estate Center at Texas A&M agrees, 

“The underlying theory is that people want to feel like they’ve moved into the nicest neighborhood they can afford. Ignoring that theory may hurt sellers on resale. If sellers have a $250,000 home, and the rest of the homes in the neighborhood are valued in the $180,000s, they’ll be competing with properties that aren’t in their neighborhood.

If all the homes in another neighborhood are worth about $250,000, buyers might think, Do I want a really nice house in a lesser-quality neighborhood or a more-moderate house in a higher-quality neighborhood?”

EXCEPTION TO THE RULE

The exception might be a property with a unique feature for the neighborhood, for example, the only house on the block that backs to the greenbelt or has a desirable view of the hill country or downtown.

Buyers, however, will want to find out if any future developments might affect or diminish this unique feature. For instance, a new phase of the subdivision could replace the greenbelt, or a new high-rise building could block the once cherished view. 

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IN•HAB•IT \in-’hab-bet\ 

1. To occupy as a place of settled residence or habitat.

2. To be present in or occupy in any manner or form.

AUS•TIN \aw-stuh-n\

1. The greatest city in the greatest state in the greatest country in the history of the world.

2. The place we inhabit.

YOU ARE WHERE YOU LIVE ^sm

With all Austin has to offer, it is no secret why more and more INHABITANTS are calling the city home. This place is rich in history, lush in nature and there’s always a great place to eat right around the corner.

Local is the native language. And it only takes a stroll down South Congress Avenue or a Gospel Brunch at Stubb’s to expand your vocabulary. Yet, words alone never fully capture the vibrant energy that permeates the air.

Whether you dwell downtown or in the surrounding areas, there is never a shortage of creative inspiration to be found. Our city celebrates culinary uniqueness, all forms of art, eclectic shopping and a sensational night life. This place is, has and always will be a destination.

WHO WE ARE

INHABIT AUSTIN is a local real estate firm owned and operated by husband and wife, Jason and Shayla Groves. We opened our doors shortly after planting our own roots in this fabulous place. And ever since then, we have been giving full service to buyers and sellers of residential properties throughout the city.

What we love about Austin directly influences how we serve every one of our clients. Your lifestyle is our focus. And we are passionate about helping you find your place among the diversity Austin affords. Through exploring neighborhoods, evaluating financing options, negotiating offers and smoothly navigating the closing process our value is evident. Not to mention, our property marketing will knock your socks off!

Our approach to real estate is different. No self-indulgent mug shots on the business card or huge magnets plastered on the side of the car. Conversely, INHABIT AUSTIN thrives on personal relationships. The focus is on you, even long after we’ve signed all the papers at closing. We don’t just buy and sell, we INHABIT.

There’s no doubt the downtown Austin buzz is growing. It seems there are more than a few people considering a lifestyle change by moving out of the suburban areas and into downtown. Until recently, there hasn’t been a large supply of downtown residential space available. Predictably, demand for condos and lofts in the urban core continues to swell.

For example, the W Hotel & Residences saw 80 percent of their units reserved within a week of breaking ground and the sales center opening its doors (1 reservation = $10,000.00 deposit per unit). That’s remarkable given the expected completion date is still 3 years away… But even if you’re not willing to wait 3 years for your condo, there are at least 10 other projects under construction and roughly 2,000 units due to be complete by the end of next year. All of this begs the question… How much will it cost to own a downtown condo?

 AustinTowers rightly points out, “The price of a condo is only one component of the final cost. In addition, you’ll need to think about monthly condo fees, property taxes, utilities, etc. the good news is that the price is relatively fixed: unlike owning a single family house, you won’t need to worry about surprise maintenance projects like a new roof or new AC that can cost thousands of dollars.”

It is true condo owners don’t have to worry about as many maintenance issues when compared to owning a single-family residence. However, it is crucial for condo buyers to carefully investigate the financial health and viability of the owner’s association. Otherwise, you may be subjected to surprise assessments down the road. I will expand on this in a future post. 

Here is a breakdown of what you might expect to pay for three common floor plans in a high-rise condo development in downtown Austin. My assumptions are noted below the charts.

