Texas Real Estate Daily

Despite a tighter labor market, elevating commodity and fuel prices and sluggish retail sales, the Texas business sector remains stronger than most other parts of the country, according to the Federal Reserve’s latest Beige Book survey for the Dallas district.

The Dallas district evaluates economic trends in Texas, as well as portions of northern Louisiana and southern New Mexico.

The most recent survey says the district’s economy grew “modestly” in late July and August. Many members of the district’s business community reported higher energy and commodity prices in the latest report, with some of the companies passing these costs on to their consumers in the form of higher surcharges or selling prices.
Labor Market

The labor market remains tight. Most members of the business community interviewed for the survey said hiring either remains flat or moderate when compared to years past. Wage pressures were mild, but some employers reported an increase in requests for higher wages.
Manufacturing

With residential construction still weak, the manufacturing sector says demand for residential construction-related materials is lagging. A drop in production levels also has spawned a decline in inventory levels.
Retail Sales

Retail remained consistent with the last Beige Book survey. Discount retailers noticed stronger sales in the most recent survey. However, growth levels remain lower than last year. Traditional department stores said sales remain below 2007 levels, with discretionary items like electronics, jewelry and housewares becoming increasingly less popular among buyers. Auto sales also remained sluggish. Most auto industry leaders expect to see no improvement until early next year.
Construction and Real Estate

Sales of new and existing homes are still sluggish with buyers worried about the economy, the report said. Inventories are going back down with homebuilders building fewer new properties. Prices are holding up relatively well in new and existing home markets, the Fed also added. However, the lending market is still feeling a pinch from tighter lending standards that are preventing some credit-worthy buyers from obtaining mortgages.
Energy

Oil and natural gas prices remain at high levels when compared to 2007, according to the survey. However, in the past few weeks, energy prices have declined — a trend attributed to weaker economies in the United States and globally.

Domestic rig counts increased in the latest report, with 79 rigs added in the past six weeks. A significant portion of new drilling activity in the most recent period was related to “land-based natural gas activity in the Barnett and Haynesville shale.”

Credits: Biz Journals

Lennar Corp.’s multiyear, billion-dollar effort to develop decrepit former military properties on San Francisco’s waterfront has tapped a new financing source, underscoring the home builder’s success in doing deals to survive the wretched housing market.

Lennar says it has formed a new venture with Ross Perot Jr.’s Hillwood Development Co., and the investment firm Scala Real Estate Partners LP. The venture is taking equity stakes in massive projects at former military properties across San Francisco, including a project at Hunter’s Point, which would bring development to one of the city’s poorest neighborhoods.

The new venture replaces the 50% stake held by LNR Property Corp., a unit of Cerberus Capital Management, in the Hunter’s Point project. It also is taking half of Lennar’s 50% stake in another ambitious development project on Treasure Island, home to a former naval barracks and sweeping city views.

The venture is taking half of Lennar’s 100% stake in Candlestick Point, the possible new home for the San Francisco 49ers, according to Lennar. The builder will continue to manage the projects. The developments are slated to create thousands of units of housing. The venture also took a stake in land on the New Jersey waterfront across from Manhattan.

As part of the deal, sealed during the weekend, the Lennar-Hillwood-Scala venture paid $145 million in cash to LNR, Lennar and several minority partners. Hillwood and Scala have committed to providing long-term financing to the projects, which could take 10 or more years to complete.

The capstone of Lennar’s megaprojects in San Francisco are Hunter’s Point and Candlestick Point, which were acquired from the city for a nominal fee. Lennar and its partners have agreed to spend more than $1 billion building thousands of affordable rental and for-sale housing, along with parks and a site for a new stadium for the National Football League’s 49ers. The first large phase of the project is to begin in 2010.

“We now have strategic partners committed to 50% of the cost going forward,” says Emile Haddad, Lennar’s chief investment officer, who negotiated the deal for the builder. “They are committing hundreds of millions of dollars.”

The San Francisco venture reflects the strength of the city’s housing market, where values have held up amid the national downturn — and Lennar’s ability to close land deals in such an atmosphere.

