Some people may consider California to be the land of dreams, but Californians see Texas real estate as their dream come true. And the Waco area has not gone unnoticed.
David Groce has built 82 duplexes in Robinson and China Spring since 2003, and he estimates that 20 percent have been bought by investors from California and Chicago.
“They are always very impressed with the super value they're getting for the dollar,” Groce, general manager of 3 Kings Construction, said of the California buyers who snap up the duplexes for about $189,000 each.
Californians, he said, love the scenic views and the school systems, and drool over the money-making potential of leasing out the duplexes and maybe selling them later.
People in the industry say investors on the West Coast have made a lot of money at home, as well as in Las Vegas and in Phoenix. Now they're turning their attention to the Lone Star State.
“It is surprising how much I do run across it, especially with people from California,” said Trammell Kelly, a local real estate agent. He had appointments Thursday and Friday with an investor from California who wanted to look at Waco properties.
Kelly said he's seeing interest in a “wide assortment” of properties, including single-family homes, small apartment complexes and duplexes.
Investors can't believe the deals they can get on real estate and the price of housing in Texas.
“It's cheaper than these out-of-state investors can find somewhere else,” said Kelly. “A lot of times they buy it looking for a tenant. But a lot of times it is already occupied, which makes it even more appealing.”
Jim Gaines, a research analyst at the Texas A&M Real Estate Center, said real estate brokers and agents statewide have talked with him about the “phenomenon” of Californians interested in Texas real estate.
The key, he said, is the affordability of housing in Texas versus that on the West Coast.
“Our housing to Californians appears under-priced as to where it should be, could be or where they think it might be,” he said. “With half a million dollars they can buy one house there or four, five or six houses in Texas, which has a particularly favorable climate for mortgage loans.”
An aggressive investor, he said, might buy “10, 12 or 14 properties with the notion of renting them out or trying to sell them.” They don't seem to mind, said Gaines, that homes in Texas rarely sell as quickly as they do in California.
As an example of housing affordability in Waco, Gaines cited Housing and Urban Development statistics showing that the median price of a home in the Waco metropolitan area is $88,400. Based on the prevailing mortgage rate of 5.93 percent, a borrower could make as little as $20,200 a year to qualify for a loan to buy that home. But he or she could have very little other debt, and some local lenders expressed skepticism that a person making $20,200 a year could afford to make a 20 percent down payment.
Still, HUD statistics also show that the median family income in the Waco metropolitan area is $47,350, said Gaines, meaning “the area's median family income would buy a lot more than a median-priced house.”
Doreen Plott, a local real estate broker, confirmed that out-of-staters are moving to Texas and investing in Texas real estate. Not all of them are from California.
She recently sold a 20-acre site on Pecan Lane to Mile High Capital Group from Denver, Colo. Mile High spokesman Jeff Keiffer said it would like to place homes and duplexes on the property.
Commenting on California interest in Texas, Plott said: “The average sales price of a house in the whole country is $217,000. In California, it's twice that. In parts of Texas, it is half that. People can sell an average house in California and buy three houses in Texas.”
At first glance, Texas real estate would not appear so attractive. In the first quarter of 2005, Texas homes appreciated at 3.77 percent, the lowest rate in the nation, according to the National Association of Realtors.
That compares with 31.2 percent in Nevada and 25.4 percent in California for that same period.
But investors are banking on Texas pulling out of the economic slump that started about five years ago, when technology companies began slashing jobs in Dallas and elsewhere. Foreclosures skyrocketed then, but are now leveling off. Investors believe the state's low cost of living and bargain real estate will again attract people and business.
The Wall Street Journal reports that U-Haul International, the moving-truck company, has so many more trucks going to Dallas than leaving it that it charges more than twice as much for a one-way trip from Anaheim, Calif., to Dallas than for a trip going the opposite way.
Some people buy Texas real estate for investment purposes, spurning the uncertainty of the stock market. But others are moving here for good.
“There is a big influx of people coming to Texas,” said Plott. “I'm working with people who are locating here. L-3 (a local aircraft modification plant) can't find enough employees.”
Plott said commercial developers know the score. It was not by accident that AIG Baker of Birmingham, Ala., decided to place several big-box retailers at Interstate 35 and West Loop 340 in Waco, in a development called Central Texas Marketplace.
“These companies spend hundreds of thousands of dollars studying hot spots,” said Plott, “and it's only natural that homebuilders will be coming right behind them. There are going to be a lot of houses built in this city.”
Kathy Schroeder, vice president of residential services for Coldwell Banker Jim Stewart Realtors in Waco, said she's noticed agents working with California clients recently.
One couple from California has a son entering Baylor University. They're negotiating the purchase of a home for him to live in, while hoping to rent out rooms to others.
“Another client from California is retiring here to be near kids in Austin and Dallas,” said Schroeder, adding: “One of the brokers here has family members in California who are interested in investment property in Fort Worth.”
Karla Hinch, an investor relations specialist with Mercedes Homes in Dallas, said in a telephone interview there is “huge” interest in the Dallas real estate market among out-of-state investors.
“I've probably worked with 200 California investors the last few months. They're cashing out their equity and buying up several homes in the area,” she said. “These primarily are investments, but many are buying their own personal homes. They've made so much in California, they can afford a nice home here, where the price per square foot is low in comparison to any other large city.”
Commenting on Waco, Hinch said: “I think it could be a great location, especially with Baylor there. You could buy a couple of smaller homes and turn them into rentals that could be occupied for much of the year.”
Jim Bland, a longtime Waco builder, said if California investors want to buy homes in Central Texas, they will have plenty to choose from. He described the Waco housing market as “pretty hot.”
“If this was not a good area,” he said, “D.R. Horton wouldn't be here.”
D.R. Horton is the 600-pound gorilla of homebuilding. Founded in 1978 in the Dallas-Fort Worth Metroplex, it has expanded into more than 70 markets in 23 states. It is publicly traded on the New York Stock Exchange and has grown to more than $4 billion in stockholders' equity.
Terri Tepera, a spokeswoman for D.R. Horton, confirmed that the company has moved into the Waco area, building homes in Hewitt and China Spring.
“We have been told there has never been a national builder in Waco, so we are the first,” said Tepera, adding: “It has been a wonderfully enjoyable experience so far.”
Bland said a nationally powerful company called Nash Phillips Copus built homes in Waco decades ago, but it did not stay long and is now defunct. But whether D.R. Horton is the first national company in Waco or not, its presence tells a story, he said.
“Waco is what Austin was 25 or 30 years ago. It could blow up just like that,” he said. “If we could get the George W. Bush Library, it really could.”
Source: http://www.wacotrib.com/news/content/news/stories/2005/08/28/20050828waccaliforniansbuy.html