1970 Vintage Home - A Work in Progress

Jennifer and Tony Latto, and their two girls, have a 1970’s vintage home in a very nice neighborhood of Austin.  Jennifer, who is a registered architect and interior designer, has made some interesting updates to their home. 

Roselind:
Jennifer, first of all, thanks for sharing your ideas on the ongoing remodel of your home.  What have you done so far that has made a difference? 

Jennifer:
We arrived from Boston just over two years ago and moved into a 70s home in Bee Cave Woods.  We loved the open floor plan, the private yard, the existing trees, and the location.  The home was smaller than those we’ve had in the past but we recognized the potential!   

We tackled items that were relatively inexpensive first, just to get the house to where it felt like “ours.”  Since I earn a living improving environments, I have a hard time staring at the ordinary or run down!  This trait drives my husband crazy because I constantly want to make upgrades! 

Most of the work we have achieved thus far was outside; however, one of the biggest impacts was to reface the stone fireplace with gradient glass tile on the vertical surface and a quartzite slab hearth to match the kitchen.  This is a focal point for our living area and always extracts comments!  I’ve included a photo (even though we have yet to grout it!).



Roselind:
I’m glad to hear that you are like most folks – remodeling is something that does not get done all at once.  It can go on for years – and that is OK.  Shaping a home takes time. 

Tell me a little more about gradient glass tile.  I can see that is goes from a more intense color at the bottom to a lighter shade.  Where did you find this tile?  And, quartzite slab?  What is it, and where do you find it? 

Jennifer: 
This is our fourth home remodel in ten years.  We’re a bit tired but there’s still always a project around here and we attack them when finances and schedules allow!  It’s really a lifestyle!

There may be other resources for this but the tile on our fireplace is from Hakatai, www.hakatai.com.  I loved their program for customizing the blend from their glass tiles.  You can select the tile colors used.  By adding the same color twice, the intensity of that color is increased.  A minimum of two colors is required but a maximum of ten can be used.  Their custom design tool will allow you to preview the design and it generates a price.  The same tools are available for a custom “blend” which are popular for kitchen backsplashes and bathrooms.

The slab is quartzite, which is a man-made material composed of about 90% quartz combined with pigments and polymer resins. It is stain, scratch, and heat resistant and doesn’t require sealing like natural stone.  It can cost just as much, or more, than granite and marble but I love the modern monolithic look and you can’t beat the durability.  Vivid colors are also more readily available than in natural stone as well.   CaesarStone and Silestone are two brand names. 


Roselind:
Your backyard is amazing!  I remember when you bought the house, I was pleased with the big back yard – but it was pretty boring.  What a difference now!



Jennifer:
Tony and I both grew up in the Southeast.  We have been corporate gypsies landing in Raleigh, NC, Portland, OR, and Boston, MA.  When Tony received an offer from Dell, we couldn’t wait to get back to the South and found Austin to be everything we were looking for with the weather, people, and lifestyle.  We gave away our snow shovels and made a commitment to a better life outdoors.  We agreed that the backyard was our favorite place and we were lucky that it was a “blank slate”. 

We evaluated joining a local pool versus building our own.  In an ideal world, we’d have both but having our own pool was more attractive because it would make our backyard the private escape and social place we wanted.  And when those temperatures soar, we gather outside and enjoy our investment (although Tony still calculates the dollars per dip)!

This spring we added a limestone patio with a fire pit.  This is used a lot, especially in the fall.  Tony was an Eagle Scout and loves to make fires and even cooks in a Dutch oven out there! 

The kid’s trampoline and swing set is in a mulch bed and disguised behind palms.  This area serves a more durable space for our pets too.  There is a storage area where pool supplies and equipment is kept.  We hid this behind a wire fence and flowering vines.  We stained the existing wood fireplace a dark brown for a dramatic background. The Tiki torches, string lights, and pool lights liven the atmosphere and show my passion for lighting.  Essentially, our outdoor space has been subdivided into comfortable “rooms”.  Each area has casual seating in groups perfect for entertaining. 




Roselind:
Are there parts of the interior that you want to tackle in the future?


