Fredericksburg Texas

Breaking News!  Last Thursday, May 19, 2005, Fredericksburg re-joined the 21^st century and had the “soft opening” of the brand new Stagecoach Theater.  While no one seems to be sure whether or not this multi-plex will be two, three or four screens, it opened with much success showing the last installment of the Star Wars series.

For years, we’ve had no theater.  Our drive-in closed years ago and our one-screen “Palace Theater” closed many years ago as well.  If you want to experience first-run movies on the big screen, you had to drive 22 miles south to Kerrville and sit in a nasty run down, barely-porno-worthy dive.  We now have state of the art projection and sound with stadium seating and high-back rockers!  Welcome to the big time!

All you city-folk take that sort of thing for granted.  Having moved here from Austin and having two kids who love movies, I really missed that amenity.  No more waiting for Blockbuster or NetFlix or Pay-Per-View.  Can you tell I’m excited?

While the impending opening of the Wal-Mart Super Center may give some pause, I think that Wal-Mart and the theater will keep jobs and tax revenue in home Fredericksburg rather than see it go scampering off to Kerrville. The more amenities we offer only solidifies our town as being a great place to visit and a great place to live.  In my opinion, we need not be courting a “major employer” that will draw permanent residents to the area.  Employers feed off of employers and before you know it we look like Austin.  No one who lives here wants that.  We love our small town and want to keep it that way (albeit with all the modern amenities).

Does having an “open house” or hamburger luncheon for the realtor community help sell a $1,000,000+ house?  I love to hear any feedback from the bloggers out there who are interested in this sort of thing.

Since you’re now wondering, I think that it is a rather useless exercise. First, it seems to me that if any agent worth their salt has a buyer in the price range they won’t need any marketing gimmicks to know the inventory currently available (hello..it’s called MLS).  Second, they should have already previewed any and all appropriate listings for their buyer.  Finally, very few agents in this community can attract and hold a buyer of that caliber, so, in reality, you’re wasting your time and marketing dollars chasing buyers that already know about you through just a very small hand full of agents.

Isn’t it amazing how dependent we’ve become on cyberspace?  Our office is on Road Runner, we’ve been down for the last few hours and I fell totally cut off from the world.  No e-mail, no Google, no Blogs, no MLS,  heck, I might as well pack it in and call it a day.  Oh yeah, we can still do it the old fashioned way, BY TALKING!

Pick up the phone, read the newspaper, talk to your office-mates, friends or neighbors.  Wait, screw that…we’re back on line!

One of my favorite times of the year in Fredericksburg is fast approaching…Peach Season…yeah!  Fredericksburg, TX is well-known throughout the state for it's world-class peach crop.  All the things that are required to produce tasty peaches come together in our area; soil conditions, weather, rainfall, number of winter freezes, etc.  Soon, roadside stands will be brimming with all things peach.  Pies, cobblers, ice cream, if you can stuff a peach in it, we got it…

Folks come from all over the state to sample our bounty (like they do to see the wildflowers earlier in the Spring).  A little planning and homework beforehand will assure you hit town during the right period of the ripening of your favorite variety.  The best source I've found for this info is at www.texaspeaches.com .  Check the link for ripening dates.  My favorite is the Loring variety.  If you come, be sure to stop at Behrends Orchard on US 290, just east of town, and stock up on Annabel's Peach Ice Cream. It's unbelievable! A great "pick your own" place is Marburger Orchard south of town.  The kiddos love a pick-your-own excursion.  If you're lucky you can get in on Strawberries and Blackberries too…

Ah, the life of a professional realtor…the money, the glamour, the women, the fame.  O.K., not so much…

For those of you who care (and even for those who don't) the life of a realtor is no better or worse than that of anyone else who works for a living.  Please allow me the liberty of setting straight some common misconceptions about my profession.

1)      Making a commission as large as 6% on, say, a $250,000 sale is a lot of money for the effort.  That $15,000 commission (generally paid out of the seller's proceeds) is more often than not, split evenly between the listing agent and the agent representing the buyer. So, from $15,000 we're now at $7,500.  Unless you own the agency (or are Broker of Record) you have to split that $7,500 with your broker.  The industry average here is 70/30, so now we're at $5,250.  Deducting your self-employment tax (we're all "independent contractors", read, no security, no benefits) and income taxes and we're now down to around $3,500 for that $250,000 sale.  Out of that $3,500 we pay for our overhead which includes, but is not limited to, automobile expenses, advertising, websites, franchise fees, professional dues (national, state and local), E&O insurance, health care, etc., etc.

2)      What does our customer/client get for the less than $3,500 that I pocket? Unlimited access to me, my office, my experience and proprietary MLS data 24 hours a day and seven days a week.  Many clients do not respect the fact that you have a life outside of your office.  Why is that?  If I hire the services of an attorney, do you think I get his cell phone number and can call him anytime of the day or night.  Do I expect him to miss his children's soccer games on Saturdays or church on Sunday to be at my beck and call?  How would he react to that if I had those expectations?  My only guess is that people think that for the money we make, we should be on call…see #1 above.

