Austin Real Estate and the Government Shutdown

Will the Shutdown Hurt Austin Real Estate?

Isn’t that the million dollar question?

Many parts of the Federal government shutdown on October 1st, 2013 and as a result, around 800,000 federal workers are furloughed (not working) and another million are currently working without pay. Many government websites are turned off, many consumer-help phone lines aren’t being answered, and most critically, lots and lots of paperwork is not being processed.

How does that impact Austin real estate?

Let’s talk specifics, about the stuff we “know”: most single-family properties are bought with cash, or financed, or some combination of the two (and some much smaller number have other arrangements for their transfer, but that is a different topic).

When a house is sold, the buyer and seller don’t just shake hands and hand over the deed. Lots of paperwork has to be processed: paperwork that confirms the seller has the right to sell, paperwork that confirms the buyer has the ability to buy, paperwork that records the sale in the public records and so on. Some of that paperwork is handled by banks, some by title companies, some by governmental agencies and lots more is handled by people in all sorts of other positions – it’s not a simple process, even for the simplest of transactions.

If the government isn’t open for business, some of the paperwork for home purchases can’t be processed, and some transactions will stall, or fail.

Let’s talk about some of the actual numbers for Austin-area home sales and how they could be impacted by the shutdown of the Federal government.

How the Shutdown Can Impact Cash Sales (Homes Purchased for Cash)

According to the Austin Board of REALTORS (ABOR), 3,409 single-family homes sold in the city of Austin in the 3 months before the shutdown (July, August and September of 2013). (3,409 were listed in the MLS, so the actual number is higher). Of these, 693 sold for cash (about 20%). Although cash transaction still have a lot of formal paperwork (they still have to go through a title company, for example), they don’t generally depend on government paperwork to qualify the buyer’s ability to purchase the property (which is often the case with financed purchases).

Of course, that 3-month period is before the shutdown, but it gives you an idea of the number of properties that changed hands in that amount of time . . . and an idea of the number that might change hands in the coming months. And yes, we can talk about all sorts of related topics (consumer confidence, interest rates, changes in unemployment numbers that will all shift depending on what happens in Washington over the coming weeks – but let’s save those for another article, or the comments on this one).

Some of those 693 cash sales in Austin in July, August and September of 2013 were HUD-owned properties. HUD is the US Department of Housing and Urban Development. If the owner of a home with a federally-backed mortgage defaults, HUD ends up with the home, which is then re-sold.

Of those 693 cash sales in Austin in the last 90 days, 30 were foreclosures, and of those, 9 were HUD homes (and one was owned by the VA).

So, it seems reasonable to suggest that the government shutdown, had it been in effect during that 3-month period, would have only directly impacted a smaller percentage of the cash purchases in the Austin area. During the shutdown, HUD is running on a skeleton staff (beware, that link is a download of the actual HUD contingency plan for the shutdown), with only 4% of employees still on the job (349 out of 8,709 employees). That means that HUD doesn’t have many people to process the paperwork necessary to sell a HUD-owned home, but these sales are only a small number of the overall sales figures for single-family cash purchases in the city of Austin.

(I’d really like to hear from people that can explain some of the areas where cash sales intersect with governmental agencies, and how the shutdown could impact these sales in the coming weeks or months. If you’re a cash buyer, investor, or part of the chain of folks necessary to get a deal closed, please send me email, comment in the comments, and so on, to get this discussion going. And, of course, if you’re not in that chain, but still interested in the topic, please weigh in.)

Financed Purchases are a Whole Different Ballgame

Most home purchases are financed.

Financing the purchase of a home requires a lot of formal paperwork processing, and some of that paperwork is processed at the Federal level (the part of the government impacted by the shutdown). One of the forms most lenders use to verify income is Form 4506-T (Request for Transcript of Tax Return) that comes from the IRS. During the shutdown, the IRS isn’t generating those forms. For purchases already well underway at the time of the shutdown, the forms were probably already in-hand (received back from the IRS) and the processing of those loans can proceed. For other transactions, the applications for those IRS forms are piling up and there will be a backlog that need attention when the government reopens. The longer the shutdown, the bigger the pile, the longer the delay. Fortunately, some lenders have workarounds in place (see last paragraph).

So, most financed purchases need forms from the government (the IRS) that aren’t being processed right now. And some of those purchases also need FHA case numbers, if the financing is an FHA loan. (In addition to processing paperwork to sell HUD-owned homes, HUD also produces FHA case numbers for homes that are purchased with an FHA loan.)

What kind of numbers are we talking about, for financed home purchases in Austin that requires some paperwork from a governmental agency impacted by the shutdown?