Jennifer:
The next steps are refinishing the hardwood floors with a darker stain and a glossier finish to go with our décor. Then, we are replacing an old sliding glass door to the pool with a window and a bar counter for serving food and drinks from inside.  I hope these will be done in the next six months. 

Here’s my wish list (Tony rolls eyes): 
I’d like to expand our kitchen.  We usually eat at the kitchen island table and when the kitchen has all four of us and two big dogs nearby, navigating the room for the forgotten condiment proves challenging.  We have an enormous pantry that is great for storage but by expanding into this and a garage workroom, we gain about 7 more feet of floor space and another window in the kitchen. 

We would like to replace the ceramic tile in the kitchen and baths although my husband and I have not agreed on a material yet.  We own some basalt and granite slabs and copper sinks for the bathrooms and are just waiting on funds for the installation!  We would like to replace the standard fiberglass tubs with something more modern as well. 

Eventually, we plan to add a master suite over the garage to gain a guest bedroom.  This addition will serve to modernize the ranch exterior as well.  We’d like to build a pool house that serves as an office and bathhouse.  The entry will be off the limestone fire pit patio.  This is our forever home so we’ll build as we need instead of moving!

Roselind:
As an architect and interior designer, are you open to helping others who are thinking of remodeling? 

Jennifer:
Although I specialize in commercial work, specifically corporate and medical offices, during these times, I’m finding residential work is more readily available.  I used to think that the residential market was so different from the commercial world; and in way they are - different codes, materials, and client approach. But it’s all still design and it’s what I love to do!  I’m working on a kitchen remodel and overall facelift for a neighbor now.  My website is http://www.reddesignstudios.com/.  I’m new to the area and am still building my practice, so I think I offer a great value on consultations. 

Roselind:
What advice do you have for people who are thinking of undertaking a remodeling project?

Jennifer:
I have found that many people may overspend on a project if they don’t have a professional partner.  Not “overspend” like they’re being overcharged but “overspend” because they spend money on things that don’t give them the biggest impact.  Many people are also missing out on real estate bargains or investment possibilities because they cannot see potential in the available property.  Having a professional shop with you can help the buyer understand how easily their goals and style can be obtained. 

Austin Texas Real Estate Guide

Remodeling Decisions That Add Value: Better Living Areas

The main living room is the central core area of your home.  It is both a private and public space that you share with family and guests.  The main living room should easily connect with dining areas, kitchen, and hallways to bedrooms.  This space should be given top priority in the hierarchy of rooms.  However, too often it is not. 


Sometimes the front door opens right into the living room, and the passage deeper into the house cuts right through it.  Please!  Before you go a step further, stop to imagine how you would furnish and enjoy being in a room like this.  If you home has this layout, consider some serious surgery to correct this problem.  Never allow walkways to cross through the middle of living areas.  This creates an unsettling division within the space which no furniture placement will solve.  If you have this floor plan, face up to it, and make the necessary changes before moving on. 


Most buyers today prefer two or more living areas.  In addition to the main living room, these may include a family room or den, a study, and a game room.  The trend today is to avoid wasted space.  Rooms that are used primarily for display have very little actual use and value.  Consider converting an unused formal living room into a study.  Sometimes a wall can be opened up to bring a seldom used room into a real relationship with the house.  This is much cheaper than adding on more space.  Remodeling tip:  Make better use of the space that you have.  It is cheaper than adding on.


The “greatroom” is a popular layout that combines the living-dining-kitchen space.  This open style is efficient in its use of space, combining multiple uses.  The house seems bigger than it would if divided into small rooms.  You will be able to work in the kitchen and talk with family members and guests in the living area.  If you can open a wall to allow a better connection and more light to flow between spaces, you will be making a change that most buyers prefer.

If budget allows, a gameroom is a space that serves a multitude of functions.  It is a more private living area that is often used for TV watching, computers, pool table, or children’s toys.  The gameroom is often an upstairs common area that connects to bedrooms.  Special media rooms are sometimes added, although the trend today away from extra rooms that receive infrequent use.  Consider combining a media room with pool table, ping pong, or other gathering room functions.


You cannot think about living areas without considering the traffic flow through rooms.  A natural and logical flow will guide people from the front door into the heart of the home – the main living area.  The pathway should not cut through the middle of rooms, or make you skirt around furniture.  Visitors should not be confused as to where to go.  A logical floor plan is crucial to making visitors feel welcome and comfortable in your home. 

