Report: Austin Home sales dip 10 percent

Today’s Austin Business Journal reports more of what’s been happening this year – the number of sales are falling COMPARED TO LAST YEAR, but the prices keep rising and days on market look good. In other words, the Austin real estate market is sending conflicting signals. What gives?

Let’s take a look at the article.

Austin Business Journal – 3:01 PM CDT Monday, September 24, 2007
Home sales in Austin continue to fall.

A total of 2,501 single-family homes were sold in August, down 10 percent from a year ago, according to the latest Multiple Listing Service report released Monday by the Austin Board of Realtors. The August sales figure is also down 5 percent from July, further proof of a market in decline.

Still, other factors are tempering the sales downturn. The median price for single-family homes rose 6 percent year-over-year to $192,000 as the number of days homes sit on the market fell 3 percent to 58 days.

Pending sales dropped to 2,196, down 24 percent compared with last year as the number of new listings ticked up 16 percent.

No doubt the market is shifting, but we’ve had less than 2 years of an up market following 4 years (2002-2005) of a flat market. This isn’t the normal real estate cycle. What’s up?… The national down market is washing into Austin’s fundamentally good market. Let’s look at some quotes from area agents below.

Jack McDonald with RE/MAX Austin Associates says one thing he’s noticed is that those moving to Central Texas from other parts of the country — particularly places like California and Florida — are having difficulty selling their homes and therefore are delaying purchases in Austin. However, McDonald says the dominant problem is the mortgage situation, which has taken a lot of potential buyers out of the mix.

“We’re going to have to go back to doing real estate the way we used to,” says McDonald, which means more FHA and government loans.

“We are seeing a slow down,” says Tausha Carlson realtor and co-owner of Marathon Real Estate. “I think it’s been so hot for so long it had to experience a slow down. But I don’t think we’re going to experience the crash that is happening in other markets like Las Vegas and Miami because we didn’t have the tremendous rise that those places did.”

Like McDonald Carlson says she’s seeing a growing number of contingency offers, where buyers moving to the area agree to purchase a home here only if they can sell their existing one elsewhere.

But Carlson says even with the slowdown, she believes “Austin remains a healthy market overall.”

I will add that the number of investors Sylvia and I work with has decreased tremendously, starting about the middle of summer 2007. The loan products that were once available to investors have decreased. There are still good loans for qualified investors, but I think many have decided to sit back for now, and we’re also seeing a lot of investor homes coming on the market as the weight of negative cash flow starts to erode the excitement of owning rental property.

We’ve shifted to working more with traditional buyers and sellers. We also wrote our first FHA deal in more years than we can remember (see Jack’s comments above – he’s right), which will close for our buyer this week.

The sales decline is also likely to be mean a significant cutback in the ranks of agents operating in Austin. McDonald says the number of agents has grown tremendously during these boom years, but that’s unlikely to be sustainable. “I think we need to be somewhere around 7,000 agents, and I think right now we’ve got about 11,000,” he says.

Yes, we have way too many Realtors in Austin. See what I wrote about “the pretenders dropping like flies” a while back.

Finally, there is a class at our Southwest Market Center this week – “How to Sell Homes in a Shifting Market”. The sky ain’t falling in Austin, but rose colored glasses can come off for now, and we’ll start seeing the market separate some of the agents and sellers from the crowd.

Posted by Steve
9 years ago
Steve

Steve is a Real Estate Blogger, Husband and Dad, UT Austin Grad, Runner, Real Estate Broker and owner of Crossland Team and Crossland Real Estate in Austin TX.

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Jim - 9 years ago

Even last year, I was noticing from MLS that in the core Austin market (excluding the outlying towns like Hutto, Manor, Kyle) the # of sales was down vs. 2005. Now this trend has spread to the entire MLS area. It’s good, in a way.

The rising prices is what I consider a hot market, not the number of sales. It’s getting nearly impossible, for example, to buy a good quality place for under $200k in central Austin (6,7,1b,ut,dt,4).

I’d love for more of the part-timers to drop out. They take away our business by offering money back to their friends/relatives and do nothing more than put their name on a piece of paper. It devalues our profession.

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Steve - 9 years ago

> The rising prices is what I consider a hot market, not the number of sales.

That’s the view I’ve always held. When it’s time to sell, a seller cares only about the price her home will bring in the market, not how many homes are selling. Now, the level of inventory and number of homes against which a seller is competing will help determine the selling price, but if that selling price is still a solid number, higher than a year before, the seller will be happy.

Likewise, as a buyer, it matters not that you have a lot to pick from if it’s all priced above your range. Again, excess inventory should make the price more negotiable, but I don’t see that happening in the close-in Austin areas. In the outskirts, yes, there are homes sitting.

I don’t doubt we are in a shifting market. The question is, when or if it will affect sellers. I certainly don’t think a qualified buyer should sit around hoping prices fall between now and next summer. If anything, the 10% appreciation we’ve been seeing will slow to 5%.

