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The Crossland Team
Sylvia Crossland, Broker Steve Crossland, MPM (512) 301-5811 |
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Inverted Pricing Cascade Showing up in Austin Real Estate Prices
October 31, 2007
I ran a CMA (Comparative Market Analysis) the other day for someone. The CMA revealed what I call an inverted pricing cascade. That is, when looking at the pricing of the Active, Pending and Sold listings, the lowest average prices and prices per square foot for this particular neighborhood started with the Active listings, next was the Pending, and then the Sold listings were the highest priced. This is a symptom of a neighborhood where prices are dropping.
Normally, in a rising market, it’s the other way around; Actives are priced higher, followed by Pending, then the actual Sold listings have the lowest prices. This is because as homes sell, the sold prices justify higher listing prices and thus the Actives and Pending lead the market in pricing. Each home that sells for a higher price justifies the next listing to be priced higher, and thus prices move up over time. The result is, when I scan a “rising market” CMA report and move down the page looking at the pricing of each category, I see a “cascade” of price ranges, falling from the Active (highest priced) to the Pending (middle priced) to the Sold listings at the bottom. When it’s headed the other way, I call that an “inverted” pricing cascade.
So what does it mean if this normal progression is turned around? It means, plainly, that the average price for the neighborhood I was looking at is headed down. It means, as a seller or listing agent, you have to look at more than just the Sold pricing, you have to look at the Active and Pending listings and wonder why it is that your competition is all priced at what seems to be BELOW MARKET (based on Sold comps), yet none of them are selling. It means you have to get underneath your competition in pricing and above your competition in condition.
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Austin Rental Market Update - September 2007
October 29, 2007
The rental market in Austin remains strong, helped further by the fact that there are in fact some qualified buyers who are electing to rent instead of buy because they fear that there is an Austin Real Estate bubble, and they don’t want to buy into that bubble. I’m not going to go into several paragraphs of “there isn’t a bubble” commentary, but there is not a real estate bubble in Austin TX.
To those buyers voluntarily taking yourselves out of the purchase market, the rest of the buyers thank you, as do all of us who own rental property. You’re helping create better purchase opportunities for the buyers who are smart enough to recognize this as a great time to buy a home in Austin, and you’re creating more demand for rental homes, which helps drives up rent prices. If you are qualified and ready to buy a home in Austin, and you know you will live there at least 2 years, there is absolutely no reason not to purchase a home in Austin TX today.
For September in Austin, average rents are up 6.7% over Sept 2006, from $1269/mo. a year ago to $1354 this September. Like the sales market, our number of homes rented is down over a year ago. The average and median days on market for rental homes is substantially better than a year ago at 43 days average, and 31 days median. This means half of all rental homes leased through the Austin MLS found a tenant in 31 days or less. Not bad.
September stats and year to date stats are below. I haven’t had time to do my area breakdowns, so I’m posting what I can and will try to catch up on the quarterly area breakdowns later this week.
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Computer Disasters Less Painful that in Past
October 25, 2007
Sylvia’s work computer crapped out on us yesterday. It won’t boot. Now it’s in the shop and probably has a bad motherboard. We’ll get it back, if it’s worth repairing, by Saturday or Monday, but it’s really no big deal.
Not many years ago, a PC going belly up meant that most productivity came to a grinding halt, email and other files were not available. No MLS access (it’s all web based now), and work life became difficult.
Not anymore. We’ve learned our lessons, and we have better tools and strategies to lessen the pain and impact of computer failure.
Let’s take a look at two simple things we do that allow us to keep working without a hitch when one of our computers decides to kick the bucket without notice.
1) Multiple ways to access email
At present, if you send an email to me or Sylvia, a copy is also sent to free Gmail and Yahoo accounts, such that the Outlook email client on the computer is not needed to keep receiving and responding to email messages. This means that any emails or email attachments that need to be accessed can be without relying on the PC-based email client.
If you are not doing this already, even with your personal emails, there is no reason not to. Plus, Gmail acts as a permanent and easily searchable archive of all emails ever received. This has come in handy more than once.
2) Automatic and Instant backup of all important files
When my computer went south for about a week earlier this year, it was a problem because mine was the file server we used to keep all of our deal documents, pdf files, faxes, etc. Sylvia accessed files from her computer via our network, but everything was stored on my hard drive.
