Here’s a good question. If the Texas real estate market is so hot, why are our best cities (Austin, Dallas, Houston and San Antonio) experiencing the highest foreclosures in the nation?

Great question! In recent years, Texas home sales outpaced our counterparts along with nice appreciation in our largest cities. My hypothesis is that foreclosures are the downside of a frenzied real estate market.

FACTORS IN THE TEXAS FORECLOSURE RATE

1. Home seller refinances. In 2003-2004, mortgage rates were at historic lows. Many home owners refinanced to make improvements or purchase consumer goods. This is a set up for a foreclosure because the owner has removed their equity, perhaps overimproved the property and now have higher property taxes and mortgage payments.
2. Adjustable rate and zero down loans. Texas was a buyer’s market at the same time rates were historically low.  Zero down loans or adjustable rate mortgages were the mortgage product of choice. Most of those adjustable loans were 3-5 year, so the rates have been increasing every 6 months. A refinance in Texas requires at least 80% loan to value ratio on homestead properties and 90% on investments. For buyers with no equity, but an increasing payment, a foreclosure is one of the few options.
3. Risky investor loans. Investors have been buying in Austin, Dallas, Houston and San Antonio in droves. Most were putting less than 10% down and had high interest rates, but little or no cashflow. In Austin and Dallas, it was common to buy negative cashflow and negative equity properties on speculation. Now, San Antonio and Houston are especially seeing a glut of low-end investment properties, so days on market has increased.

The bottom line is that no market is ever going to be completely predictable. Texas is unique in many aspects, but home buying decisions should always be based on the property’s current value.

Link: San Antonio foreclosure and the Texas A&M research on the issue.

Check out the interesting post about Affordable, Luxury and Modern Home market in Texas.

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Memorial Day weekend is a wonderful time to remember those who have served America. In our time of war, I find it ironic that the gas industry helps us celebrate by hiking gas prices to the highest they’ve been in American history. I understand that it’s customary for gas companies to raise rates during the "travel season" in the U.S, but reporters are speculating we will approach the $4 mark by end of Summer.

You can have much more fun with your $4 in Texas this weekend or others!

• Austin. If you’re under 18, you can visit the Bob Bullock Museum for only $3. It’s only a few dollars more for the rest of us, but seniors have a discount.
• Southeast Austin. Visit McKinney Falls State Park, which is only $4 per day.
• San Antonio. Park near the River Center Mall and take a stroll down the San Antonio Riverwalk.
• Corpus Christi. Children and Seniors can visit the very beautiful South Texas Botanical Gardens for less than $4. Adults pay only $5.
• Houston. Buffalo Bayou, a very cool master-planned community in Houston, has boat cruises the 2nd Saturday of every month for only $3 for children under 12 years-old. Adults pay $5.

I’ve reached the pain threshold of paying at the pump, so am looking into buying a motorcycle or moped at Woods Fun Center here in Austin or on Craigslist.

If you like the outdoors, try buying a Texas Parks Pass.

Read more: Gas prices approach record high.

What are some other great things we can do in Texas this weekend instead of spending our $4 on a gallon of gas?

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As an investor, it’s tough hearing about unscrupulous investors. There are a few recent cases that are notable. A story that’s been covered extensively on REIClub.com is the Flip This House case.

Not to be confused with Flip That House, Flip This House follows one or two real estate flippers each season. The original show was started by Richard Davis of Trademark Properties, who has filed a lawsuit against A&E.

The recent season of Flip This House features investors from Atlanta and San Antonio. Residents in the Atlanta Area quickly noted that Sam Leccima had lost his real estate license and accused him scamming buyers. Both Leccima and the Montelegos of San Antonio have been accused of allegedly lying about their volume of transactions as well as how quickly properties sell. In fact, some properties still haven’t sold, but the show presented them as if they had.

In other bad news, it was reported that 9 Texans were indicted in a mortgage fraud scheme just last week. Mortgage fraud is serious because it affects unsuspecting buyers and/or sellers as well as lending institutions. You can read more about the Texas mortgage fraud case at the Mortgage Fraud Blog.

Read also onHoustonRealNews.com - Fox News Breaks "Flip This House" Case.

Learn more about real estate investing in Texas.

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Hello. My name is Dee…and I am a nerd. I’ve been a nerd for many years. I blame my condition on my parents and the internet.

You may be well aware that I like Macs, gadgets, blogging and all things geek. On the top of my geek "to do" list is the upcoming Podcast Camp in my home town of San Antonio, Texas. You may ask, "What should one expect at a podcast gathering, besides extremely interesting people?"


According to my internet sources (the event website), this FREE conference will provide ample opportunity for Margaritas as well as discussions on video blogging, audio and video podcasting as well as blogging. As real estate blogging, video blogging, and podcasting become more prevalent in the industry, I imagine I’ll see more enthusiastic real estate agents and brokers at these events.

Even if you aren’t a geek, maybe you can show up to enjoy the Riverwalk and do other site-seeing in San Antonio.

Read more and register today: PodCamp Community UnConferences / PodCampSanAntonio.

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I was just discussing how much I miss speaking Spanish since moving from San Antonio to Austin years ago. Although Texas has a large Hispanic population, smaller cities like Austin seem to have a smaller multicultural population.

