September 2008

Downtown Waco

A news report in the Waco Tribune Herald: Downtown Waco is starting to really thrive! I’m pretty excited about the new changes in the Waco area. It’s a breath a fresh air to really see projects actually start and take hold.

I moved to Waco in October of ‘95 and have to admit that the area seemed pretty stale for the first several years I lived here. Waco today is like night and day compared to 13 years ago. The township seems more excited about the city, new employers are coming to town, new retail opening doors, new home construction has been brisk, renovations have been completed and much more….. heck, we finally have a Cheddar’s AND a Chipotle! (can we also get Grandy’s back to Waco and a Spaghetti Warehouse too)?

According to the Waco Trib, there’s a wave renovations underway in downtown Waco. Old buildings turned into an art gallery, recreation hall, concert venue, new restaurants, Irish pub….. Oh and “loft living”. Some of these condos are priced at over $200,000.

Investors have snatched up old abandoned building along Austin Ave. and other parts of Waco. Alot of this activity by the way, is within the last 3 years. In 2004, along the 700 block of Austin Ave., the only thing really there to speak of was the Hippodrome. Now? Find dining restaurant, indoor-outdoor bar with live music most nights, reception hall, and more. Also, a new 4,000 square foot art gallery will display work from artists all over the country. Another investor/developer has bought a building on Austin and plans to build loft apartments.

The whole Waco area has really “boomed” in the last few years, from my point of view:

• Addition of the Central Texas Marketplace outdoor mall
• Demolishing of the old Lake Air Mall and new shops/stores that have opened in its place
• Sanderson Farms opening of plant
• L3 Communications
• Caterpillar Logistics Center
• New restaurants such as: Cheddar’s, Chipotle, Pei Wei, etc…
• New hospital and more at the what will be Legends Crossing
• Upscale home construction. New neighborhoods like Twin Rivers, Badger Ranch, the continued expansion of Hidden Valley, Stone Creek Ranch, Cotton-Crossing, etc….
• And much more!

With all the development and renovations going on in the downtown area, it makes everything else look that more promising and gives you something to be excited about.

Pubs, art galleries, reception halls, fine dining, and loft living…. Is downtown Waco going “Cosmopolitan”?

Lehman Brothers, Wall Street, and The Impact for Waco Real Estate

The Lehman Brothers bankruptcy, no doubt, has caused some water cooler talk at the office. After all, it did help send the Dow Jones down over 500 points on Monday (9-15-08). But in the carnage that sometimes is Wall Street, what does that mean for you, your mortgage, home, ability to buy or sell, obtain financing for real estate, etc…? Here’s how some of the experts weigh in on the “fallout”:

What efffect does all the bad news have on mortgage rates?

According to bankrate.com, the interest rate has fallen a little. The average 30 year mortgage is now down to 5.78%, down from 6.08% last week. Just last month in August, the rate was about 6.5%.

The decline in interest could be only a temporary though. With all the news from the past weekend and the rough market yesterday, it shows how risky mortgage investments are these days… which could drive the rates back up. Also, the rates could go up if Lehman decides to dump their mortgage related investments as well.

So is it a good time to buy a home?

The short answer is yes. However, with the subprime mortgage crisis, lenders are increasingly picky about who they’ll lend money to. Lenders, on average, are requiring a higher down payment now than they did just 18 months ago. in 2006, it wasn’t uncommon to get into a house with zero down but now many companies are requiring 5% or 10% down and more, especially if you have less than great credit. Also, be aware… folks that have less than stellar credit will find it nearly impossible to get those rock bottom rates.

I’m a first time home buyer, does that mean I’m not going to be able to get a loan?

Not necessarily! The good news is that the government wants you to own a house and they provide incentives for people to invest in their first home. See: $7,500 tax credit for first time home buyers.

If you don’t have the credit history of “seasoned” home buyers, an FHA loan may be the best route for you.

So, why do we even have a mortgage crisis anyway?

A few years ago, during the “housing boom”, mortgage companies were willing to lend money to people with pretty shaky credit. Mortgage companies were able to borrow money cheap and in turn dish it out to home buyers. Of course, some of those loans have come back to bite them.