A great living area draws people into it in a natural way, and provides a center for common activities.  Remodeling decisions that place great importance on the main living area add value to the home.   



Austin Texas Real Estate and Homes For Sale

Remodeling Decisions that Add Value to Your Home: Historic Connection

If you are planning a remodel, consider building your improvements around the best original design features of your home.  Historic elements contribute to an enduring style and will be more valuable to buyers if you decide to sell.

A sense of historic connection is valued by buyers.  People love clues to the past. Don’t be afraid to blend old finishes with modern ones. The one-of-a-kind, eclectic look is much desired, instead of a mass produced sameness. Sometimes folks rip out interesting old finishes and replace them with bland, standard issue cabinetry or tiles. They miss the chance to create a truly unique combination of new and old.  Historic features endure and will give a sense of timelessness to your home.

Wood windows and doors, wall panelling, period door knobs, old stone steps, original baseboards, and refurbished fixtures can add a touch of historic significance to your home. People are delighted by retro bath tiles combined with a splash of new wall color. Consider working with the old fireplace tile or stone before tossing it into the dumpster. Retro wallpaper can be a great find.  Old wood siding can find new life on a ceiling.  These touches of original character can be incorporated into your design to create a unique final product.

The Craftsman style, built in the early 1900's, is in very much demand. Rustic stonework, deep eaves, tapered columns, stained woodwork, and wide trim reflect the handmade look that people love.

Farmhouses are a great style choice for today. Reclaim the basics of this style - simple floor plan, hardwood floors, wood windows, local stone, and muted colors that connect with nature. Like farm buildings, the rooms are informal, somewhat sparse, and provide just what is needed.

Younger folks are breathing new life into their parent's ranch style and split level houses from the 1950’s and 1960’s. Mid-century modern furniture, paint colors, fixtures, and rugs are all the rage, and help to bring this style back into top form.

Urban modern has been around since the 1950's, with experimental use of space, color, glass, plastic and metal. Simplified spaces with clean lines and fresh colors are an antidote to today's complex lifestyle.

When planning a remodel, take care to reinforce and build on the design strengths that it already has. Your results will achieve greater value and stand the test of time.

Austin Texas Real Estate Guide

Austin Real Estate Market: 3rd Quarter 2009

The Austin real estate market tightened slightly during the 3rd quarter of 2009. Inventory for Austin as a whole is balanced - with a level of 5.7 months of supply. This is down from 6.3 months of supply at the end of the 2nd Quarter. However, throughout the Austin area, there are local variations in the market. Here is a map showing the state of the market within each local area: 3rd Quarter 2009 Market Data


Sellers Markets: 1 - 3 months of supply

There are 9 local areas with less than 4 months of inventory. These are all located in the close-in suburban part of Austin. Median home prices range from $100,000 to $400,000. Homes in these neighborhoods are mostly limited to re-sales. Builders have generally moved further out to find lots for new construction. There is strong demand for these close-in areas. Mortgages are readily available. And, the first time homebuyer tax credit has drawn buyers into the market. Strong demand has kept inventory at low levels.

Balanced Markets: 4 - 6 months of supply

There are 17 local areas with balanced markets. The balanced markets are distributed throughout central core areas; close-in suburban areas; and some outer-suburban areas. Median prices in these neighborhoods range from $100,000 to $400,000, with a couple of areas up to $600,000. There is some new construction in these areas – which increases inventory. Readily available conforming mortgages; first time homebuyer tax credit; and low interest rates have improved the demand side, and kept these areas balanced.

Buyers Markets: 7 + months of supply

There are 20 local areas with over 7 months of inventory. Median home prices in these areas vary from $100,000 to over $1 million. Generally, these neighborhoods have more new home construction available - which increases supply. Upper end homes continue to have higher inventory than the lower and mid level part of the market.

Upper End Market:

Areas with many homes over $800,000 include Central and Northwest Austin, Westlake, Barton Creek, and Lake Travis. These neighborhoods have been popular locations for speculative building or remodeling.

