Austin Based Home Away Adding 2,000 Jobs

It was reported in today’s Austin American Statesman that Austin based Home Away will be adding an additional 2,000 new jobs starting in 2019.  For those of you that are not familiar with Home Away, they are a company that lists short term rentals for owners and has recently been purchased by Expedia.  The location of the new headquarters will be a new 315,000 square foot office tower located in the Domain.  The Domain is the site of the former IBM plant located at Braker Lane and Burnet Road.  The Domain has it all, Tiffany’s, Whole Foods, lots of top scale restaurants and top notch apartments.  Very first class indeed.   When you consider that Expedia is located in Bellevue, Washington, but that the expansion is taking place in Austin, it says a lot about what corporate America this of Austin.  I think that the cost of construction had a lot to do with it.  It’s been a while since I visited friends living in Bellevue, but as I recall, there isn’t much of a place to build there, and if you tried to build, it would empty your pockets.  Then too, there is cost of living, Austin is much cheaper than many high tech areas.

All the more reasons for owning Austin area residential real estate.

Rick Ebert / Austin, Texas  / 23 June 17

1 Million Fewer Homeowners today than 10 Years Ago

At a recent conference held in Berkeley California, Ken Rosen president of the National Association of REALTORS, and University of California economist Ken Rosen gave their views on why there are fewer homeowners today verses ten years ago.  It is something of a mystery but the speakers did a good job of unrevealing it for us.  One reason is that many people still remember the bad times of all of the nations’ foreclosures and how long it took to get back on our feet.  So these folks are shell shocked and avoid buying a home.  That is good news for us investors in residential real estate as we can provide good housing for those that are risk avoiders.  Reasons also cited included:

  1. The shortage of single family homes.  Production of single family homes simply hasn’t kept up with demand.  Nationwide there is an estimated 3.7 million deficit over the last eight years.  And in the Austin area, the cost of acquiring land has increased dramatically.
  2. The price of buying a home has increased due to the lack of inventory (see #1).
  3. Student loan debt is high and this keeps many young families from buying a home.  They simply can’t save for the down payment while paying off this debt.  And as they continue to pay down student loans the cost of buying a home increases.  It seems for many to be a moving target.
  4. Mortgages are harder to come by today than yesteryear with stricter qualifying standards in place.  I think this is a good thing.  As we investors know only too well, there is more to owning a house than just making the mortgage payment.  Those window treatments and plants really start to eat into the pocket book.  Then comes the maintenance expenses.

So folks for the foreseeable future owning a well-placed piece residential rental in a growing area like Austin is a good investment.

Rick Ebert Austin, Texas / 12 June 17

How much cheaper is Austin Compared to ???

A recent article in the Austin Relocation Guide compared living in Austin to other major cities.  Specifically, how much money does it take to have a decent lifestyle in Austin when moving away from these cities?  The study assumed that the person was making $60,000 a year.

For instance it you make $60,000 in Detroit you only need to make $59,440 in Austin.  The plus side here is our winters are the envy of the nation.

Moving from here to Austin you only to make this much to have the same lifestyle:

San Francisco:                    $32,173
Boston:                                $39,397
Denver:                                $51,996
Seattle:                                 $39,381
New York City:                   $33,431
Los Angles:                         $39,819
Chicago:                              $48,354
Portland:                             $45,225

Why such a large gap in wages to sustain the lifestyle?  Because Texas does not have a state income tax and is frugal in spending tax dollars.  These reasons coupled with a favorable climate, good roads, and a can-do business attitude that attracts employers and thus creates jobs, means that you can live here for less than similar size cities.  And since these new arrivals need housing, coupled with the fact that the demographic of the typical renter and homeowner are changing, it means that landlords are in a great position.

Rick Ebert/ Austin, Texas / 29 April 17

 

What Renters Say About Renting

A recent article in the “Daily Real Estate News” quoted a survey from Freddie Mac of renters about how they view renting.  The information is pretty much on target with other information I have gleaned from other sources, so I consider the information in the survey to be more of a confirmation of trends that I have seen in the Austin area and with our managed properties.  Here it is:

  • Renters are not likely to move even if there is a rental increase
    • Overall percentage was 55% plan to stay
    • Those who stated that they plan to move within the next 2 years dropped from 38% to 33%
    • 60% of those aged between 35 to 49 stated that they plan on staying put vs. leaving even if there is a rental increase
  • Generally, renters like where they live and feel good about renting
  • Fewer renters are working towards home ownership
  • Fewer renters are planning to buy a home within the next few years
  • Of those surveyed who plan to move 59% plan on renting vs. buying a home
    • This is a 55% increase over September 2016
  • Tenants who expressed an interest in owning a home in the future dropped to 41% from 45% in September 2016.