In March 2007, the builder and LNR turned heads when they reduced their stakes in a venture called LandSource. An investment vehicle for the California Public Employees’ Retirement System paid about $920 million for a 68% stake in LandSource, while Lennar and LNR each received $660 million in cash from the deal. LandSource filed for bankruptcy-court protection in June.

In December 2007, Lennar sold 11,000 house lots to a venture mostly owned by Morgan Stanley’s real-estate arm for $525 million, which was about 60% less than what Lennar carried the land on its books. Since then, land values in some of the markets where the lots are located have continued to erode.

Hillwood has experience developing big projects such as the Fort Worth Alliance Airport and the American Airlines Center basketball arena in Dallas. Irvine Calif.-based Scala has raised $200 million from Lehman Brothers Holdings Inc. and others to buy land during the real-estate downturn.

Credits: WSJ

More small buyers are investing in undeveloped land.

“There is a really attractive market emerging for the small investor,” says Eric O’Keefe, editor-in-chief of Land Report magazine. “With credit tightening, what you’re seeing in essence is some of the air being let out of the bubble that was driving prices up.”

Buying land is no slam-dunk. An investor must be able to judge which land is most apt to deliver a profit down the road and be able to hold onto the property long enough to benefit.

Also, variations in prices make these kinds of investments painful for the faint of heart. For instance, the Texas real estate commission reported that land prices went up by 20 percent in 2007. But land values in Southern California have tumbled at least 50 percent along the coast and as high as 90 percent. inland, investors say.

Plus, ownership can be expensive. Besides high borrowing costs, there are property taxes and liability insurance costs to pay.

Nevertheless, some investors are convinced now is the time. “It’s a delicate business, but it’s just about bad enough to be good again,” says William Shopoff, chief executive of Shopoff Group, a real estate investment firm in Irvine, Calif.

Credits: Waldo Village Group

The Austin City Council yesterday approved a 20-year, power purchase agreement (PPA) with Nacogdoches Power LLC for the electricity generated from a 100-MW facility fueled with biomass. The proposed facility is scheduled to commence operations in 2012.

The project, located in northwestern Nacogdoches County, will use a variety of wood wastes, including residues from forests and sawmills, as well as waste pallets and municipal wood waste. The facility will use a bubbling fluidized bed boiler to directly combust the wood wastes, together with a steam turbine for power generation. With respect to air emissions, the design includes a baghouse to control particulate emissions and a Selective Non-Catalytic Reduction (SNCR) system for NOx control. With respect to carbon emissions, biomass power generation is deemed carbon neutral.

Unlike wind and solar renewable resources that generate power only when the wind blows or the sun shines, the hour-to-hour generation from a biomass facility can be dispatched by the operator to meet changing load and market conditions.

Gainesville Regional Utilities (GRU) is discussing a similar project with Nacogdoches Power LLC that could be constructed at the existing Deerhaven Generating Station near Gainesville, Florida.

Earlier this week, Georgia Power submitted a request to the Georgia Public Service Commission for approval to convert an aging, coal-fired unit at its Mitchell Generating Plant in Georgia to use wood wastes. The modified unit would use a direct-fire, stoker technology for a design capacity of 96 MW.

These three projects show a rising interest in developing large-scale, electric generating facilities that are reliant solely upon biomass as the fuel.

Credits: Energy Online

To finance employee pay increases, higher fuel bills and escalating utilities, more Texas school districts are encouraging residents to agree to higher property taxes.

Austin, Corpus Christi and Houston school boards are among those seeking higher funding through increased levies. After property tax relief was required by the Texas legislature in 2006, about 20 percent or 230 districts sought taxpayer approval on hiking property taxes. The relief resulted to districts reducing their maintenance and operations tax rate to $1 for every $100 property value assessment from $1.50 for the next two years.

Since Texas has placed a limit on district funding at 2005 or 2006 levels, many districts said they are financially challenged. School district officials argued that they need more money because their costs are not frozen, while funding has flat growth.