In short, a lot of lenders made bad loans. Loans to people that wouldn’t be able to pay them back. After the buyers closed on their new home, Lenders would then sell these loans to investers, who then abosorbed the risk for potential high returns. Unfortunately, even to obtain the loans, some buyers (with really risky credit or a higher debt to income ratio) would have to get an adjustable rate mortgage (ARM). After a set time, these mortgages would reset their interest rate and many of these buyers found themselves unable to afford the mortgage payments. With the higher house payments, price of fuel and the subsequent rise in price of goods and services, it really put a squeeze on people. Truth be told, it put a squeeze on people who really couldn’t afford their new home to begin with…. There was a lot of “house poor” folks! Oh I forgot to mention, that a lot of these loans were “intersest only”, meaning that the mortage payment was NOT going to the principal. Those home owners were counting on the value of the property rising to offset the fact that they were not paying anything toward the principal. It wasn’t a problem for awhile, but with the glut of foreclosures on the market, those values started to decline and many home owners found themselves owing more for a house than it was worth!

Although foreclosure rates are up in Waco, the areas biggest hit with the scenerio I mentioned are California, Arizona, Nevada, New York, Florida, etc… Waco (and Texas in general) have been pretty good as far as home affordibility goes. Have you ever watched HGTV?? They have these shows, what you get for your money. Those home prices blow my mind! In California for instance, 1200 square foot home – 3 bedroom 2 bath – NO yard to speak of for over $400,000!!! I saw one such episode, the couple that bought the house had to be in their early to mid 20s. I don’t know about you, but a $400,000 loan is a pretty big payment for anyone, but especially for a someone in their early 20s who is “just getting started in life”.

So in a nutshell, the mortgage crisis was brought on by people who got loans they couldn’t pay back, lenders giving money to people that couldn’t pay it back, and a “renters mentality”. Meaning, zero down, low down = no or little equity in their home. Some folks literally packed their stuff, put the keys to the house on the bar, moved out. Some of those buyers didn’t even tell the lender they moved!

If you are having problems paying your mortgage, plenty of lenders are willing to work with those buyers now more so than ever! If you find yourself unable to afford your payments, CALL YOUR LENDER and see what they can do to help.

Down Payment Assistance Going Away

If you want to buy a house with an FHA loan, you better hurry! And I mean HURRY. As of October 1st, the down payment assistance that a seller can contribute is going way, bye bye, outta here. Also, the minimum down payment requirement for those seeking an FHA loan will increase to 3.5% from 3%.

It looks like financing is going to get a little harder to come by. Under current federal rules, only a charity, a family member, or an employer can provide a down payment as a gift. That is, if you’re seeking a mortgage insured by the Federal Housing Administration. Of course, those rules spawned a whole industry of “down payment assistance” charities. Those “charities” gifted down payment assistance to buyers, but then were reimbursed by the seller. In May 2006, the IRS ruled that these “charities” funneled money from the seller to the buyer, and in the process, collected fees, so therefore could not be considered a “non-profit” orginization.

The new housing bill will put an end to seller financed down payment assistance programs. This will start in October.

Officials at HUD have stated that those buyers obtaining loans with down payment assistance programs had higher default rates. Ya’ think?

Builders in many parts of the country, have been relying on those down payments assistance programs to boost their home sales. Some builders are crying foul over the new housing bill, saying that the housing bill will in fact do more harm than good.

$7,500 Credit for First Time Home Buyers

The Housing and Economy Recovery Act of 2008 was signed into law. One of the main points is the $7,500 tax credit to qualified first time home buyers. Not to mention, if you haven’t owned a home in the last three years, you can still benefit!

If you buy a home before the end of next June (June 2009) than you can deduct as much as $7,500 off of your tax bill! That’s actually off of your tax bill and not off of your taxable income. If, at the end of the year, you owe the IRS $7,500 (and you bought a home for the first time) the you’ll owe the IRS zero. Or, if you owe the IRS $500, then you’ll owe them zero, PLUS you’ll get another $7,000 in a refund.