Although most builders have slowed or stopped speculative building in the high end, this level of inventory has been slow to contract. This is because mortgage money is not as readily available for buyers of high end homes. Jumbo mortgages (over $417,000) require 20% down payment; excellent credit and income; and a higher interest rate. Many buyers in this market have been unable to sell their previous home in another state, and this has slowed the demand for high end homes here.

Months of supply on the market for homes over $800,000:

                 1st Q       2ndQ       3rd Q

Area 1B    25.1         28.7         27.2

Area 8E    21.0          21.6         17.8

Area 8W   22.1         23.7          24.6

Area W     24.0         25.8          20.7

Area LN    34.0        40.4          56.6

Area LS     28.8        38.8          41.1

Area RN    18.6        20.2          20.9

Foreclosures:

On average, foreclosures are 3.1% of listings on the market – not a significant part of our market. (1st Quarter was 3.7%; 2nd Quarter was 3.6%) However, some sections of Austin have more foreclosures than this. These include the Manor, Elgin, Bastrop and some Southeast areas. Here you may see foreclosures at 8% to 12% of listings. These areas were popular with first time homebuyers, and were also targeted by investors during the boom market. The good news is that these neighborhoods do not have very high inventory levels. This indicates that their foreclosures are being absorbed quickly and inventory is not building up.

Conclusion:

In Austin we are not faced with serious depreciation, as a result of prices that were pushed to unsustainable levels. We are not faced with a serious foreclosure problem, generating its own downward spiral. And, we are not faced with widespread job loss.

Joel Kotkin, whose research appears on Forbes, ranks Austin as the best big city for jobs. He writes, “Few places have received more accolades in recent years than Austin, the city that ranked first on our list of the best big cities for jobs. 

Builder Magazine placed Austin second on their list of the “healthiest housing market for 2009.”  Their study says: “While other markets lost employment, Austin added 17,400 jobs last year – a 2.3% growth rate. It helps that Austin is home to both a major university and the state capital. Existing homes cost a little bit more in Austin than other Texas markets, roughly $188,600, but that’s still below the national average. Also, Austin is one of the few metro areas in the country where median prices actually rose in 2008 -- 2.7%. Amazingly, Austin now generates more home building activity than Chicago, which has six times more people.”

For buyers in all price ranges it is a great time to come into the market. Interest rates below 5% are the best in a lifetime, and they certainly will not remain this low. This is not the time to be waiting around for a better deal. It is the time to start shopping for a great place to live in Austin!

Austin Texas Real Estate Guide

Austin Hill Country House - Quest for Sustainability – SIPS Roof

When Cheryl and Eric Cosway decided to build their dream home in the hill country south of Austin they teamed up with Bill Moore, Austin’s original green builder. Their passion for building green, combined with Bill’s technical knowledge, led to a truly sustainable home - built with sensitivity to the health of it occupants, use of energy, cost factors, footprint on the land, and to its impact on the environment as a whole.

This is a blog series on the green elements of this “5-Star Energy Rated” house. Thanks to Cheryl Cosway and Bill Moore for sharing their thoughts.

Roselind: I understand that you used a SIPS roof ? What is this? Why was it selected?

Cheryl: Yes, we decided to use a SIPS roof, which stands for Structural Insulated Panels. These panels are usually made from expanded polystyrene sandwiched between two sheets of OSB. Bill Moore recommended that we consider the SIPS roof because it is extremely well insulated and sealed. There is also very little waste since the panels are pre-cut by the fabricator. The SIPS roof appeared to be our “greenest” option.

Bill: Every custom job has its own set of design variables. The site location dictates the view, the direction of cooling winds, and how the passing of the sun relates to the house design. In this case the view was to the north and the breezes came from the south. So, the roof was designed with a shallow pitch that mostly faced south.

The south facing roof design prepared the home for future photo voltaic panel placement. It also shades the interior from the summer sun by putting the ends of the house on the east/west axis.

When viewing the plan, I noticed how the simple roof design and the vaulted ceilings were well suited for a SIP (Structural-Insulate-Panel) system for the roof. This system was developed to reduce the energy load of the house, and shorten construction time.

I prefer to only use a metal standing seam roof on these panels because they are a structural unit. If the roof leaks, the structural strength can be compromised, and replacing a panel is extraordinarily difficult. But the standing seam metal roof was already a part of the design parameters, so that was not an issue.

