Web Posted: 12/07/2006 11:06 PM CST

Jennifer Hiller
Express-News Business Writer

The party isn’t exactly over for San Antonio real estate, but the champagne has stopped flowing.

Home builders, feeding off of the anxiety of the national real estate meltdown coupled with the typical seasonal slowdown, have started offering deals and incentives not available a few months ago.KB Home even has started to lay off employees.

The flurry of year-end deals can be attributed, in part, to an annual strategy builders use to move homes off the books for tax purposes. But there’s also a sense that 2007 won’t be as good as 2006, and that the frenzy that typified home building and sales in recent years has eased.

“I’m hearing more people being concerned than I am (hearing them be) ecstatic,” said Michael Moore, vice president of the Greater San Antonio Builders Association.

KB Home, one of San Antonio’s largest builders, laid off numerous employees Thursday.

The layoffs came just after KB Home exceeded its sales goals for its fiscal year ending in November.

Spokeswoman Cathy Teague said the company had to streamline the business to match the volume of work it expects next year, while still remaining profitable.

“We will continue to open new communities and expand in the market by offering new home designs and neighborhoods to attract new home buyers,” she said.

KB Home has laid off workers in other cities — recently in Denver and Las Vegas — but Teague said Thursday’s layoffs were a local decision and weren’t done as a directive from the corporate office. She wouldn’t confirm the number of employees who lost jobs.

Those layoffs likely will feed a growing sense of industry unease.

It’s a new feeling for San Antonio, where for the last year the city’s real estate market has been a shining contradiction to the rest of the country’s woes.

The new home market party started when Fortune magazine anointed San Antonio the nation’s strongest housing market, predicting an 8.3 percent home price appreciation in 2006, luring investors who helped push the market to record levels.

As a result, one segment of the real estate market already has a hangover: single-family home rentals.

Out-of-town investors flooding into San Antonio this year have glutted the market with rental homes, and the average rent has dropped $202 a month since this time last year, from $1,301 to $1,099, according to the San Antonio Board of Realtors.

At the end of October, renters had their pick of more than 2,000 homes. So far this year, more than 10,650 homes have gone onto the rental market — 22 percent more homes than last year.

Kevin Knight with Liberty Management Inc. said the out-of-state investors had a different mentality than local landlords, who traditionally bought fixer-uppers.

The out-of-state investors wanted new homes that required little maintenance.

“San Antonio investors used to buy for positive cash flow,” Knight said. “In California, they buy for appreciation. They’ll buy a house here and lose $200 to $300 a month and they don’t care.”

That’s helped contribute to a drop in rents.

“We’ve had owners who are used to getting $1,100 a month in rent and we tell them they have to drop their price,” Knight said. “They don’t want to hear that.”

One such owner is Missy Stagers, a real estate agent with Coldwell Banker D’Ann Harper Realtors. She owns five rental homes that used to be moneymakers, but now are breaking even.

“They’ve ruined our rental market,” Stagers said of the investors, many of whom cashed out of the East or West Coast markets and planted their money here. “You can now rent homes cheaper than you can buy.”

Real estate malaise has struck much of the country, but Texas, which never saw a rapid run up in prices, stayed largely immune.

San Antonio homes appreciated in value about 8 percent this year, and the state is projected to have stronger job growth than the rest of the country in 2007 — a critical factor in whether people buy homes.

A recent report from the Federal Reserve Bank of Dallas said builders across the state have pulled back on starting homes and have increased incentives to sell rising inventory.

“On the new home side, we’re starting more houses than we’re selling,” said Bob Gardner of Gardner Financial Services.

Actual inventory figures were not immediately available, but new statistics should be released in January.

Business for home builders usually drops between September and January, often as much as 20 to 30 percent from spring and summer highs, but this seems to be larger trend than just a seasonal slowdown.

Centex Homes recently offered as much as $25,000 in incentives on its homes. Buyers could apply the money toward the down payment and closing costs or add upgrades to the home.

Such deals were unheard of a few months ago.

“We hit a wall at Halloween,” said Leslie Mullins, operational marketing manager for Centex Homes in San Antonio. “It’s not just us. We’ve spoken to all of the other big builders in town.”

Home buyers should expect to see aggressive marketing and the ability to negotiate prices on new home, said Jim Gaines, research economist with the Real Estate Center at Texas A&M University.

“The builders are seeing the market slow down. It’s doesn’t mean it’s falling off a cliff,” Gaines said.

Despite the troubles, no one predicts a San Antonio market crash.

Low interest rates for mortgages and job growth should drive sales and construction, even if it’s not at a party-atmosphere pace.

And the market for existing homes remains strong. It takes less time to sell a home this year than last — 60 days on average, compared with 70.

No one can say when the party might be over, but as Travis Kessler, CEO of the San Antonio Board of Realtors, puts it: “At some point you can’t go up forever.”

The Denver Business Journal - 12:28 PM MST Wednesday

A sluggish market led to a dip in Denver metro-area housing starts during the third quarter of 2006, according to a report by Metrostudy’s Denver division.

Denver area third-quarter housing starts fell 22 percent from the same period last year, from 4,889 new homes to 3,830. The year-to-date rate through the third quarter declined 3 percent, from 19,568 in 2005 to 18,908 in 2006.

The Houston-based housing market research firm found that Douglas County led metro-area counties in new home starts, although the year-to-date amount was still down 14 percent from the same time last year, to 4,236 units.