The Humble and North Forest school boards are seeking the maximum $0.13 rate increase, while Alief would be content with a $0.075 hike to pay for a 3 percent wage adjustment for school workers.

Sarah Winkler, president of the Alief school board, told the Houston Chronicle, “In reality, the 3 percent isn’t even a cost-of-living increase, but that’s all we thought we could afford… You hate to have to ask your taxpayers when you know they’re struggling, but we’re all struggling for the same reason.”

The maximum amount that could be hiked without voter approval is $0.04.

According to the Austin Chronicle, the city’s tax rate is $0.18 lower than San Antonio, $0.25 than Houston, almost $0.30 lesser than Dallas and $0.46 lower than Fort Worth.

Credits: All Headline News

The Palestine Historic Landmarks Commission, local residents, and property owners are to be congratulated on their desire, drive, and commitment to preserve Palestine’s wealth of historic resources. By the end of September, the City of Palestine and its citizens will have designated over forty historic properties as Palestine Landmarks and two Palestine Historic Districts since January 2007. This is, of course, only the “tip of the iceberg” as over 1,800 historic resources were identified in the 1993 Historic Resources Survey and that number has grown substantially since. The goal of the historic Preservation Office is to update the Historic Resources Survey by the end of 2010 and that will be ten years after the last update in 2000.

One of the criterion for listing on the National Register of Historic Places is that a building must be at least fifty years of age, which means that houses and buildings built as late as 1958 could be eligible for Listing on the National Register and next year the fifty year mark will be 1959, and so on. The majority of Palestine’s houses and buildings are at least fifty years old. Palestine has a higher percentage of historic houses and buildings than almost any of Texas’ small towns. People are beginning to recognize this and, as I have said before, they are coming form all around the United States to take advantage of our history, the value of our historic properties and neighborhoods, and our quiet, peaceful lifestyle.

That being said, we also have to recognize that Palestine has room for improvement and some of Palestine’s citizens are making a commitment to improve our neighborhoods and provide affordable housing for people of modest means. By rehabilitating some of Palestine’s older and historic sub-standard houses and building affordable new houses in existing neighborhoods, they plan on Palestine becoming an even more desirable place to live, work, and play.

One of the groups is a recently formed Texas Non-Profit corporation, Palestine Makeover, Inc. The corporation is currently accepting donations of properties, materials, money, and labor to achieve those goals. Another corporation, Historic Palestine, Inc., which is the corporation that saved the Gregg-Link building from demolition in 1995, has also accepted the donation of a condemned historic house for rehabilitation. That makes a total of five houses that have been condemned and been issued their demolition order by the City of Palestine Building and Standards Commission that will now be rehabilitated. Once the houses are sold and occupied, they will once again be put back on the tax rolls and be beautiful, safe houses for a family to enjoy. Palestine Makeover also wants to follow the Habitat for Humanity model by screening applicants and, if selected, they will be allowed to work on the rehab of an existing structure or the construction of a new one, thus producing equity for the homeowner in their home. This proven model makes it possible for a family to own their own home rather than rent when they do not have the money for a down payment to buy a home.

I might add that one of the advantages of a non-profit corporation is it can receive tax deductable donations from for-profit corporations and businesses and individuals who have like-minded goals, but they may not have the time to participate in accomplishing their goals. It is a win-win-win situation that will make Palestine an even nicer place to live for all people. We are looking forward to seeing more of Palestine’s sub-standard houses once again become beautiful homes that people can be proud of and raise their families in. We are also looking forward to seeing more of Palestine’s historic neighborhoods, houses, and buildings become rehabilitated and be designated as Palestine Historic Districts and Landmarks for all to see and enjoy.

The August 28th “Your Old House…or Building” program and workshop at the Palestine Public Library on Thursday evening was entitled, “What Are Historic Landmarks and Historic Districts?” and it was presented by Peggy Riddle, Architectural Historian and Historic Preservation Consultant with Cornerstone Heritage Preservation Services and Neely Plumb, Palestine Historic Preservation Officer and Main Street Manager. The program explained the types of historic designations, the criteria for obtaining a historic designation, and the types of historic districts that are in Palestine and other cities. The September 15th program, entitled, “How Do I Get A Historical Marker?”, will explain the procedures for obtaining the various types of designations and markers and the costs involved.