Also this site is on a bluff with the potential for severe wind storms. This interlocking roof panel system is designed for high wind speeds. After Cheryl and I discussed the benefits of this greener approach, she agreed to go this route.

Roselind: So, the long, simple roof design made it a good candidate for a SIP system. Let’s talk about the panels themselves. Cheryl said that SIPS are made from rigid foam insulation sandwiched between two sheets of OSB. OSB is oriented strand board - made from wood strips laid in cross orientation, similar to plywood. The foam insulation core makes it very efficient in keeping a stable temperature inside the house. What about the cost? How do you compare between SIPS and conventional roofs?

Bill: As is usually the case with comparisons – it is a difficult question. The SIPs panels are expensive and were ordered months in advance. We needed a forklift to unload the delivery truck, and we needed a small crane for a couple of days to put them up. But, it only took a few days to install a very large roof system. And, all the high value foam insulation was part of the system, with no waste and much less labor. All total, it may have cost a few thousand more total, but the energy savings should make up the difference in a few years with a return of continued savings after that.

Roselind: I can see that it is not possible to make an apples-to-apples comparison. In a standard roof system, you would buy lumber for roof rafters or trusses, plus a layer of plywood over the rafters, plus the insulation on the floor of the attic. In the SIP system the structural and insulation components are combined.

Although SIP's provide excellent insulation and stability, they may not work well for complicated roofs. In order to realize the maximum benefit of the SIP system, you would build a simple pitched roof, with a vaulted interior ceiling, covered by standing seam metal. The panels are pre-made, so they can be put up faster, but there is some cost for machinery to lift them up, since they are heavy. Also, I imagine there is a learning curve to installing the panels, so it would be important to use a seasoned contractor.

Austin Texas Real Estate

Austin McMansion Ordinance: Walking the Walk

The Residential Design Ordinance of 2006 (revised 2008) controls certain aspects of the design and construction of homes in Austin’s central neighborhoods. In this discussion, I would like to ask two basic questions: What does the design ordinance say? And, how does it work out in practice?

Thank-you to David and Doug for sharing their experience.

David Cancialosi - Permitting and land development consultant; former city of Austin residential reviewer; member of City staff during implementation of McMansion Ordinance

Doug Marsh – Former president of Austin Remodelers Association (NARI); member of the original McMansion Ordinance task force; master builder.


What does the Design Ordinance say about house size?

David: Good question. The main objective of the McM Ordinance was to limit overall structure size on a residential lot. Prior to the Ordinance, a structure's overall size was limited by the 45% impervious cover rule. This determined how large a footprint a house could have when combined with driveways, decks and other non-permeable surfaces.

Roselind: So prior to McM, the concern was impervious cover. One could juggle some things – maybe have a short driveway, or no deck, and have more indoor space. Or, have a two story, instead of one story house.

David: The McM Ordinance introduced FAR – floor to area ratio - to residential permits - at a factor of 40%. This means that for every square foot of land, an owner can build 0.4 square feet of gross floor area - GFA. For example, if the lot is 6,500 sq. ft., the maximum gross floor area would be about 2600 sq ft.

Roselind: So this ties house size to lot size. It would be of interest to know what is included in gross floor area (GFA).

David: Basements, attached garages, covered porches above ground level, and portions of attic space count toward your allowable gross floor area. All this significantly reduces the floor area that a homeowner may apply to heated and cooled living space.

For example, a walk-out basement on a sloped lot is not visible from the front of a house. These are common given Austin's terrain. Prior to McM, this would not count toward gross floor area. And, for a certain time after adoption, basements did not count. But, revisions have been made to count basements that come three feet above natural grade as habitable space.

What about the impervious cover on the lot? Is that still an issue?

David: The impervious cover still remains at 45% for most residential properties within the McM boundaries.

Doug: When we meet with a client we request a survey of their property to check their current impervious coverage. If it appears that it is too close to call, we tell the client to get an impervious cover survey. This is where a licensed surveyor will calculate the impervious coverage. This is critical because the City of Austin will require it at final building inspection, and an overage would be a costly fix. Often times we will remove driveways or patios, to gain ground so we can increase the building footprint.