Jefferson and Adams counties reported declines of 19 percent and 17 percent, with 1,479 and 3,433 starts, respectively. Arapahoe County posted a 4 percent increase in activity due to continued growth in southeast Aurora.

Inventory continues to climb, with 31,450 homes on the market at the end of September — an increase of 16 percent compared to the same time last year. Still, prices remain high, with 54 percent of new homes falling in the $200,000-to-$350,000 range. Homes priced above $500,000 made up 14 percent of the market.

“Housing in Denver appears to be more stable than in many other Western markets. However, consumer financial stress has increased, and many potential home buyers are worried about high foreclosure rates or are waiting for the market to normalize,” said John Covert, director of Metrostudy’s Denver division, in a statement. “These factors have led to softening demand and increased levels of both existing and new home inventory.”

By Analisa Nazareno

San Antonio Express-News

RISMEDIA, Nov. 1 – (KRT) – The postcards in the mail and the books on the shelf have been sending out this siren call: “Get rich off of real estate investing,” “Let your money work for you by becoming a landlord.” They prey on the fantasies of a population being told to forget about Social Security, to say goodbye to company pensions, and to not count on seeing any appreciation on their insecure 401(k) plans.

And because of these concerns, many are heeding that siren call — or considering doing so.

“There are a number of people buying rental property in San Antonio right now,” said Steve Foster, who heads Boardwalk Real Property Management and Stephen D. Foster & Associates.

Author and real estate investor Richard Jorgensen said interest in real estate is so high these days that publishers are now asking him to write books, whereas before he pleaded to be published.

“I wrote my own book and was declined by publishers,” said Jorgensen, author of “New No-Nonsense Landlord: Building Wealth With Rental Properties” and “What Every Landlord Needs to Know: Time and Money-Saving Solutions to Your Most Annoying Problems,” both published by McGraw-Hill.

“Now the real estate market is so hot, they asked me to do one more book. They even gave me an outline,” he said.

With low interest rates on mortgages continuing, combined with affordable housing stock in San Antonio, more people are able to buy homes and also to buy rental properties.

Ironically, Foster said, because of these circumstances, rental properties are seeing a rise in vacancies, with Texas metropolitan areas seeing 15 to 20 percent vacancy rates.

“The problem we have right now is an overabundance of rental property now for rent,” Foster said. “A lot of qualified tenants are buying houses. It makes more sense to buy than to rent a house. So the vacancy is higher than it’s ever been, between 15 and 19 percent, for my company.” Nevertheless, real estate can be a good investment for the person with patience and the willingness to do the homework and the housework.

“I’ve been in the business for 35 years and I’ve never had a down market,” Jorgensen said.

“What’s bad for somebody is an opportunity for another person,” Foster said.

Clichs aside, what these men are saying is that rental real estate investors must understand that there are times when properties will sit vacant because of market conditions — and they prepare for those times with a savings and a budget.

“I think most people try to get into properties under-funded,” Foster said. “They have enough to buy something. They get a loan, and they don’t look far into the future. A house could sit empty. And even if sits empty, you still have to pay your mortgage.” His colleague, Realtor Joey Johnson, tells novice property owners that they must prepare a realistic budget accounting for such vacancies, for repairs to the home and maintenance.

“If you buy properties in need of repairs, you need to do your homework and make sure you know how much it will cost to repair that property,” Johnson said.

Another mistake that new landlords make is they forget the time when they were renters themselves and haven’t made their rental properties attractive or livable.

“They go into these cut-rate places and buy cheap stuff for their property, when they’re better off spending a few more dollars,” Jorgensen said. “You can buy a stainless steel sink for $99 at some of these places, but it might just last you a year or two. If you spend $299, you can get a good one that can last the life of the building. Buying good high-quality materials is important.” To get through vacancies, these veteran real estate investors said the only thing that a property owner can really do is reduce rental rates.

“If you buy property correctly and have the funds to support what you’re doing, the easiest and quickest way to rent property is to lower your rent,” Foster said. “The cheaper your rent, the more people you have available to rent your property.” Lowering your rent for a cycle is cheaper than borrowing money to pay your mortgage, Jorgensen said.

One of the fears many landlords have about lowering their rent too much is attracting the “wrong kind” of tenant.

Fair housing laws prohibit property owners from discriminating based on race, religion, sex, family status, disabilities, or national origin. But they do allow landlords to perform criminal and credit background checks on applicants — if the background checks are performed on all prospective tenants.

“It can kill your building if it gets the reputation of being a drug house,” Jorgensen said. “My advice is if you’re going to be in the rental business and you don’t know the people in front of you, you cannot just eyeball people and say they look good. I wouldn’t secure one tenant unless you’ve got your credit report and background check.” Jorgensen advises new real estate investors to start out small and to slowly build a portfolio.

“Because the thing about a duplex is you have half the property to help with payments and you can live in the other half,” Jorgensen said. “If you’re a real estate investor, you can start out with a duplex and once you get established in the duplex and build equity, the next step is to go to the next property.

“And you use the equity on your first duplex to buy your next duplex. Then you can buy your own home and use the duplex equity as a down payment. And once you get into a home, you won’t have much of a mortgage payment.” Jorgensen said real estate is the type of investment that any person with average intelligence can manage if they’re willing to follow the right steps and to do the calculations on their balance sheets.

“If you’re investing in real estate, don’t expect to get rich overnight,” he said. “It takes time. And these people who tell you that in 90 days you can make $30 million, well, there’s no truth to it. It takes time and work, and you can’t get rich overnight.”