So what does this tell us?  Answer:  That owning a residential rental that is in good repair and well maintained and located in a desirable area is a product that will have a tenant.  Reading between the lines, it also tells me that the tenant will take some pride in residing in the property which should translate to taking care of it.  All the while as home prices continue to rise in our area we have a tenant who is helping us increase our equity position in the property and provides cash flow.

How sweet it is!

~Rick Ebert

Austin Job Growth 3.3% in 2016

According to a recent article in our local paper, the Austin American Statesman, the job rate in Austin and our surrounding cities was 3.3% in 2016. This is really great news but the article pointed out that this figure was off a tad from previous years. Payroll increased by 3.8% meaning that employees are earning more money. All of this bodes well for us investors in residential rentals as it means that our area continues to grow and attract both employers and employees who need housing. And since housing is still in short supply here, and since interest rates have increased and look as if they will continue to increase, coupled with the increased price of homes making saving for down payments more difficult, it looks like renting is the option for our new transplants. When you factor in that many people are “choosing” to rent vs. buying a home, such as retirees and minerals, this is driving the average rent price upwards.

Looks like the good times will continue to roll on for us – especially if you own Austin area rentals.

Rick Ebert / Austin, Texas / 26 March 17

Austin is Number 1

According to an article in US News and World Report this week Austin, Texas is the number one spot to live and to buy a home.  Just an FYI last year Austin was ranked number two on the list.  The survey examined the top three ranking metro areas to come up with Austin as being number one the last.  Austin beat out Denver, Colorado and my home town of San Jose, California.  With San Jose being such an expensive place to buy a house I’m really surprised that it made the cut.  A part of the qualifying process was linking job opportunities and finding a home that that is affordable.

Well Austin and the surrounding cities are indeed affordable by nationwide comparisons, but the value of housing continues to increase yearly and is becoming more unaffordable for many in our area.  This is based on the fact that Austin home buyers and home renters pay only 27 percent of their income on housing.  Household incomes are not rising fast enough to match the rising home prices according to the Austin Board of REALTORS.

This information tells me that Austin and the surrounding cities continue to be a great place to own residential rent properties, why:

  1. Austin area property values continue to increase yearly
  2. Job growth continues to be strong in our local area
  3. Nationwide there is a tendency for people to rent housing vs. buying a house
  4. Millennials prefer to rent housing vs. buying a house, and there are plenty of them here
  5. As home values continue to increase rental houses in our area build up tax-free equity

All of this adds up that it is a great time to own Austin area residential real estate.

Rick Ebert / Austin, Texas / 2.9.17

Two Congratulations to Mike Gonzales RPM® TRLS

Mike Gonzales is awarded the Austin area chapter of NARPM® “Member of the Year” award by chapter president Michael Ebert. Mike Gonzales’s was cited for his contributions and continuous support to the Austin NARPM® chapter and to his unfaltering assistance to the chapter president.  Mike Gonzales stated that he was both surprised and honored to be the recipient of the award.

This year Mike Gonzales is the president of the Austin NARPM® chapter. As incoming president he takes the reins from outgoing president Michael Ebert.  Austin Landmark Property Services, Inc., CRMC® is proud to have on their staff such dedicated professionals who promote the highest standards of excellence to be found in our industry.

Rick Ebert / Austin, Texas / 6 Jan 17

Why Aren’t Home Builders Building?

This was the headline in a recent post in REALTOR Magazine this week.  There were several reasons cited in the article.  Leading the list among them were increasing regulations regarding building.  The article stated, but did not identify what kind of regulations were adding to the cost of building new homes but the cost was estimated to have increased to 29% of the cost of construction over the last five years. I assume this means not only implementing the regulations but also finding the hardware and training craftsmen to make the changes through trail and error.  These costs can include building around trees, impervious cover, set back requirements meaning less land to build on, the height of door handles and light switches all of which have to be designed and then implemented, and the list goes on and on.  Additionally builders are citing the lack of suitable labor and the increasing cost of lots to build upon. 