3)      On average, a homebuyer takes three months (or longer) to make the decision to buy a particular home.  For us, that three months (or longer) of showings, phone calls, hand holding, driving, faxing, e-mailing and explaining an enormously complicated financial transaction to people who , generally speaking, are unappreciative of our efforts and expertise, especially in light of our compensation.  Again, see #1 and brake that down per hour over a three month (often longer) period.

4)      Realtors are exposed to a tremendous amount scrutiny and liability.  We get blamed for everything that can go wrong in a deal and we can easily (an in some cases rightfully) be held liable for any number of things.  Hell, I can get in trouble for writing "realtor" and not "Realtor®".  As with any profession, we have our share of slackers, idiots and scammers.  Most folks I know in this business, folks who do it everyday and make a nice living of it, are honest, decent, hard-working people like everyone else.

Oh shut up, you chose this profession, you knew what it was like.  If you don't like it, quit.  Good point. Yes, I know this business well enough to temper my expectation accordingly.  The question raised by this missive is do you, dear reader, know this business?

http://www.fdic.gov/bank/analytical/fyi/2005/021005fyi.html

U.S. Home Prices: Does Bust Always Follow Boom?

U.S. home prices have boomed in recent years. Average U.S. home prices rose 13 percent in the year ending September 2004, and are up almost 50 percent over five years. In December 2004, the Office of Federal Housing Enterprise Oversight (OFHEO) noted, "The growth in home prices over the past year surpasses any increase in 25 years." Because of this rapid growth, some have become concerned about the possibility of a home price collapse, either nationwide or in a number of major cities.

But before we evaluate the implications of the recent housing boom, it is useful to put it in a historical context. How extensive has the surge in home prices been in recent years? What can history tell us about the likelihood of "booms" to go "bust"? This issue of FYI examines the historical movement of home prices at the metro level to gain insight into the outlook for U.S. home prices. There is some evidence that home price booms can be followed by busts—although we find, at least by our criteria, that this pattern may be more the exception than the rule.

Defining a Housing "Boom"
In order to examine the historical evidence of home price booms and busts, we first need to arrive at some definition of a "boom." Although there are many possible ways to approach this issue, we chose a fairly simple definition based on a cursory examination of cities that have exhibited some of the strongest home price cycles in recent decades. We define a "boom" simply as a 30 percent or greater increase in inflation-adjusted (or real) home prices during any three-year period. For our "1/3 in 3" rule, we adjust the nominal home price series that is published by OFHEO using the Bureau of Labor Statistics consumer price index (CPI) less the price of shelter, which is used by OFHEO to adjust home price changes for inflation.

Defining a Housing "Bust"
One way to measure home price busts in our historical sample would be to start with our definition of a boom (real price increase greater than 30 percent in 3 years) and simply reverse the sign and look for price declines. However, applying this approach proves to be too stringent a definition, resulting in the identification of only five metro-area price busts since 1978. The reason this measure proves to be too stringent is that home prices tend to adjust slowly (or be "sticky downward," in economists' terms) during a downturn. Unless homeowners have lost the means to maintain their mortgage payments, say through mass layoffs, or are forced to move due to some other circumstance, they typically have the option to withdraw their homes from the market—especially if they feel the price being offered by potential buyers is too low. Because prices are sticky downward, it will be necessary to define a price bust using a lower threshold and a longer time period, such as a real price decline of 15 percent or more in five years.

So, must a bust always follow a boom? Based on our look at history, our answer must be "no." Only infrequently do home price booms lead to busts, at least by our criteria.  Clearly, the lion's share of home price booms have not ended in busts historically.

How Do Booms Typically End?
If it is relatively rare for housing booms to result in a price bust, how do booms usually end? Our look at history suggests that stagnation in home prices is often the most likely outcome. Of the 54 boom episodes prior to 1998, 45 did not see a subsequent bust. In these cases, nominal home prices rose by an average of 2 percent per year during the five years after the boom ended. The equivalent figure for real home prices was a modest 2 percent per year decline. So for 83 percent of our post-boom cities, nominal prices continued to inch up and any declines after inflation were very modest. Home prices in these markets simply stagnated, or stalled out, following their booms rather than going bust.

What Does History Suggest about the Current Situation?
This paper has suggested three facts about home price booms and busts. First, home price booms do not last forever. Between 1978 and 2003, the nationwide HPI grew an average of 5 percent per year in nominal terms. Even after allowing for strong local population or economic growth that could temporarily boost home price appreciation, the 20 to 25 percent price gains that have been witnessed in some cities in recent years clearly are not sustainable over the long term. Second, we have seen that most booms usually do not go bust but instead tend to result in a period of price stagnation. Finally, busts do sometimes follow booms. In those instances, severe economic shocks—often including a net outflow of population—appear to be a key factor in pushing nominal home prices sharply lower. Home price declines do not occur simply because home prices have boomed, and they do not occur independently of local economic conditions.