What about height requirements?

David: It is still 32' for single family homes, and 30' for duplexes. The main difference is that now applicants must show on their plans the exact elevation of "finished" and "natural" grade so staff may determine where to measure the building height from. In most cases this requires an additional topographical survey to be performed at the applicant's expense. There are limited exceptions such as chimneys, etc.

Have setback requirements changed? This refers to the number of feet back from the property line for building.

David: The zoning setback requirements are mostly the same, and are based on the zoning district's regulations. On the front setback, "averaging" is now allowed. Before, averaging was allowed only if a neighborhood had adopted it as part of their official neighborhood plan.

Can you explain the setback planes, or virtual tents?

David: One of the most significant changes implemented with McM is the setback plane. The setback plane is used to regulate a structure's impact on adjacent properties by requiring the structure to fit within a virtual tent. The tent is vertical for 15’ on the side and rear property lines; then it slopes inward 45 degrees. The tent is used to determine your vertical buildable area.

Often, many homeowners' only choice is to build up, by adding a second or third story. The tent requirement significantly reduces the potential size of any structure that may be built. There are a many challenges associated with tent requirements.

The idea was to avoid a 3,000+ square foot two-story box-shaped house overshadowing an adjacent 1,000 square foot cottage. Having two adjacent structures that are not similar in design represents a problem with respect to neighborhood continuity and the overall look and feel of a neighborhood.

Doug: There is also what is called “the remodeling exception” with regard to the tent. The Ordinance states that a new 2nd story structure may be 10’ 6” from the top of the original wall to the top of the new roof. However, this must include floor trusses, roof, and old ceiling joists. So the remodeling exception allows for only an 8’ wall height.

We work within this constraint. However, for new 2nd floors this dimension definitely limits the design. This can create issues regarding window sizing for egress, tempered glass, and the operable window rule - since the windows would be more than 6’ above grade.

Also, there is a fair amount of difficulty, as David says, in getting the required documentation to show that the 2nd floor does comply with the Ordinance. This is because a lot of surveyors are not used to providing such a document, and are unaccustomed to using a tape measure on site rather than an instrument.

Sometimes the only way to document it is to measure the components and provide a drawing to show the calculations. Surveyors are not used to drawing this type of detail. I have heard that there is a possibility that the City will be implementing a checklist that will give the onsite inspector a procedure to aid in this area.

However the net result of the tent and the remodeling exception means more cost to the Consumer: (1) Line survey for confirming existing footprint relative to property line; (2) topo survey for sloping lot for measuring height; (3) tent survey for confirming height of built structure for 2nd story buildings, (4) stamped drawings for 2nd story additions.


The side wall articulation is a new idea introduced by the ordinance. What is this?

David: There are side-wall articulation requirements where an exterior wall must bump "in" or "out" at different wall sections. This creates potential design problems on the inside of the house, such as a large bump-in located in the dining room, for example. If you do not want a bump-in in your dining room and cannot comply otherwise, you must seek a waiver.

Doug: We can see why this is in place, since the “maximize square footage on the lot” approach will often create long, tall walls. The unintended consequence comes into play when it starts driving the design process, on some projects, in an artificial manner.


Is it possible to get a variance from the Ordinance rules? How often are these granted?

David: There are limited exceptions in the McM ordinance. If a homeowner cannot comply with a McM regulation, he or she may request a waiver by appearing before the Residential Design Compatibility Commission, and explain why the design cannot comply. The RDCC is a city commission made up of volunteers. They generally try to work with applicants on a case by case basis. The problem with complying with the more arduous McM code sections is the application of a one-size-fit-all rule to the variations of small inner-city lots.

Doug: I believe the maximum deviation that the RDCC can administer is 25% say, for example, in a case of an additional FAR request.

How do you see this ordinance working out in practice?

David: The city appears to be struggling with interpreting aspects of the McM code, as are many of my clients. I think this says a lot about the complexity and practicality of the ordinance. The city has a multi-layered, confusing review process that can result in significant and unnecessary delays. Plus, the homeowner's costs for architects, consultants, or carrying costs associated with a property may result in thousands of dollars before a single permit is issued.