Credits: Palestine Herald

Charlene Zeman spent more than a decade in the housing business, including the last three years selling homes.

But the housing slowdown – the worst nationally in a generation – sent her, like thousands of other agents, looking for a new career.

“I had to have a more steady income,” Ms. Zeman said. “I had to know when the next paycheck was coming. And they were getting fewer and farther between.”

With home sales in North Texas down almost 30 percent since the peak in mid-2006, real estate agents are feeling the pinch of smaller commission checks and less business.

No wonder many agents in the Dallas area and across the country are switching to a new line of work.

The National Association of Realtors, the Washington, D.C.-based trade association, dropped by more than 100,000 members from the end of 2006 to this March.

Even in Texas, which has escaped the worst of the housing depression, the number of licensed sales agents and brokers is down about 3,000 from last summer. And the number of new sales agent applications is off about 30 percent from a year ago.

“The fall-off would be expected as the market slows down,” said Dr. James Gaines, an economist with Texas A&M University’s Real Estate Center.

But he said it’s impossible to draw a direct correlation between the slowdown in home sales and the decline in agents.

“And since they often pay a two-year fee, the license numbers don’t vary as quickly from year to year,” Dr. Gaines said.

Ms. Zeman didn’t need a university study to tell her it was time to get out of the home sales business.

“I was in it when it was great, in it when it was good and in it when it wasn’t so good,” said Ms. Zeman, who is now working in sales for telecommunications giant AT&T.

“I love it,” she said. “It’s been very successful. I’ve been in the top 10 since I got here in February.”

Christian Walker spent almost two years in Dallas residential sales before deciding to change direction.

“At the time, I sensed that the Dallas market was going to contract some and that this, combined with the saturation of agents, made it a good time to consider other options,” said Mr. Walker, who has gone back to school while working at a Fort Worth architectural firm.

He’s just started working full time on a master’s degree in architecture at the University of Texas at Arlington.

Mr. Walker said he “saw an opportunity to put the experience and awareness of customer needs that I had acquired to move into a related field, architecture.”

“Endless showings and open houses also gave me a perspective about customer needs and expectations that I feel will be invaluable for an architect.”

Credits: Dallas News

With the constant speculation of the failure of Fannie Mae and Freddie Mac creating mortgage market crisis across the country, it would seem appropriate for home buyers to steer clear of any real estate ventures in the near future.

However, according to the Temple Belton Board of Realtors (TBBOR), this could not be further from the truth.

During a committee meeting Thursday, August 7 TBBOR President Terry Covington stressed the “importance of reporting the local news” and getting the facts out to Central Texas homeowners. She emphasized the fact that the Texas real estate market has managed, for the most part, to avoid these mortgage market problems due to continued growth and said that now is a great time to buy in Texas.

Covington strongly desires to get the word out about the Belton and Temple real estate markets’ success amidst chaos and believes that doing so will ensure a continuation of local prosperity.

Those considering buying or selling a home should not be scared off by the threats of market failure but should take advantage of the recent changes stemming from the Housing and Economic Recovery Act of 2008 that was passed on July 30 by President Bush.

Caren Hildinger, CMPS of Castle & Cooke Mortgage detailed a few of these changes on Thursday.

Those in danger of losing their home, who meet eligibility requirements, may be able to refinance into government-insured mortgages that are much more affordable.

First time buyers may be capable of receiving a refundable tax credit of up to $7500.

Lending guidelines will also be significantly tightened. This may seem counter- productive in an effort to stimulate a struggling market, but with stricter qualifying parameters comes a higher faith of repayment and a greater trust between buyer and lender.

This combined with the new buyer incentives and aid to those nearing foreclosure, will provide those selling a home with a more reliable pool of buyers, those buying a home the security of an honest and trusted lender and possibly government assistance, and those in fear of losing their home with hope.

