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HSB's REAL ESTATE TRENDS, PRICES & VALUES.  

HSB REAL ESTATE:  Trends & Values.
By Ken G. Martin

HSB got its first newspaper, The Beacon, during the fall of 2005.  This series began running in the paper’s March 22, 2007 issue.  The subtitles of the articles, their dates of publication, followed by the actual article are listed below in chronological order.

1) SALES OF FULL-SIZED UNDEVELOPED HSB LAKEFRONT LOTS - 1/2002 to 1/2007).    3/22/07.

2) ATTENTION HSB HOMEOWNERS:  YOUR BOAT JUST GOT LIFTED!  4/5/07.

3) MORE EVIDENCE OF THE INFANCY OF HSB’s RENEWED REAL ESTATE APPRECIATION.   4/5/07.

4) ANOTHER SIGNIFICANT FACTOR TO CONSIDER REGARDING HSB’s REAL ESTATE VALUES.   4/12/07

5) HSB’s TWO HIGH-END DEVELOPMENTS – ESCONDIDO/LAGO ESCONDIDO AND SKYWATER– HAVE ATTRACTED THE COUNTRY’s TWO MOST ACCLAIMED HIGH-END MARKETERS.  4/12/07.
 
6) ATTENTION HSB HOME OWNERS:  Add 10% More to Your Home Value!  4/19/07.

7) ANOTHER POSITIVE FACTOR FOR HSB REAL ESTATE.  5/3/07.

8) CENTEX SELLS OUT ITS 4th CONDOMINIUM BUILDING.  5/10/07.


1) SALES OF FULL-SIZED UNDEVELOPED HSB LAKEFRONT LOTS

(1/2002 to 1/2007)

Excluding the Trails Subdivision, HSB has about 800 lots platted on its lakefront.  As of January 5, 2007, approximately 60 of these 800 remained undeveloped, but only 27 of the 800, being 3%, were available for sale unconditionally.  The average asking price of the 27 as of that date was $1,301,000.

The cheapest of the 27 was priced to sell at $595,000, whereas the most expensive was available for $3,200,000.  Its owner had rejected a $2,800,000 offer earlier. HSB’s historical average annual absorption rate for such lots has been about 22 per year.  The remaining 33 undeveloped lots were held by developers who had their own building plans.

The 6-13-2006 issue of USA TODAY reported that Texas’ real estate prices had been significantly depressed relative to elsewhere in the country from late 2000 through the first quarter of 2006.  Worst yet, the study, which compared prices in 317 metropolitan areas across the country over the prior five years, found the eight most undervalued cities in the country were all in Texas, they being Bryan, Dallas, Fort Worth, Houston, Killeen, Midland, El Paso and McAllen. Fortune Magazine predicted in its 12-25-06 issue, which covered a three-year period forward from1-1- 2006, that 2006 would be a transitional year for Texas’ real estate and that it would transform swiftly from the country’s worst as of 3-31-2006 to where it will be the country’s best during 2007 and 2008, if not further beyond.

HSB's prices have shown remarkable strength bucking this trend.  HSB’s real estate values began picking up during 2004, two years earlier than elsewhere in Texas, especially on its lakefront, and prices have grown progressively stronger ever since.  Its break out from the rest of the state is indicative of HSB's growing recognition as one of America's most desired locales. 

The trend in Number of Annual Full-size Lakefront Lot Sales, Total Annual Sales, Average Annual Price, Annual Percent Price Change, and Areas In HSB Where Lakefront Lot Sales Occurred, dating back five years to the beginning of 2002, are shown below:

YEAR SALES TOTAL SALES/YR AVERAGE PRICE/YR PRICE CHANGE/YR HSB AREAS

2002 

11

$3,212,000 

$292,400

 

HSBP & HSBW

2003

11

$3,195,600

$266,300

-9%

HSBP & HSBW

2004

24

$6,794,100

$283,100

+6%

HSBP & HSBW

2005

41

$20,509,840

$500,240

+76%

Add Escondido

2006

48

$42,741,000 

$884,810

+75%

Add Lago Escondido

       

Average = +32%/Year

 

CHANGES FROM 2003 THROUGH 2006 (since 2003’s bottom).

A) NUMBER OF LAKEFRONT LOT SALES INCREASED BY A FACTOR OF 4.4 (48 divided by 11).
B) AVERAGE YEARLY SALES PRICE INCREASED BY A FACTOR OF 3.3 ($884,810 divided by
    $266,300).
C) AVERAGE YEARLY % CHANGE IN LOT PRICES INCREASED BY A FACTOR OF 49%.
D) TOTAL ANNUAL LAKEFRONT LOT SALES INCREASED BY A FACTOR OF 13.4 ($42,741,000 divided
    by $3,195,600).

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2) ATTENTION ALL HSB HOMEOWNERS:  YOUR BOAT JUST GOT LIFTED!