Of the 3,409 closed sales in the 3rd quarter of 2013 (July, August and September of 2013), we’ve seen that 673 were cash purchases, a small number of which would have been impacted by the shutdown.

That means up to 2,736 single-family homes sold in Austin that needed some type of financing. Of those, 273 were bought with FHA financing and another 102 had a VA loan. Without getting in to the specifics of those loan programs, the takeaway from that number is that at least 13.7% (375 of 2,736 purchases) of the non-cash purchases required at least some interaction with Federal agencies in some way for the transaction to go through.

Add to that the loans where the lenders required Form 4506-T from the IRS to proceed. Not all lenders require this form (during period of normal government operations), but many do as they seek to reduce the risk of borrowers being unable to repay home loans. During the shutdown, some lenders will proceed without the form (and verify later), but others won’t. That last link is a really facts-dense link but the details in it are critical: it explains specifically the stance adopted by some of the nation’s biggest lenders on how they will proceed with regards to Form 4506-T during the shutdown. Some
are requiring the tax transcripts to have already been pulled (the results of Form 4506-T) while others are requiring just that the signed forms be in the loan application file, with the transcripts being pulled later. The lenders’ stances are, of course, based on the underlying requirements of other agencies and entities to which they may later re-sell the loans (if the lender re-sells the loans, not all do).

You Can Still Buy a Home in Austin During the Shutdown

If you are in the market to buy a home in the Austin area, make sure you call your lender and ask specifically about which parts of the loan process might be impacted by the shutdown. Listen carefully to the answers, and make sure that you and your real estate agent write the contract in a way that allows enough time to accommodate potential delays. Fortunately, the standard TREC contract for purchasing single-family homes in Texas is very specific about the timeframes for performance, including specific language on financing. When you have a good agent and a good lender on your team, your transaction has a better chance of going through with fewer hiccups. That is true during “normal” home buying periods, and especially true during this shutdown.

Canyon Creek Real Estate Market Data | Austin TX

 

A home in Canyon Creek in Austin Texas
A typical home in Canyon Creek in Austin Texas

Canyon Creek Subdivision in Austin Texas

Most of the homes in this area have mature trees in both the front and back yards, with brick or limestone on the exterior of the home. Sidewalks making walking easy, and Canyon Creek Elementary School (RRISD) is located within the boundaries of the subdivision (but not all of the houses map to it.) Most homes have mature landscaping, and most yards are well-kept.

For the 12 months ending August 17th, 2014:

  • 81 homes sold, with a median price of $395,000 (range: $239,900 to $557,000), in a median of 4 days on the market.
  • The median size was 3,050 square feet (range: 1,643 to 4,448 square feet)
  • 19 homes are currently for sale, ranging from $339,000 for 2,338 square feet built in 1994 to $615,000 for 3,696 built in 2004.

Contrast that with these stats we published almost 2 years ago:

For the 6 months ending September 20th, 2012:

  • 63 single-family listings sold for a median price of $335,000 (range: $230,000 to $449,500) in a median of 7 days.
  • 14 properties are currently for sale ranging from $225,000 to $449,900.
  • Of the 92 properties with market activity in the last 6 months, sizes ranged from 1,658 square feet for a single-family detached condo in the Villas at Canyon Creek to 4,449 square feet for a home built in 2004 with 5 bedrooms and two bathrooms.
  • Lot sizes for these 92 homes ranges from .135 acres to .336 acres.

Schools for the Canyon Creek Subdivision

Some of the homes in Canyon Creek map to Round Rock ISD (RRISD) and others maps to Leander ISD.

Amenities for 78726

When I first moved to Austin in 2004, the shopping along 620 was pitiful: a few places to buy rocks and swingsets and a handful of other businesses. In the last 8 years, a giant HEB opened up on the corner of Anderson Mill and 620 and a huge Home Depot opened as well. Now the whole corridor has a decent selection of places to buy stuff you need without having to drive “in to town”. Stuff like moving boxes, BBQ and even bigger swingsets.

Images of Homes in Canyon Creek 78726

Google Map for Canyon Creek Subdivision in Austin TX


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Got Junky Vehicles You Want to Park in Your Yard?

Cars parked in a front yard
Cars parked in a front yard in NW Austin

You might be able to park them in your yard, or you might not.

It usually depends on two things:

1. The local ordinances (code) for where vehicles can be parked

and

2. Whether or not your HOA (Home Owners Association) allows it.

In many areas, if you don’t have an HOA, then where you can park is usually determined by the city, or town. HOAs can further restrict parking from the rules set by the city or town, but they can’t make them more permissive.