These calculations assume an average price of $350 / sq ft. Owner’s association dues are calculated on an average of $0.34 / sq ft. The mortgage principal and interest payment is based on a 30-year, fixed rate mortgage with a down payment of 10 percent at an annual interest rate of 6.25 percent. Assumes tax rate of 2.5% annually.

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Related Post :: Urban or Suburban: Where Should You Live

First it’s important to know the definition of both market conditions. In a sincere attempt to avoid insulting anyone’s intelligence, a buyer’s market is characterized by supply outpacing demand. In other words, there are too many homes on the market for the number of buyers. Typically, we see the following in a buyer’s market: 

1. Flexibility in negotiating price.
2. Added seller concessions (closing costs, repairs, etc.)

Conversely, a seller’s market is characterized by an insufficient level of supply for the ready, willing and able buyers. In a seller’s market, it’s common to see this happening: 

1. Multiple offers.
2. Shortened time on the market.

Regardless of when or where you want to move, generally the market is trending in one of two directions defined above. Yet, it is possible for the market to be stagnating in transition, which is all the more reason buyers and sellers need to anticipate which way the market will move. More specifically, you should have a clear understanding for which direction the particular neighborhood that you’re searching or selling in is trending. The real estate market is not monolithic. Some neighborhoods outperform others (see below).

Markets constantly fluctuate. Unfortunately, by the time we read about it in the paper, it’s already history. So apart from negotiating transactions on a regular basis how can you remain informed and know if Austin is presently a buyer’s or seller’s market? How can you know which way things are headed? (faint drum roll) ….Behold, the INHABIT INDEX. I developed and routinely update this index for my clients to easily gauge how supply and demand is faring in the Austin, Texas real estate market. Here’s how it works.

Essentialy, the index illustrates the current rate of sales against the current level of inventory for single family homes. Home prices in Austin, and any other city, are simply a function of supply and demand. By studying the balance between the two variables it’s possible to first, determine if we’re in a buyer’s or seller’s market, and then be better suited to anticipate how future prices may be affected. 

For example, if the INHABIT INDEX value is greater than 30%, then market conditions will generally favor the seller. Otherwise, when the INHABIT INDEX is at a value less than 30%, market conditions will likely favor the buyer. Usually, when a soft market is saturated with too many listings or if a hot market is efficiently turning over inventory for an extended period of time, prices tend to adjust accordingly. Here’s the summary:

> 30%  → Seller’s Market

< 30% → Buyer’s Market

I use the chart up top as a bird’s eye view, and the latest MLS/ABoR data tells me Austin is now a buyer’s market. The index will give even more insight when I zoom in to a particular area or neighborhood. Buyers that are now ready to begin their home search still need to be aware certain neighborhoods may not have shifted into the buyer’s zone. For example, look at all of Austin compared to the hottest areas this September.

   Location         INHABIT INDEX     Est. Days on Mkt.

1. Austin                           17%                               60

2. MLS N                           43%                               33

3. MLS 10N                       34%                               34

4. MLS 10S                        33%                               30

MLS area N, 10N and 10S are above the 30% threshold (seller’s mkt) and are seeing a very short exposure time on the market. I belive much of the attraction to these areas can be attributed to their affordability (median prices $170,000-188,000).   As I mentioned above, the INHABIT INDEX is a tool that I provide my clients to help them easily gauge the overall market condition. Keep checking back as I routinely update it and will share my findings in future posts.

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It’s no secret our emotions play a large part in the decision making process when it comes to buying a home. “What about my home would influence a buyer’s emotions when they enter?” This is what a seller should be asking weeks before they begin marketing their home.  If you’re thinking about selling, take a whiff and you may find the answer.

The Smell of Money: Marketers Use Scent to Encourage Spending describes how of all the 5 senses, smell is thought to be the most closely linked to emotion. The post goes on to discuss how major corporations leverage the subtle tactic to encourage a sensory, emotional response and subsequent purchase of their products.

It can be akward for both a Realtor and seller when the topic of “this house has a smell” comes up.  Truth is, every house has a smell, it’s usually either good or bad. When selling your home, know that scent is a catalyst for either a positive or negative first impression. Baking cookies before an open house or showing will only last for so long. My suggestion. Deep clean with a lemon scent.

I should point out I’ve never had a client decide to buy a particular house because it smelled nice, but I have seen contenders crossed off the list because they didn’t.