No, it wasn‘t that.  Police Chief Bill Lane says no boat rustler hit town in the dead of night and our waterfront did not get cleaned out.

And no, even though we’d just waded through one hell of a deluge, it didn’t overpower the Wirtz Dam folks and only raised the lake six inches – max.

Nope, at a Town Meeting held a week ago last Friday afternoon at the Marriott, two generations of Jaffes went public with a dazzling display of plans and vision for HSB Resort, and a powerful testimonial to their belief in the long-term viability of HSB.

The turnout was strong and so was the message, so strong in fact that it might have turned your most nay-saying friend into a HSB believer – or may’ve at least converted him from a “glass-half-empty” kind of guy.

Better yet, the Resort has even more exciting stuff on the drawing boards, though not even a mere hint was offered.  More changes are planned and more amenities on the way, one of which is a whopper! 

HSB’s stars have realigned.  Texas’ economy will be leading the country for the foreseeable future, and HSB will lead Texas.

Investors have seen the realignment happening.  They long ago talked the talk.  Today, they are walking the walk.

Since March 2000, they’ve stepped forward with close to $3 billion of commitments to our immediate area – the “HSB Triangle.”  Today, well over half of those projects are either underway, if not completed.

The Jaffes acted first, setting the pace by enhancing the Resort with the Marriott Hotel.  They’ve since agreed on a new vision for HSB and are is in the process of putting in another hundred million bucks worth of investment dollars. 

And there’s a good chance that could double, with a tripling actually a possibility.  Their additional hundred million - or two or three, whatever it might be - is on top of the almost $3 billion committed by others.

The Jaffes are remarkably far along with their plans and how they will be realized.  They see a clear and achievable path to regain the resort world’s peak.  When it is all said and done, people will be surprised to learn how instrumental Douglas III has been in leading the way.

The Jaffes have gone to great extremes to make certain they pull this off in 5-Star fashion and have nationally-recognized experts guiding them at every turn.  They, their consultants, and the City are working beautifully together to make certain all factors are considered and that no mistakes are made.

Those of us living in HSB today are blessed to have found HSB early enough to see all this come about.  And the best news of all is:  The return trip is on them. 

Believe it or not, we’re all getting a free ride.  Our homes will be worth far more when HSB regains the ranking of a 5-Star Resort.

And who could have possibly thought those of us owning homes in HSB aren’t blessed?  What the Jaffes are doing will lift all boats – and every thing else you own in HSB! 

MANY WHO ARE FOLLOWING THIS CLOSELY BELIEVE YOU CAN TAKE THAT TO THE BANK!

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3) MORE EVIDENCE OF THE INFANCY OF HSB’S RENEWED REAL ESTATE APPRECIATION.

The BEACON has published several articles regarding HSB’s growth – where it has been, where it is going - since it began focusing on the subject last July.  We’ve pointed out that over recent weeks, months and years, several indicators have signaled that Texas is now the state and HSB now the city that will lead the country for the foreseeable future. 

We’re pleased to report that an immensely important new indicator emerged on March 28th, when James Thomas, Chairman and CEO of the Thomas Properties Group Inc, stated his belief in the region in unmistakable terms, announcing a $1.15 billion dollar commitment in the March 29th edition of Austin’s “American Statesman.”  The newspaper reported that Thomas’ firm, which is known for its high-profile properties and projects, is buying a package of real estate in Austin that includes some of the city’s most prominent buildings.

“Austin is expected to exhibit the strongest job growth in the nation over the next five years,” Thomas said in describing the huge bet he’s making on the region.  He added that the portfolio being purchased “is well positioned to benefit from that growth.”

He went on to say “Austin’s skilled workforce, moderate cost of living and attractive quality of life make it a highly desirable place for companies to do business.  We have long-range designs on Austin, with no plans to flip its new holdings.”

John Sischo, one of Thomas Properties’ three executive vice presidents, reportedly confirmed the company’s thinking, adding: “Like Northern Virginia and Silicon Valley, Austin is attracting the brightest and newest of companies, including biotech and high-tech, and some of the best and brightest people.”

The company began acquiring prime commercial real estate in Austin in late 2005, with the latest package being its largest.  When the new deal closes in late May, Thomas Properties will reportedly be Austin’s biggest office landlord.

Further confirmation of Thomas’ strategy comes from Cousins Properties, which manages Austin’s Frost Tower.  A top executive of the firm was quoted as saying, “Austin’s office rents have been lower than many other major cities, but that is changing.  Going forward, we’ll be closing the rental-rate gap between Austin and areas like California and the East Coast.”

The Thomas deal sheds light on several important points:  1) it is far larger than any of the 100 or so deals making up the $3 billion committed to the HSB Triangle since March 2000; 2) it emphasizes how far behind Austin’s real estate values are today relative to those in California and on the East Coast; and 3) it confirms that there’s a lot of appreciation to make up before we catch up. 