My take on all this means that if you own a residential rental right now that you are in a good place.  Take all of the above, now factor in the rising interest rate and probably more to come, and the lack of folks to save for a down payment, and you have a lot more people needing to rent vs. being able to buy a house.  Now add in the millennials who have a penchant for “wanting to rent” as a life style choice vs. having to rent, and this throws more prospective renters into the market.  So with a shrinking inventory or rentals, say in the Austin area, and a bunch of folks moving here to take jobs, coupled with the millennials and with those who can’t afford to buy a house and you get rising rental rates.

Just a few good reasons for owning Austin area residential rentals!

Rick Ebert / Austin, Texas / 23 Dec 16 

What and Who is an Austinite?

In the December issue of Impact, a local monthly area-wide newspaper, the publication cited several facts obtained from the Austin city auditor’s office.

Population: For starters the report cited that the city is expected to increase its population by 88,419 over the next five years.  The report didn’t clarify if the increase was from folks coming here of from children being born here.  Either way that amounts to 49 people a day on the average.  This figure actually seems low to me as Austin has seen in the last e years an average of 100 people a day relocating and other sources indicate that this trend isn’t slowing.  Time will tell.  The number of Austin households is expected to grow from 356,998 from 2015 to 395,686 by 2020 which is just a tad over 10%.  Not surprising, the number of families is expected to expand to 201,371 from 183,564.  That figure is also a bit of a 10% increase.

Income: The average Austinite earns $52,460 a year or $4,371 a month.  This figure is just about on target for the average ALPS renter (actually a bit lower).

Housing Costs:  The report stated that renters spend 48% less on housing costs than homeowners with renters reportedly spending $1,240 monthly for rent and homeowners spending $2,390 for a mortgage payment.  Frankly, I don’t buy those figures.  A small one bedroom apartment in a decent area will run $1,100 a month here, and it goes up from there; way up!  I also base my thinking on our average rent in our managed properties are over $1,500 a month.  Also taking into consideration that the “average” Austinite who earns $4,371 month would typically qualify for a rent of $1,457 – so go figure?  The report also stated that 57% of all households rent vs. 43% who are homeowners.

The Californians are Coming!  Well  no surprise there.  In a recent article in the Austin American Statesman a piece stated that 8 Californians a day migrated to our fair city between 2010 and 2014.  And just what part of California is seeing the most of this outflow?  Guess what it isn’t Silicon Valley but amazingly it is Los Angeles!  And why are they leaving.  Well for one thing they are living in California (my former home state) and what does California have and Austin doesn’t have?  Affordable housing, a “go to” work spirit, and lower taxes.  I do give California the edge on having a great climate!  But the Austin area is “climate friendly” when compared to the rest of the nation.

What Does this Mean?  It means that for us investors in Austin area residential real estate that we are in a good place, a very good place.  Our rentals are located in a growing area that is seeing lots of folks coming here, lots of jobs coming here, and folks are making good money to pay the rent.

Rick Ebert/Austin, Texas / 15 Dec 16

Austin Ranks High on Technology / Office Growth is Strong

Recon, the on-line publication from the Texas A&M Real Estate Center, reported this week that Austin ranked number 3 in cities in both the USA and in Canada that have jobs and services in the technology industry.  Tech jobs in Austin grew a whopping 33.3% from 2013 to 2015 vs. the national average growth of 7.3%.  The article didn’t state how many jobs this growth represented but let’s just agree that it is a bunch!

The article also commented on the Austin office market.  Austin ranked second in the nation on net absorption of office space.  Well this fits nicely with all of the high tech jobs coming to office because those firms can’t work out of a tent!  The Austin office market had the distinction of having the 8th highest office rent.

What does all of this mean to us investors in Austin area real estate?  It means that all of these new comers to the Austin area have to live somewhere and residential rentals provide that need.

This is especially true when taking into consideration that many high tech employees are millennials who seem to have an aversion to buying a house.  I interpret this information to mean that the high paying tech jobs spurn office growth which in turn spurns construction jobs, which spurns jobs in the retail and service industries which in turn spurns a demand for housing.  The Austin area has a strong residential rental market and the outlook seems to indicate that this demand will continue into the future.

So hang onto your Austin residential rentals,  keep them well maintained, and enjoy your profits.

Rick Ebert / Austin, Texas / 1 Dec 16