We have great programs here in Austin that target the Hispanic market, but it looks like San Antonio is making great strides in providing services to the Hispanic home buyers.

The League of United Latin American Citizens
(LULAC) opened a new office in San Antonio to help Hispanic consumers
wade through the mortgage process and, hopefully, prevent more
homebuyers from facing foreclosure.

LULAC officials say millions of families nationwide will lose their
homes through foreclosure this year and sub-prime lending is a major
culprit. About 40 percent of these homeowners are expected to be
Hispanic homeowners.

Read more: LULAC opens new San Antonio homebuyer assistance center

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Texas has deep roots and a connection (besides our border) with Mexico. We were once called Tejas until the Battle of the Alamo in San Antonio. I grew up in San Antonio, so am familiar with celebrating Mexican Independence Day on May 5th of each year.

Here’s a list of just a few Cinco de Mayo celebrations across Texas this weekend.

• AUSTIN Cinco de Mayo at Central Market. Former City Council Member Raul Alvarez hosts today’s celebration. Sat., May 5, 4-10pm. Central Market North, 4001 N. Lamar, 206-1000. Free.
• AUSTIN. Annual Cinco de Mayo Music Festival at Fiesta Gardens. May 3rd-6th.
• EL PASO. May 5 — This “Taste of the Border” festival featuring mariachis, margaritas, tequila and a mole extravaganza kicks off at 3:00 and goes into the wee hours of the night.
• HOUSTON has several events this weekend, including Cinco de Drinko and a parade.
• SAN ANTONIO. May 4-6–San Antonio draws about 30,000 to its festivities with food booths at its historic Market Square, street dancing, handicrafts, concerts and other commemorations.

See the Cinco de May celebrations in your state and remember…margaritas taste better outside.

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RISMedia published a story about HousingPredictor.com’s hottest real estate markets. Several Texas cities made the list.

"McAllen, Texas was selected as the runner-up to Albuquerque to place
second among the top 10 markets forecast for the highest appreciation
throughout the remainder of the year.

Four other Texas markets made the
list, reflecting a state real estate market in the Lone Star state that
is appreciating at levels not seen in many years. Housing Predictor
forecast the current boom in Texas in early 2006."

Austin and Houston were on the list, which I definitely concur. My favorites outside of Texas was Biloxi, Miss. and Albuquerque, NM. I really like New Mexico, so will try to make an excuse to visit for "business purposes" as soon as I can.

Link: Housing Predictor.com Announces 10 Hottest Buyers Real Estate Markets

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I find myself defending Texas real estate on a weekly basis from people who feel threatened by the sagging national real estate market. I have to remind them that Texas job growth, population increases, relocations, etc. are driving a strong economy here. If I were to invest anywhere in the U.S, it would be Texas.

Now, I have more ammo for these discussions. The Chief Economist at the Texas A&M Research Center said Texas is bucking trends due to our affordability and net population growth. Austin only had about 3.2 months of inventory on the market, so we’re even ahead of larger Texas cities like Houston, Dallas and San Antonio.

While other states like California, Arizona and Florida are feeling the temporary pain of a market correction, our Texas real estate market is one of the strongest in the nation.

Link: Economist: National real estate attention focused on Texas

San Antonio Real Estate Hot.

Read about the Texas Buyer Market Apocalypse…

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Yesterday, I wrote part 1 of my article on the Texas real estate bust that was based on hearing war stories from real estate agents and mortgage brokers who were in the business in the 1980s.

So with the 1980s not being very far away, have we learned anything?

• Reports from the Austin Board of REALTORS shows that about 1 in
  every 3 or 4 homes are a secondary purchases (non owner-occupied). Most
  local agents can tell you that about 20-40% of their business been
  out-of-town buyers and investors.
   
• Homes are being built at a ratio of more than 1:1(one home for every 1 job). See our previous forecast.
• Properties in some areas are being purchased for greater than asking price because "they will appreciate". No thought is given to debt burden, cash flow, or profitability. Previous article.

Although interest rates are still at historic lows, one thing is true.
Real estate goes through a constant cycle of inflation and recession.
Houston and San Antonio are flatter markets while Austin and Dallas have higher peaks and lows.

(more…)

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Each generation has a big event that we remember with such passion that people know where they were when it happened. I’d seen a recounting on the History Channel in which U.S. Citizens described where they were when John F. Kennedy Jr. or Martin Luther King was shot. It has been said that Generation X and older will remember where they were on September 11th.

In residential real estate, we hear of Texas during the 1980’s. Interest rates were in the 20s, so homes with 24% interest rates were common. There was no use of Adjustable Rate Mortgages (ARMs) or zero-down loans. Homes were selling like hotcakes. The Multiple Listing System(MLS) did not exist, so you had to visit an agent who would look up listings in a big, thick book.

Then, President Ronald Regan recalled a tax incentive that was causing investors to buy properties at an alarming rate just so they can deduct the loss as a write off. The Savings and Loan Crisis sealed our fates.

HAVE WE LEARNED ANYTHING?

Please come back to read the continuation of this story, (Part 2 of 2).

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