According to Hildinger these new guidelines were necessary and long overdue, and will bring us back to a “new normalcy.” She feels that this is a very exciting time in the mortgage market and knows these changes will benefit an already thriving Central Texas real estate market.

Credits: Belton Journal

The Texas Residential Construction Commission should be abolished because it is ineffective and frustrates homeowners trying to get builders to address defects in their homes, according to a state agency review released Tuesday.

Created in 2003, the agency does not have the trust of the consumers to protect them from unqualified builders, according to staff of the Sunset Review Commission, which reviews state agency performance and makes recommendations to lawmakers.

The creation of the commission was backed by homebuilders. It was praised by the industry for establishing standards and warranties for home construction, and for creating a process to resolve disputes between builders and buyers out of court.

Consumer groups have argued the agency did more to protect builders than consumers and limited homeowners’ legal recourse in disputes.

“We need to scrap it,” said Alex Winslow of Texas Watch. “Consumers need real protections against unscrupulous builders who build shoddy homes, and the TRCC has never provided homeowners with that kind of protection.”

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Home building fell sharply in July to a 17-year low, according to government readings released Tuesday that offered fresh signs that the battered real estate market has yet to hit bottom.

Housing starts plunged 11% to an annual rate of 965,000 from a revised 1.084 million pace in June, according to the Census Bureau report. Economists surveyed by Briefing.com had forecast starts would fall to a rate of 960,000.

Permits - often seen as a sign of builders’ confidence in the housing market - tumbled 17% to an annual rate of 937,000 from a revised 1.138 million in June. Economists had forecast that permits would come in at 959,000.

The sharp percentage drop from June was due partly to a jump in multi-family home starts and permits during that month. Single-family home starts and permits slipped only slightly from the June level. But the single-family starts were also at a 17-year low in July, while single-family permits fell to a level not seen since the 1982 recession, reaching a rate of only 584,000 homes in July.

The sharp fall in building activity suggests that home building will continue to be a drag on the economy in the second half of 2008. Earlier this year, many economists hoped that building activity would bottom out this summer and start to show signs of improvement.

In the second quarter, the drop in home building took 0.6 percentage points off gross domestic product, the broad measure of the nation’s economic activity. It marked the 10th straight quarter that home building has been a drag on GDP.

But the continued drop in building could be just what the battered real estate market needs. One of the biggest problem for sellers is a glut of unsold homes on the market. Since demand for homes remains weak, the glut will only ease if fewer new homes are built.

In June, builders faced a median wait of 8.4 months to sell a completed home, the longest delay in selling time in 25 years, according to a separate Census Bureau report issued recently.

David Seiders, chief economist for the National Association of Home Builders, says he’s hopeful the historically low levels of single-family permits is a sign that the glut of homes on the market could finally start to decline.

Seiders said he’s hopeful that the market for new homes will hit bottom in late 2008 or early 2009. But he added that his forecast could prove optimistic given other problems, such as rising job losses and the credit crunch. And the continuing rise in foreclosures adds to the glut of homes available for sale, particularly in markets such as California and Florida.

“We’re dealing with a weakening economy in the second half of this year, and early ‘09 doesn’t look that great either,” Seiders said. “We don’t have any numbers that really show stabilization in the housing market yet.”

The government report on housing starts and permits comes the day after a survey of builder confidence by the National Association of Home Builders remained at a record low in August. Only 5% of builders said the current market is good, 8% said they expected a favorable market in the next six months and fewer than 2% said they were seeing strong traffic from potential buyers.

The downturn in housing and building has hammered the results of most of the nation’s major builders. Late last month Centex, which is the No. 2 builder by revenue, reported a larger-than-expected loss and warned it was seeing no improvement in the home building market.

Most builders have reported larger than expected losses, although Pulte Home, the largest builder by revenue, did slightly better than forecasts. Only one major builder, NVR, has reported a profit through the current downturn, although its earnings have plunged.

As a group, the revenue of the nation’s eight largest home builders has plunged 37% over the last year. Analysts surveyed by Thomson Reuters are forecasting another 36% drop in revenue over the course of the next 12 months.

Credits: CNNMoney.com