Why History Might Not Be Applicable to Today's Booms
Some analysts and market watchers have suggested that the United States has been experiencing a nationwide home price "bubble" in recent years. The run-up in real home prices since the late 1990s has been quite pronounced, spanning the nation's largest cities and a good number of metro areas in California. Our count of 33 boom markets in 2003 is the highest witnessed at one time during the past 25 years—1988 ranks second, with 24 booms. The fact that housing booms have become so widespread may contribute to the impression that this is a nationwide phenomenon.

Although this paper demonstrates that relatively few metro area housing booms have ended in busts, there are reasons to think that history might be an imperfect guide to the present situation. Foremost among these are changes in credit markets that are pushing homeowners—and housing markets—into uncharted territory. A major financial development in the 1990s was the emergence and rapid growth of subprime mortgage lending. Subprime mortgage loan originations surged by a whopping 25 percent per year between 1994 and 2003, resulting in a nearly ten-fold increase in the volume of these loans in just nine years.  Subprime mortgages currently account for just over 10 percent of all mortgage debt outstanding. While the growth in subprime lending has made home ownership an option for millions of households who could not qualify for conventional loans, it has also been associated with higher levels of delinquency and foreclosure. There is also evidence that subprime borrowers may be particularly vulnerable to problems servicing their debt when interest rates rise or when the borrower is exposed to economic stresses, such as job loss.

Home buyers are also increasingly availing themselves of higher-leverage mortgage products. In 2003, loans exceeding 80 percent of the home purchase price accounted for 30 percent of all purchase mortgages underwritten. In a few cities, this share exceeded 50 percent. In addition, more borrowers are taking on second mortgages at closing. One method of doing so involves "piggyback" loans, which combine a first mortgage, usually for 80 percent of the value of the home, with a "piggyback" second mortgage amounting to 10 to 15 percent or more of the value of the home. The effect of this structure is to raise the total loan amount to a level very near the value of the home, which may make borrowers more likely to default in the event of a housing market downturn. An increased incidence of default and foreclosure could, in turn, contribute to downward pressure on home prices as distressed properties are liquidated by lenders. However, little is known as yet about the effects these credit-market changes might have on the dynamics of boom-bust cycles, making them promising areas for future research.

This unique gift store opened its doors in 2003 on “the best side of the best block” in Fredericksburg. The store features a wide variety of products ranging from furniture and gifts to apparel and jewelry.  The owners are proud to carry many lines that are “exclusives” to Zertz, including Koel (designed by Elizabeth Mosley and Kori Green, Pat Green’s wife), Pandora Jewelry and Mik-Wright cards.  Other lines include Life is Good, Crocs and Mary Phillips.

This sale is for the business only, no real estate is offered or included.  Any assumption of tenancy for the premises is subject to landlord approval.

The sale will include all inventory, fixtures, cash flow, mailing lists, computers, software, website address, website, cash registers, goodwill, etc.  Sellers are willing to discuss a limited-time consulting arrangement.

The price for this rare opportunity is $225,000. No seller financing is available.  Please feel free to peruse the store, but please, don’t question the employees. They are aware that the business is for sale but are not authorized to represent the owners.

More information about Zertz is available at www.zertz.com.  Financial information is available to qualified buyers upon execution of a confidentiality agreement.

Owning a Bed and Breakfast has been a fantasy for many people.  Owning a quaint retreat in a small charming town (or in the midst of a large city) and catering to the needs of romantics, adventure seekers or foreign travelers sounds like something you might enjoy.  Leisurely chats over breakfast, tea or evening wine and cheese with people from all walks of life certainly sounds good. Being your own boss, this sounds the best!

REALITY CHECK!  Owning a B&B is tremendously hard and confining work.  In Fredericksburg, where you have over 300 experienced competitors, a shortage of unskilled labor (also translates into overpaid labor), declining occupancy and high property prices, a B&B should only be looked at as a “real estate play”.

The reality of the B&B business is far removed from the fantasy.  I know, my wife and I have “been there, done that” with a very successful B&B when we first moved to town.  The first question you have to ask yourself is, am I an onsite owner or an absentee owner? Remember, the times you may want to travel yourself are often the very times everyone wants to come and stay!

The next step is to make sure you have all the information you need to make an informed investment decision.  You have to have a website for your business so you need to know the cost to design, build and maintain your presence on the web.  Who handles the bookings, you or a service?  Do you know what the services charge and what they do?  Have you looked at the realistic costs to furnish the B&B (include lots of sheets, towels, plates and glasses along with furniture and appliances). Will you serve a full breakfast, continental or no breakfast?  In a full breakfast setting, you’re “on call” and the food costs can run as much as 20% of your gross.  This is the tip of a very large iceberg.

I’ll let you in on a little secret.  From a purely “return on investment” perspective, you will not be happy owning a B&B in Fredericksburg, Texas.  Increased competition from national hotel chains and the high cost of buying in will ultimately force you to look at the operation of a B&B as a merely a transitional use of an asset to position it for future sale.  The keys to making the transition less painful to your wallet lie in having the right location and offering something to visitors that is truly unique.  No small task that.

I am often called on to advise both buyers and sellers on B&B (and potential B&B) transactions.  Those who have listened, have done very well…