Steve

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Martin - 9 years ago

Does the fact the pendings were down by 25%, and listings up by 21% put a scare into anyone? inventory to pendings went from 2.8 months to 4.5 months. If price increases have already slowed to 6%, will it slow by more, or are you saying it will be constant? I’m looking to buy in the outskirts(Round Rock), and in the past few weeks I’ve seen a lot of price reduced signs, and a few large reductions on some foreclosures. Do you think I should buy soon, or hold out until next year? Do you know foreclosures(or notices) are going up or down in the outskirts?

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Observer - 9 years ago

> The rising prices is what I consider a hot market, not the number of sales.

Well, if inventory goes up and the number of sales goes down than what direction will the prices go 😉 ?
Also, don’t forget that house prices are sticky compare to stock market

Martin, foreclosures are going up in the outskirts, as well as number of bankruptcies. You can check it on http://www.foreclosure.com

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Kevin - 9 years ago

Steve,

Can you post page 11 of the full stat package from ABoR. I tried to put it in this comment section, but wasn’t able to post it. It shows a separation of the market by price class. $130K and under seeing a major slowdown compared to last year. $170-400K actually UP in sales from last year, and $400-700K WAY up.

Page 14 of the stats would shed some light on what areas are doing specifically too.

Thanks!

Kevin

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Austin Real Estate Market News - Homes Sales Dip 10 Percent | InspiredAustin.com - 9 years ago

[…] check out another Austin Real Estate blog I frequent: Steve Crossland – Report: Austin Home sales dip 10 percent. Steve is a fellow Realtor who has a great writing style and good insights into the […]

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Ryan Brown - 9 years ago

The sales differences across price ranges is an interesting footnote to the 10% decline. The latest Multifamily data was also indicative of the decline in investors. While prices keep rising (up 19%) the number of sales has dropped significantly, down 47% vs. August 2006.

Another good article on the importance (and opportunity for differentiation) of listing agents in non-stellar markets:

Greg Swan (Bloodhoung Blog) – A buyer’s market? You bet, but even more than that, it’s a listing agent’s market

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Steve - 9 years ago

> Can you post page 11 of the full stat package from ABoR. I tried to put it in this comment section, but wasn’t able to post it.

Here you go:
http://crosslandteam.com/abor-page11.pdf

The gap between rise/fall is interesting. Just about everything below $170K is down year-to-date, and just about everything above $170K is up in the number of sales year to date. The small 1-digit drops in the $130K to $170K range don’t bother me. A lot of that is just the breather we expected after a huge 2006. Also, as the homes that sold for $130K to $150K last year are homes that sell for $140K to $170K this year, the bottom range is dropping because builders have stopped building the cheaper homes and unqualified borrowers can’t get the loans anymore.

What is really interesting to me is the strong uptick in number of sales in the $400K to $600K range. Year to date, as shown on the pdf linked above, sales for homes $400K to $500 are up 16% this year, and homes priced $500K to $600K are up 23% this year. $600K to $700K is up 16% also in the number of sales.
Steve

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dave - 9 years ago

I think this is just a correction. It isn’t cataclysmic. The sky won’t fall down…..and the BEST thing is that quite a few
folks who jumped on the RE bandwagon(investors and RE-related occupations) will be pushed out of the game.
I think our US economy(including Austin, which, last I heard, was in the US), relies far too much on RE for employment
and as an economic driver for subsidiary effects like home-equity loans. My only concern is that washed-out loan officers
and RE agents have a viable alternative in this economy, in which RE poses one of the few occupations one without
either a viable degree or decent prospects can use to make a good living. I pray that Wal-mart and Taco Bell aren’t
the only alternatives for the 4,000 overhang of agents in the Austin area(out of appox. 11,000).

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heyzeus - 9 years ago

If there can be one good thing to come from this loan situation it is this: There will be less construction of the abominable, sprawling, environmentally degrading type of developments out in Hutto/Kyle/Leander. For now, at least.

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Scott - 9 years ago

Hey, since when is a “normal” market a down market? What I’m inferring, is that we are just getting back to a normal
state of RE affairs, when people buy simply to have a place of their own, or upgrade per space considerations, or downsize for the same. I don’t EVER recall investors being involved on any level most of my years in resale and new single family
RE, with the exception of California in the 80’s. I also recall it being the norm to put down 10-20%. From what I understand, this recent loan tightening won’t come anywhere near going back to that. This is simply a reintroduction
of normality into a sector that got temporarily out of touch with the fundamentals. As I said, a correction, not a catharsis.
BTW, normal is infinitely more sustainable in the long run, so thats great news for the future of RE, after the long overdue
correction…….

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Ted - 5 years ago

I am in complete agreement with Dave. The our economic health is far too reliant on construction. When coupled with concerns over the current inventory, shadow inventory and the jobless recovery most of America is experiencing, well next year may be a bit flat.

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