Now of course, there are a couple of catches (not surprised):

• The tax credit is actually a loan from the IRS. Meaning, that you’ll have to pay tht $7,500 back over a 15 year period, but it’s interest free.
• The $7,500 is reduced to $3,750 if you file your taxes “single”
• If you own a home now, then you’re not eligible for the tax credit. If you’ve owned a home in the past, but rent now (and haven’t owned a home in the past three years), then you qualify. Also, if you’re a first time home buyer, you’ll qualify.
• The amount of the tax credit is actually based on the amount of the home – 10%. If you buy a $100,000 home, you won’t get $10,000. Likewise, if you buy a $50,000 home, you’ll get $5,000 – the tax credit is capped at $7,500.
• If you’re married and your adjusted gross income is more than $150,000 a year ($75,000 if your single), the tax credit will begin to phase down.
• You can’t get the credit if the home is not your personal residence.
• You won’t qualify if you financed the home using a state or local housing agency’s tax-exempt bond mortgage

In reality, the tax credit is a loan (interest free) from the government and you’re expected to pay it back.

If you buy a home under the Housing and Economy Recovery Act then sell your home later and make a profit, then you’ll have to pay back the remainder of the balance of the “tax credit loan” you received. The recapture cannot exceed the amount of your net gain. Likewise, if you have no net gain on the sale of the home, then you won’t be expected to pay back the remainder of the balance from any proceeds of the sale.

Confusing? Can be. If you need more info, try these links:

FAQ from Realtor.org
HUD FAQ
Summary

The basic idea behind The Housing and Economy Recovery Act, is to jump start home sales and clear out the inventory of unsold homes. Congress is trying to encourage first time home buyers and previous home owners to purchase properties and become homeowners.

Midway’s New Elementary School

On May 10th, 2008 the voters in Midway ISD passed a $75.8 million school bond. The bond was needed for the school system to keep up with the rapid growth of the Hewitt/Woodway area. It (the bond) provided the funds needed to add a new elementary and an intermediate school, as well as improvements to all existing elementaries, middle, and intermediate schools.

It looks like the new elementary school, located on Hewitt Dr. (near the park), will be called “Castleman Creek Elementary”. The school board said they wanted to stay with the theme of location oriented names like “South Bosque, Spring Valley, Speeglville, etc… To be honest, I’m not that crazy about the chosen name. It’s kind of a mouthful, and since it’s right next to the park, I thought a name like “Park Meadows”, “Meadows”, or some variation of it would have been a good choice. But nevertheless, I’m sure it will be a fine school that will add much needed space for Midway ISD.

Castleman Creek Elementary school will cost about $16 million, have about 86,000 square feet, and house 600 students. The attendance zones should be completed in October ‘08.

For more information about Midway ISD, check out these sites:

Great Schools
Midway ISD
School Accountabilty Ratings Search

New Homes with Acreage in Lorena ISD

If you’ve always wanted to live in a 1- 4 acre “neighborhood”, then there’s more to choose from now in the Waco area!

Construction of a new subdivision in Lorena is underway, Ranch Lorena. It’s really got a great location (right at the corner of Spring Valley Rd. and Old Lorena Rd). It’s just a couple of minutes from Hewitt and Woodway. Not to mention, easy access to I-35.

Home construction in Ranch Lorena has just begun. In phase 1, several lots have been sold, but there are still lots available, ranging in size from 1.4 acres to 4 acres. Actually, compared to lot prices in the area lately, those in Rancho Lorena are priced pretty aggressively for sale!

Rancho Lorena is envisioned to be a “ranch style” community with homes ranging from a minimum of 2,000 square feet to 4,000 and more. Yes, horses will be allowed! But restrictions will be in place through a homeowners assocation to make sure Ranch Lorena stays visibly appealing. Actually here’s a couple of pictures I took from the Rancho Lorena Website, these are the types of homes they say you should soon be able to find there.

I’m really excited about the potential for this new neighborhood! Some info:
1) Lorena ISD
2) Lots from 1.4 – 4 Acres
3) The subdivision will consist of about 110 homes

Builders have already purchased lots and have started new home construction. Of course, if you have more question about the new Ranch Lorena, or would like to see it. Give me a call anytime. I can help you get started with a builder if you’re thinking, “now might be the right time to custom” build.

Keep an eye out for the progress of Ranch Lorena, I’m sure it will be another “in-demand” area.