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Austin Real Estate Sold vs. Expired Comparison
October 22, 2007
Let’s take a look at the number of Austin Homes that sell versus the number that don’t sell. The graph above shows Sold and Not Sold (Expired or Withdrawn) counts for 2006 and 2007.
The dark green bar represents the number of listings sold in 2007, the light green bar represents the number of listings NOT sold in 2007. Same for the red bars for 2006.
So, for example, look at January and the sold/not sold bars relative to each other.
January 2007 shows slightly fewer sales and slightly more Expired listings than 2006, but they are close. In Feb it flips and 2007 is a better year than 2006, with more sales and fewer expired/withdrawn listings. 2007 is also stronger in March. It’s mixed in April, but May 2007 beats 2006.
From June up to the present, 2007 is underperforming compared to 2006. With regard to the number of sales, we expected 2007 to pull back some because 2006 was so strong. But look what happens by the time we get to September 2007. The number of Not Sold (Expired or Withdrawn) listings is creeping up relative to the number sold. If we plotted these as lines instead of bars, the trend shows the sold and not sold numbers converging as if they will soon meet. We’ll need to keep an eye on this.
By the way, look at the massive spread between sold/expired in June 2006. See how high the dark red bar is and how low the light red bar is? I remember that month and we were having a very hard time getting deals accepted for out buyers because we kept running into multiple offers on every deal. For some buyers, we went through 4 or 5 written offers before getting one to stick. That was a Seller’s Market for sure.
I plotted similar stats for sold/not sold last April, charting the years 2002 through 2006. Let’s take a look below at what happens when we get into a Buyer’s Market in terms of inventory levels.
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Austin Real Estate Market Sales Update - Sept 2007 and YTD
October 22, 2007
The Austin real estate market is a set of markets within a market. Trying to describe what’s going on is like trying to say what the weather is like right now in the U.S. What is true in one area often does not apply to another. Overall in Austin, the number of sales have dropped, and the inventory has risen, yet the prices overall are rising steadily in most areas, and the Days on Market for homes sold remains very good.
For September, Average Sales Price is up 11% over September last year. Median Sales Price is up 9% over last year. Days on market is 58 days and median days on market is 37 days. Year to date, average sold prices are up 7%, and both average and median days on market have fallen (which is good). When I remove Builder homes (new homes) from the YTD stats, the median days on market drops to 28, which is fantastic and amazing.
That means half of all resale homes sold through the Austin MLS this year sold in 28 days or less, and probably for a higher price than the home would have sold for a year ago. For those sellers, this is a superb outcome to their sales effort, and they would personally report a much different real estate market than the one we read about, given their quick sale.
So, for many sellers and agents, the gloom and doom we read about in the newspaper and hear on the news simply doesn’t show up in their particular sales effort in Austin TX. On the other hand, a rising level of inventory combined with fewer sales does mean something. And it can’t be dismissed. If that continues, I would expect to see the other stats, which remain good, to eventually shift. As listing agents, we assume the shift has already taken place and advise sellers accordingly. As buyer agents, we think buyers can be a bit more agressive than they could have during the summer. We are in fact in a shifting market and it may be that the stats are lagging. Nevertheless, many areas of Austin are not feeling this shift at all yet.
Below you will find the usual stats I post each month plus the Area Breakdown that I normally do each quarter. Here is a summary:
Of the 42 Austin MLS Areas tracked on the breakout chart below, 22 have better than 9% price appreciation YTD over last year.
Of those 22 areas with better than 9% appreciation, 7 have better than 15% appreciation YTD over last year.
Of the 42 Austin MLS Areas tracked, 8 have less than 5% appreciation.
Of those 8 areas, 2 have negative appreciation, Manor (MA) and far East Austin (5E). Both areas with many new starter homes.
Of the 42 areas, 24 (57%) have fewer sales this year than last, but many have much higher sales volume.
Area RN (Steiner Ranch, River Place), for example, has seen almost 40% more homes sold that the same period a year ago, and still has 10% avg and med price appreciation, though days on market is high at 84, and I know that some homes are sitting unsold.
Area 3, in close-in northeast Austin, has 51% fewer homes sold this year compared to last, and the average prices of the homes in that area are up 16%. So there is not necessarily an automatic correlation between the number of sales and the performance of the market.
