Low inventory buoys housing prices as experts see uptick in demand

As the housing market around the nation continues its slow mend, demand for residential real estate in Austin—particularly Northwest Austin—is through the roof, Realtors say.

Judith Bundschuh, chairman of the Austin Board of Realtors, said she recently began showing a house in the Canyon Creek neighborhood and within 10 days had three seriously interested buyers. One put in an offer at the top end of the price spectrum—higher than the house sold the previous time and at the full asking price.

"It's like we are in a different environment altogether," Bundschuh said.

The numbers tell a similar story. ABoR data show that sales of single-family homes in Northwest Austin were up 13 percent last year, compared with a 1.7 percent rise nationwide, according to data from the National Association of Realtors. In Austin, sales rose 7 percent.

Meanwhile, the average price of homes in the northwest quadrant, although down about 1 percent in the past year, have been held in check at about $250,000 on average, according to ABoR, because the houses that are selling are "top-notch," Bundschuh said.

But perhaps the most notable force in the Northwest Austin residential real estate market—and what is exciting Realtors who focus on the area—is the low number of houses, or inventory, available.

Based on findings by the Real Estate Center at Texas A&M University, when housing inventory is at 6.5 months, the market is balanced. In Northwest Austin, single-family inventory is 2.2–2.7 months, one of the lowest in the city.

What all this points to is a shift in the market, experts said.

"For a long time, we had a buyer's market. Now, the sellers are getting a taste of it," said Mary Battaglia, a real estate agent with Coldwell Banker United who focuses on Northwest Austin.

Adam Boenig's company, Brohn Homes, is constructing and developing a 26-house subdivision on Cima Serena Drive near the intersection of Steck Avenue and Mesa Drive. He said he already has a waiting list for the homes, which will range from about $380,000 to $480,000.

"We haven't even done any marketing or advertising. They haven't even seen our product. We are finalizing our architectural plans right now," he said.

Bundschuh had a similar experience when construction started last year on Pearson Place at Avery Ranch, a new neighborhood at the intersection of Parmer Lane and Avery Ranch Boulevard.

"They haven't even put roads in there yet, and I am getting calls from clients wanting to buy in there," she said.

Why northwest?

The public schools located in Northwest Austin are at the center of the area's appeal, the Realtors said.

"I get calls from people who are relocating [to Northwest Austin], or moving from one area of Austin to another, primarily because the schools in the Northwest area have a really good reputation," Bundschuh said.

Battaglia estimates that 90 percent of her clients are interested in living in Northwest Austin because of the quality of the public schools, which are primarily in the Round Rock and Austin school districts.

"If they're not going for the schools, they are going for the resale value. Either way, it's about the schools," she said.

Also driving demand is the fact that interest rates are historically low.

On a day in early February, Kendall Garrison, senior vice president of lending at Amplify Credit Union, said he was quoting a 3.75 percent interest rate on a 30-year fixed rate loan.

"I have been in the lending industry for 30 years, and never during my lifetime have interest rates been this low," he said.

Favorable interest rates would likely last another year or so, Garrison said, though he added that they are determined by the market, and therefore, unpredictable.

Scoring a loan

While rock-bottom interest rates are piquing buyers' interest, Realtors say mortgage loans are still tough to get.

"You have to be an A-plus borrower to get a loan. And not only that, [lenders] ask you a million questions before they are willing to give one to you," Bundschuh said.

She argues that this rigidity is hampering the market: "Getting a loan is what drives the market. You can make the argument that the bust happened because there was free money, which was absolutely the case, but I feel like the pendulum has swung too far the other way."

Kenton Brown, president of the Austin Mortgage Bankers Association, disagrees.

"It's not as hard as it sounds," he said. "It is more difficult than it was four years ago. Then, you had a fog and mirror, and you got a loan. But 10 years ago, this wasn't unusual."

Moreover, Brown said, lending standards are slowly loosening up and mortgage insurers, which guarantee mortgage payments to lenders in the case that a borrower defaults, are providing more policies.

Garrison, too, said money was flowing. In fact, 2011 was a record year at Amplify, with $95 million worth of single-family real estate loans approved. That number represents a 20 percent increase from 2010.

And so far, 2012 is looking even better, the bankers said.

"I'll be honest," Brown said, "February may be a record month for me."