And better yet for HSB, the established record says you can count on HSB actually out-performing Austin in markets driven by rising oil prices.  HSB outperformed Austin and practically the whole country in the last oil-boom, from 1973 to 1986, and it’s already doing the same this time, as seen over the past three years.  HSB residential real estate bottomed in 2003 whereas Austin’s bottomed in 2006.

To those selling HSB real estate, don’t sell yourself short.  Five years from now, when you look back on today, you’ll see HSB restored to its former late 1985 glory, if not far superior.

Practically anything with clear title will be up 50%.  HSB’s prime properties, like those on its lakefront, will have tripled in value. 

Folks, you must take heed at the changes underway.  HSB is not building to attract the masses; it has turned away all such advances.  It is merely readying itself for the high-enders who are on their way. 

The dollars going into the HSB Triangle are without exception designed to lift quality.  Five years from now, our quality will be as good as it gets – anywhere in the country! 

The $3 billion being spent in the HSB Triangle and the Resort’s $100,000,000+ upgrade are all designed to attract the same type of up-scale clientele that largely went elsewhere between 1986 and 2003, when the rest of the country feasted on low oil prices while we languished in the doldrums brought on largely by the oil-price collapse.  

Although our unusually wet February and March set back the start of our prime selling season, HSB will nevertheless experience a record year - whether it be measured in the number of sales, average prices, or total sales. 

And all it takes for a lakefront triple in five years is 25%/year appreciation.  Accomplishing that could be a walk in the park.  In fact, many who are watching all this closely believe:  YOU CAN ACTUALLY BOOK THAT!

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4) ANOTHER SIGNIFICANT FACTOR TO CONSIDER REGARDING HSB’s REAL ESTATE VALUES.

HSB’s real estate values, which finally emerged from a bottoming process that lasted 18 years, from 1986 to 2004, are thought by many to have considerable room and many years to run.  Innumerable factors have appeared, coming from a variety of direction, that point to a doubling of values across the breadth of HSB over the next five years. 

To double in five years requires an average appreciation of 15% per year.  Many see a tripling in certain select situations where demand is greatest.  It takes annual appreciation of 25% to get a triple in five years.

Signs continue to surface that signal HSB is on the verge of major appreciation.  This month alone, Escondido has had two “spec” homes go under contract that fuel the thinking. 

The record price paid for a HSB home not located on the lakefront is $1,400,000.  It was paid for a view-lot home located on Diamond Hill in HSB West.  HSB’s view-lots have sold for a slightly higher premium than golf-course lots, historically.

However, the price of earliest of these two “hard” contracts is $2,100,000, representing a 50% increase over the prior record.  The price for the second of the two is $2,450,000, amounting to a 75% increase.

The home selling for $2.1 million contains 3,900 square feet, which amounts to $538 per foot.  The home selling for $2.45 million, which has 5,000 square feet, went for $490 per foot.

Whereas $1,400,000 is HSB’s record price for an off-water home, HSB’s record price for a lakefront home, which are typically larger, is $4,000,000.  It went under contract last April.

The price differential between lakefront and off-water homes has increased sharply in recent years as demand for lakefront properties has strengthened.  For example, in late 2003, when the $1.4 million off-water sale occurred, the differential was only 1.65.  However, the differential had grown to 2.86 by April, 2006 - a 73% increase in 2½ years.

If these two home sales on Escondido’s golf course are consummated, and substantial hard money will be forfeited if they aren’t, one could reasonably conclude that they set the stage for a lakefront sale in the  $6,506,500 range. 

How does one get there?  Take the average of the two Escondido sales ($2.1 + $2.45 million), which is $2,275,000, and multiply it by the differential of 2.86.  However, the price for lakefront lots has continued to increase faster than off-water lots, indicating that today’s differential is no doubt higher than it was a year ago.

Since we’ve got some numbers from which to extrapolate the differential, let use them.  A 73% increase over 2½ years amounts to 29.2% per year.  Extrapolating 2.86 by this amount increases the differential to 3.695.  Support for such an extrapolation can be found in the observation made in the preceding paragraph, namely that the price of lakefront lots continued to increase faster over the past year than off-water lots.

So, instead of supporting a lakefront sale in the $6,506,500 range, as indicated by last year’s differential, today’s inferred differential of 3.695 presupposes that a lakefront sale in the $8.41 million range might be on the horizon. 

Time will tell.  But, one thing is for certain.  There won’t be a lakefront home sold in the foreseeable future for $8.41 million. 

How’s that?  Because none are priced that high.  HSB’s highest lakefront offering is priced at a mere $7.5 million.

However, it may be of interest knowing that HSB currently has eight single-family lakefront offerings in the $4.25 to $7.5 million dollar range.  Their average price per square foot is $920.

See you next week with more tidbits regarding HSB’s real estate.

 

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Though we strive for accuracy in our reporting, we do not guarantee it, so check things out before acting.

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