Saturday, February 7, 2009

Job Loss Hits Texas

The government just released December numbers and it is official, we are losing jobs in major Texas markets faster then we are adding them. DFW had 12,600 fewer employed persons than the prior month as we dropped below 3 million employed, down to an estimated 2,990,900. The Austin area saw a reduction of 7,300 jobs with a non-farm civilian workforce of 822,100.

These are December numbers, before many of the recent layoff pronouncements which arrived in January, so I expect this trend to continue, as it has been happening across the rest of the country over the past year. This is one time when you are glad to be the last ones at the table. The Governor's office released an economic advisory stating this trend should continue until September or October of 2009, but I have no clue as to why they think they can predict the future with any accuracy.

The thing we have in our favor is that we continue to see companies announce relocations and additional jobs into our area. Click on these company names to find out about the type of job growth we continue to see as organizations like St. Jude Medical and EaglePichler add to the available jobs in the Dallas area.

A couple of other interesting notes:

On the foreclosure front the numbers of foreclosures in the DFW area has flattened. DFW used to lead the country in the rate of foreclosures, but at .9 foreclosures/100 homes we are now almost 50% lower then the current US average of 1.7 foreclosures/100 homes.

Rentals of single family homes continues to be strong. We are still at 95% occupancy and continue to increase rents in the DFW market. If a home is priced correctly we are finding a good tenant within 3-5 showings. If a home is priced too high we will not see enough showings. If it is priced "right" you get enough showings, but if nobody is applying to lease it then the house is probably in need of upgrades or serious reduction to compensate for the need for an upgrade. That emerald green carpet which is still holding up well because you put in the "good stuff" back in 1997 might be holding back the home. Remember styles change and if your product does not keep up with the styles, it can cost you in reduced revenue. If an upgrade is recommended you need to evaluate how long it will take to recoup the new expense by the higher rent you will receive. The additional benefit of an upgrade is that the better equipped home tends to attract a better quality of tenant who is more likely to take care of the home and meet all their lease obligations.

Brace yourself for this last item. How old is your home? If you purchased your investment property new in 2004 or 2005 you need to prepare yourself for the expense of replacing the original builder installed fence. This will typically cost in the $2,000 to $4,000 range. Unfortunately, most builders use construction materials and methods which have a planned obsolescence of five years. The builders install an inferior fence to save money with the understanding that the typical owner occupied home has their original occupant five years or less. For an additional 20% more in cost the builder could have installed a fence that would last 15 years before needing a major repair. Most of our clients hold their investment properties for 10-15 years to make the asset work best from a financial return, so unless they have been through this before, this expense is a unwelcome surprise. We are reviewing all the properties we manage to better forewarn about this and other repairs and if we recommend a fence replacement we will be recommending an appropriate fence, one which will last longer, have fewer repairs and still look good at time of resale.

Sorry for the long post, I will try to keep the next one shorter.

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