And in some cases the McM rules actually increase the size of a structure - making it look more like a castle than a mansion. In my opinion, if the city is going to require compliance with very complicated rules, then it ought to implement very clear, concise review procedures. Frankly, that just hasn't been done.

Doug: When we were in the middle of the Task Force effort it was very clear to me that there would be unintended consequences for us all. The main issue I see is that it is a one-size-fits-all ruling that drives design and increase costs to consumers. The implementation of the Ordinance in the field and in the permit office has been difficult because of the technical and legal aspects involved.

It seems that the City pushes something like this through in a hurry to stop abusive building practices but fails to put the training and staff in place to handle the increased load to the Staff. I think we are all adjusting.

Are there any other concerns that you have about this ordinance?

David: One concern I have is that the McM ordinance may be actually driving potential inner-city families out to the suburbs simply because it is too expensive and frustrating to comply with the existing rules. In a state that supports individual property rights and a city that promotes new urbanism, why is it so hard to see those two ideas codified?

My hope is that as long as the McM rules stay on the books the city will do its part to implement permitting processes that are less challenging to navigate. And I think that starts with adopting a pro-customer service attitude. There are a lot of bright, talented folks working for the city. If the city will think outside the box about how to deliver their services, then I believe they can implement the changes necessary to facilitate inner-city density, adaptive re-uses, and a unique, eclectic look and feel throughout the entire central area.

Doug: I do believe that the Ordinance needs to be revisited. I think that with proper training for the City staff, including the inspection department, the intent of the Ordinance could be applied more on a per property and building basis. This would be fairer to the citizens, neighborhoods, and honest builders while, at the same time, stopping the abuses we have witnessed in different neighborhoods.


View the ordinance and boundary map .

Jumbo Loans: Back in the Game

Our analysis of the Austin real estate market for 2nd Quarter, 2009, revealed an elevated inventory of upper end homes. The sluggishness in this market segment has been due in part to higher rates and tougher requirements for jumbo mortgages. This Q and A is intended to clarify jumbo loan confusion, and help you be better prepared to finance higher end homes.

I appreciate the insight and advice of my professional panel: A big thank-you to:

Dan Reagan - Cornerstone Mortgage - 328-2945

David Reed - C D Reed–Integrity Mortgage - 924-6076


First, what is a jumbo mortgage?

Dan: A jumbo mortgage one that is higher than the conforming limit set by Fannie Mae/Freddie Mac. The current conforming limit is $417,000. Fannie/Freddie did categorize certain parts of the country as high cost areas and have increased the limit above $417,000 in those areas. Texas does not have any high cost areas, so $417,000 is the conforming limit across the state.


How do the rates for Jumbo mortgages compare with conforming loans?

Dan: Jumbo rates for 30 yr fixed products are about 1% higher than conforming loans. There are some attractive rate opportunities for adjustable rate jumbo mortgages that are currently in the mid 5’s.

David: Since the secondary market for jumbo loans essentially disappeared during the mortgage “realignment,” jumbo rates have been all over the map. Most lenders offered jumbo loans as high as 2% over conforming rate. There were some portfolio lenders (meaning banks that issue the loan with no plans to sell it, but instead keep it in their portfolio) with good pricing on jumbo loans. These loans are of the hybrid nature, meaning the interest rate is fixed for, say, 3 or 5 years before turning into an adjustable rate.

Before the mortgage crisis hit, a jumbo rate might be ¼ to ½% higher than a conforming rate. Now lenders might price a fixed jumbo rate at 1.5% - 2% higher than conforming. Recently, however, we’ve seen some definite thawing in the jumbo market, with certain lenders getting very aggressive. A few lenders are offering jumbo rates at around 1% higher than their conforming cousins.

For instance, you can find a 30 year fixed conforming rate at 4.75% (with a point) and a jumbo rate at 5.75% (with a point). When you consider that just a few months ago conforming rates were in the 5 - 6% range, this is not bad.

Not all investors are jumping into the jumbo pool, but are keeping their jumbo rates artificially high. When lenders don’t want to issue a certain type of loan they essentially price themselves out of the market.


What is the debt/income ratio for jumbo’s, compared to conforming loans?

Dan: 40-45% total debt to income ratio is typical for most jumbo lending products. Required reserves are typically higher for jumbo financing than the requirements for conforming financing.