Austin Parking Code

A handy dandy search for “Austin Parking Code” yielded this rule:

“The City of Austin’s Restricted Front Yard and Side Yard Parking Ordinance prohibits parking a motor vehicle in the front or side yard of a residence except in a driveway or a paved parking space. These areas are designated on the Restricted Parking Area Map.

If you click on the link for the ordinance (above), you will find a FAQ (Frequently Asked Questions) with a lot more detailed information about what is, and isn’t permitted for parking areas (old, new, grandfathered-in).

Not suprisingly, the area where the photo is taken isn’t shown on the map as being subject to additional approved parking restrictions. Although several other homes in the neighborhood had multiple vehicles, included RVs, parked in front and on the side of homes, this one really caught my eye (hence the photo).

If you don’t want to see yards covered in vehicles like this in your neighborhood, make sure you know what the HOA restrictions are before you buy. And by the same token, if you have a bunch of cars and stuff you want to keep on your property, make sure you buy in an area where it is allowed.

Anderson Mill East Real Estate Market Data | Austin TX

A home in Anderson Mill East
A single-story home in Anderson Mill East

Updated: September 14th, 2012

Older Homes from the 1970s and 1980s in Austin

The small pocket of older homes in 78729, east of 183 and north of Anderson Mill, is commonly called Anderson Mill East. This area has small pockets of newer homes (built after 1990) mixed in with the subdivisions of Anderson Mill Village, Forest North Estates, Springwoods, Village Oaks, Northwest Woods and Jolly Oaks.

When you drive around this neighborhood, you see trees. Lots and lots of towering trees. Some lots have so many tress, you can barely see the houses.

In the mornings, even in the hot Texas summer, you will often see people out for a walk, for a run, or working in their yards. You might notice how many streets don’t have sidewalks.

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This area has quick access to 45/620, 183 and Parmer. Several shopping centers have small specialty businesses as well as the standard fare (dry cleaning, restaurants, etc.).

Anderson Mill East Real Estate Sales Activity

For homes built before 1990, in the 6 months ending September 14th, 2012:

  • 27 properties have sold.
  • The sizes of the sold properties range from 1,695 square feet to 2,800 square feet.
  • The median selling price was $155,000.
  • The highest selling price was $259,000 and the lowest was $106,378.
  • The median days on the market was 13.

The home that sold for $106,378 was a short sale, with 1,428 square feet that needed foundation repairs.

  • 16 properties are currently for sale, ranging from $185,200 to $327,000.
  • Many of the older homes in this area have not been updated when they come on the market. Popcorn ceilings and cultured-marble vanity tops are common.

    Of the homes in Forest North Estates that sold in the last 6 months, most of the lots were between .3 to a little over .4 acres and are on septic systems. Most of these homes sold at the higher end of the price range.

    Anderson Mill East
    Anderson Mill East Location in NW Austin

    River Place – Austin TX: Real Estate Market Update April 2012

    Gorgeous Hill Country Living at River Place

    River Place Austin TX 2012
    Looking for a home with sweeping Hill Country Views in the Austin city limits?

    Take a drive through River Place off of 2222 near 620 and see the variety of homes and views that are on the market this Spring.

    Homes in this subdivision range from the low-to-mid $300s all the way up to several million dollars. Homes have been built in this area since the early 1990’s and are still being built in 2012.

    River Place Real Estate Sales – January 1st to April 25th, 2012

    A Huge Home in River Place off 2222 in Austin TX
    As of April 25th, 2012:

    • Currently, 24 homes are for sale with a median price of $607,000. (Median means half were above that selling price and half were below).
    • The least expensive home for sale in River Place is $364,000 for a 3 bedroom home with 2 bathrooms and 3,016 square feet of living space on two levels.
    • The most expensive home for sale is listed for $4,150,000 and has 4 bedrooms, 5 bathrooms and a 3-car garage. This home is on the river, has a boat dock, a multi-level deck, a swimming pool and high-end finishes in the interior and on the exterior.
    • Since January 1st, 2012, 20 homes have sold for a median price of $431,000. These 20 homes ranged from $320,000 to $855,000. Another 16 are under contract.

    Characteristics of Homes in River Place in Austin, Texas

    If you drive through River Place, you will see a lot of limestone exteriors, and limestone mixed with brick. Some homes also have stucco exteriors, often mixed with brick or limestone as well.

    Many homes have gorgeous, sweeping Hill Country views, and most of the older homes have mature trees and landscaping.

    On the interior, most homes have higher ceilings, and many that have sold recently (or are for sale) have granite countertops and hardwood floors.

    River Place is in the Leander Independent School District.

    Google Map for River Place


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