3 quick tips to make your home smell better and sell faster:

1. Keep it clean (if you don’t have the time, call in the professionals). 

2. Remove pet odors (litter boxes, dog beds, pets…etc.).

3. Replace the air filters (keep the house ventilated with fresh air).

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 Should you live downtown or in the burbs? With the re-emergence of downtown living, this question is on the minds of many in Austin. There are obvious advantages and disadvantages to both the urban and suburban way of life. But ultimately, it comes down your preferences.  

So what are the top 3 advantages to urban and suburban lifestyles in Austin? I’ve lived in both Austin’s urban and suburban environments. Here’s what I think.

3 advantages to living in downtown Austin

Entertainment. Like any great city, there’s always something going on downtown, be it a concert, an art gallery or some type of festival. It isn’t difficult to find something, to keep you entertained. Music lovers, not much is left to be said about finding shows any night of the week. From salsa lessons to cooking classes, to having a cup of coffee at Progress or JO’S and watching eccentric people pass by, there are so many things to keep boredom at bay.

Public transportation. Austin’s public transportation and infrastructure isn’t nearly as robust as San Francisco’s or Seattle’s, but it is improving. The bus system is a great alternative to driving around the core of town. This aspect will only get better once the rails are further developed. But when it comes down to it… The real advantage to being downtown is simply being within walking distance to your most visited destinations. 

Culture. Anytime a large group of people are living close to one another, diversity is bound to flourish. Yet in the midst of so many differing ideas, there’s something uniquely Austin that transcends it all. To better understand what I mean, take a walk down South Congress Ave or go to a Gospel Brunch at Stubb’s. Also, the Farmer’s Market is a great place to experience the culture.  Something different everyday, that appeals to me big time.

3 Advantages to living in suburban Austin.

Price ($).Price per square foot for homes outside of Austin’s core is commonly 2-3x cheaper than homes in central Austin. For example, a newer 1,500 sqft home in Southwest Austin may cost $187,500 where a similar sized, and likely much older home in  central Austin would cost at least $360,000. What’s more, the southwest area is a short 8 minute drive away from downtown Austin (sans rush hour traffic). By living a little farther out, you can enjoy all the offerings of the city and not be forced to eat peanut butter and jelly for every meal in order to fund your monthly mortgage payment. Hopefully, you didn’t finance your urban digs with an adjustable rate…

Space. By space I mean a few things. More house for less money. A space to park your cars or SUVs if you prefer (I read a statistic that Austin averages 1.4 cars per person). Space to have family and visiting guests to stay the night (in their own bedrooms). Space to have a home office, music or art studio. Space to hang your stuffed deer head or whatever else you’re proud of. Whether you have a big back yard or a great front porch, chances are you will likely have a great space to entertain your friends and neighbors.

Yards & pets. Austin is an extremely pet friendly place, even in the urban area. However, one of the reasons we purchased outside of Austin’s core, was to have a yard. We have a cat and a dog that are right at home in the shade of the live oaks in our back yard. The pets are much happier outside while we’re at work during the day. Also, we have a great area in our yard to grow vegetables. The crop isn’t overly abundant right now, but someday soon it will make an incredible garden.

Bottom line… when you’re considering urban versus suburban, carefully analyse both. Write down your preferences and decide which lifestyle appeals to you more and don’t forget to check the price tag.

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Related Post :: Urban or Suburban: How Much Does it Cost to Own?

Provided By: CBS

This segment details what’s become of the subprime mortgage market and explains how to avoid financial disaster before shopping for a loan.  

According to Freddie Mac, subprime loans account for 50 percent of current home foreclosures. So, what does this mean for the Texas housing market?

“Dr. Mark Dotzour, chief economist with the Real Estate Center, says the real vulnerability in the residential housing market is in the entry-level housing category in regions where a large percentage of buyers have purchased with little or no down payment.

In recent years, investor thirst for the higher yields of mortgage-backed bonds has allowed mortgage lenders to relax credit standards and issue loans that have a much higher risk of foreclosure,” Dotzour said. “It stands to reason that when you make riskier loans, you are going to have more foreclosures” (Real Estate Center | Texas A&M University, January 2007).

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