What about the down payment requirement?

Dan: There are some opportunities to allow for a 10% down payment, depending on the purchase price, but a rule of thumb is that 20-25% down is typically required for jumbo lending.


David: Most jumbo lenders ask for a minimum of 20% down, but may require more based upon both the loan amount and credit score. For instance, someone with a credit score of 720 may borrow up to $1MM with 20% down; but with a 680 score the maximum loan amount may drop to $650,000. Typically, the higher the loan amount, the more down payment might be required. With a higher credit score, less may be put down.

Jumbo lenders can have their own internal pricing structures, unlike conforming loans underwritten to Fannie or Freddie standards. But commonly jumbo lenders require a minimum of 15% down, while asking for a minimum 680 credit score.

There are other options when higher end borrowers have their own private banker at their retail or investment banking institution. Such private bankers are able to offer more favorable terms, larger loan amounts, and even lower down payments if the borrower has other financial assets, such as stock, bonds or insurance needs. Most every major bank has a private banking division. If you’re one of those with considerable financial assets, the first place you should call for jumbo financing is your private banker.


What about credit scores? Are they higher for jumbo borrowers?

Dan: Most jumbo lenders require a credit score of 720 or higher. There are a few investors that will allow a credit score as low as 660.


What about the loan length for Jumbo’s? Can people get 30 year fixed rate loans?

Dan: 30 Yr fixed loans are available, but those rates will be at least a full percentage point higher than a 5 year adjustable rate mortgage.


Is it still possible to do a 1st and 2nd lien to avoid doing a jumbo loan?

Dan: This strategy is used often as of late. The problem can often be that 2nd lien loan amounts have been reduced quite a bit. The maximum 2nd lien loan is $150,000. So, if a buyer is purchasing a home for $630,000, they can get a conforming loan at $417,000 and a maximum 2nd lien of $150,000, thus allowing the buyer to use only 10% for the down payment.

David: Yes, but 2nd lien lenders have reigned in some of their lending criteria, and have pulled back on the amount of money they’ll lend. Because 2nd liens are in a subordinate position, you will find them harder to qualify for than a conforming 1st lien. For example, someone with excellent credit can get a 1st lien approved with a 49% debt to income ratio. But the 2nd lien lender might only allow a 45% ratio. Second lien lenders are becoming fewer and fewer and their guidelines are tightening every day.

A 1st and 2nd lien combination is always a consideration, but it’s not always a “hands down” choice. The larger the 2nd lien, the more it can wipe out the advantage of having a conforming rate on the 1st. This is because 2nd lien rates are always higher than 1st lien rates by far.

If the sales price of the home is in the mid-jumbo range of $600,000 to $800,000, then the 1st and 2nd lien combo makes sense.


Do you find that appraisers are being harder on higher end homes?

Dan: I wouldn’t say that appraisers are being harder on higher end homes. It can be more difficult to obtain the necessary value for higher end homes due to the availability of recent comparable sales to support the value. Investors typically want comparable sales to be in a recent 90 day period, which is a much shorter time frame than was required in the past.

David: I haven’t had that experience, but higher end homes have fewer comparable sales than those closer to the median, which could impact an appraisal. I had a client who bought a home in West Austin for $695,000 and the appraisal came back at $740,000, so it’s more of what’s sold recently and less of the fact it being a jumbo.


What would you recommend to someone who needs a jumbo loan? What should they expect?

Dan: Jumbo lending conditions have improved over the past few months. There was a time recently when jumbo terms were quite unattractive. Now many investors have decided to jump back into the jumbo lending market. Underwriting turnaround times can be a little longer so I would plan for at least 5 weeks for underwriting to complete their process.

David: Prepare for it like any other loan. Have good credit; expect to put down 20%; and provide two years of tax returns (if self employed), or two years W2s and pay stubs. Jumbo loans, like conforming ones, haven’t as much tightened their lending guidelines, but instead have returned to their original roots.

A common fallacy I still hear nearly every day is that jumbo money isn’t available. Not only is it still available but the rates are becoming more and more aggressive. In the current environment, if you’re a buyer thinking of buying, and you can get a jumbo rate under 6%, there is no reason to wait - because the money is there waiting for you.