Austin to spend $1M on rail study

Austin City Council members agreed Thursday to spend $1 million on a preliminary engineering study for the Austin urban rail plan.

The city signed a deal with local firm Austin Urban Rail Partners to complete the study. Officials hope to have the results in time for an expected vote on the rail plan next November.

The effort is part of the Austin mobility program, which aims to mitigate traffic.

The project is separate from the Capital Metropolitan Transportation Authority’s rail line and does not involved Cap Metro.

“If downtown and all the roads are full, then we have an economic issue in Austin,” Rob Spillar, Austin’s transportation director, has said.

The city will need at least some preliminary engineering results by spring to have a good chance at for a transportation bond on the November ballot.

Department officials are optimistic, but “we will not head into something we are not prepared for,” a spokeswoman has said, adding that bond issues are up to counsel discretion.

If officials decide more work needs to be done, it could be deferred to a May 2011 election.

Condo Lending FHA News

New lending rules for condominium buyers already are forcing some developers to change or to scrap plans for new projects for fear too many buyers will be shut out.

On Monday, the Federal Housing Administration started limiting the number of buyers in condo buildings that can get loans insured by the agency. The rules also put restrictions on buildings with poor finances, too many delinquent owners and a high number of rentals.

The tighter lending standards are designed to protect the financial health of the FHA. Roughly 18 percent of loans insured by the FHA are either delinquent or in foreclosure and the agency’s financial cushion has dipped below the federal minimum.

But the move is a blow to condo buyers because the FHA has become a key source of mortgage financing. The agency insures roughly one in four new loans today because buyers need to have only a 3.5 percent down payment.

“It is a huge debacle for us,” said Rene Oehlerking, marketing director for Salt Lake City developer Garbett Homes.

The company has canceled a 300-unit condo project, spending $300,000 to redesign it into free-standing homes. Most of the builders’ homes and condos this year went to buyers with FHA loans.

Garbett’s condo project didn’t pencil out with the new FHA rule that allows only half of a condo building’s units to have FHA-backed loans, with some exceptions. That number falls to 30 percent in 2011.

Another new rule requires at least 30 percent of units in new buildings be pre-sold before the agency insures any loans. That number will rise to 50 percent in 2011.

Government officials, however, say the rules are necessary to ensure consumers are purchasing units in viable buildings and to help ensure that defaults on condo projects don’t rise too high.

While the rules could be tough for builders, they will protect consumers because lenders will be forced to be more careful about which projects they fund, said Richard Vetstein, a real estate lawyer in Framingham, Mass.

“On the whole, it’s a good thing,” he said. “Financially sound condominiums make better investments.”

Austin Home Listings Slide by 20%

The Wall Street Journal is reporting that the number of homes listed for sale has declined in many U.S. cities in November, reversing a strongly negative trend.

In the 27 metropolitan areas covered in the ZipRealty survey, housing inventory dropped by an average of 28% over the last year and 2.4% during the last month. In Austin, the number of home listings slid by 19.8 percent over the last year and 3 percent between October and November.

The slide in inventory is a positive step: it means that supply and demand are returning to a more normal balance after a very difficult year. While seasonal trends will cause inventories to rise again in January, it’s the year-over-year trend that is most important.

According to the Journal, the one month change is less significant as “Inventories typically decrease modestly in November compared with the previous month, according to Zelman & Associates, a research firm. Over the past 25 years, the average change has been a decline of 1.8%.”

The Journal also notes that the exact level of supply is impossible to pin down, partly because multiple listing services don’t include all the foreclosed homes that banks are preparing to put on the market. As of the end of October, banks and mortgage investors had 639,000 foreclosed homes for sale across the U.S., Barclays Capital estimates. That’s equivalent to more than 10% of expected U.S. home sales this year. The bank-owned homes are largely concentrated in Florida, California, Arizona and Nevada.

The MLS also excludes newly constructed downtown Austin condo units that are not being sold by realtors. This means that most of the units in the Austonian, Four Seasons, W, Spring, and other projects are excluded from the inventory numbers. Since the same was true last year, the 12 month change does seem to be a significant development.