Area 8E (Eastern part of Westlake/Eanes Schools) is the most expensive area of Austin with an average sales price of $918,694, which is a 16% increase over the same period last year and 4% fewer sales. The least expensive area is far East Austin (5E), with an average sales price of $110,144, which is a 3.18% decline over the average sales price during the same period a year ago, and 12% fewer sales.
In short, the market is mixed and one cannot draw conclusions from one piece of data or the stuff you read in the newspaper or watch on the national news without looking at it in the context of other LOCAL information.
More stats and thoughts below. As usual, comments and questions are welcome, especially if you have a recent/current experience to share.
Below is the September year over year comparison. Note the big increase over Sept last year, but the big drop from a month ago. This is a seasonal adjustment we see after school starts, but some of the month to month drop in sales price could also be slowing appreciation. We’ll have to see how the remaining months of 2007 pan out.
Previous Month and Year Comparison
All MLS Areas - Houses Only
# Sold
Avg List Price
Median List Price
Avg Sold Price
Med Sold Price
Avg Size SQFT
Median SQFT
Avg $ per SQFT
Avg Days on Mkt
Median Days on Mkt
Below is the Year to Date chart, for Jan-Sep 2007 compared to 2006. Austin average sales price is up about 7%. That’s a steady, healthy growth. It’s what we told investors last year they might expect this year. If inventory keeps rising and sales keep slowing, I think we’re looking at 5% for 2008 overall, but some pockets (mostly close in areas) will continue to do better than 10% appreciation.
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September Austin home sales drop 22 percent
October 19, 2007
The real estate slowdown crept up on us, but it’s really here for sure, despite the fact that the headlines say it (see below). Yet prices in Austin keep rising. A buyer a couple of weeks ago told me “I’m going to wait to buy because the bubble in Austin is going to burst soon”. Huh?!? Austin has no bubble, dude. Our prices were flat as a pancake from 2001 through the end of 2005. We saw reasonably decent appreciation of about 10% for 2006 and the first part of 2007, but not the sort of appreciation that creates a “bubble”. The medain home price in Austin is still $185,000. In other words, there is no inflated price ceiling from which Austin has to fall.
By the way, during our 4 years of ZERO appreciation in Austin, each year was a record year in NUMBER of sales, yet many, many sellers could not sell.
Anyway, I’m going to work on my monthly, quarterly, and YTD stats this weekend and see exactly where we stand in all the different areas of Austin as we head into the last three months of the year. Meanwhile, here is a story from today’s Austin Statesman.
Number of homes on the market hits four-year high.
Friday, October 19, 2007Mirroring the national housing slump, existing home sales in Central Texas continued on a double-digit decline in September. Sales fell 22 percent from a year ago, following a 10-percent drop in August, and the number of homes on the market reached a four-year high of 9,979.
When Real Estate Bloggers go Wild
October 17, 2007
I was recently challenged about a blog article I wrote. I was told that the references to the “bozo agent” along with the accompanying visual graphic of Bozo the Clown was over the line and damaging to the real estate industry and the reputation of all Realtors. It was suggested that unflattering stories about the real estate industry erode confidence in Realtors, as evidenced by the first reader comment under the article that stated, “This is why we always represent ourselves. We have had bad luck with agents and find them to have the biggest ego’s.”
Given that the content of the article was a factual retelling of actual events that I experienced as a listing agent dealing with a buyer’s agent, and that the agent was indisputably incompetent, I didn’t at first understand what the problem was with the article. In other words, it really happened exactly as I told it. I thought there was a lesson to be shared by telling the story. I thought readers would appreciate having a glimpse into the real life happenings of a deal gone bad. Coloring it up a bit with a nice photo of Bozo and some harsh, opinionated commentary about the agent seemed appropriate to me. Nobody will ever know who that agent is, but you’ll know there are agents like him out there. And you should know that. You deserve to know that. Why should I keep it a secret?
Nevertheless, I edited the post, removed the photo of bozo, and toned down the writing a bit, though the message of the article remains unchanged. I did this out of respect for the wishes of the person who shared their concerns with me. I always appreciate when others respect my concerns, so I try to do the same. It’s only a blog article after all.
This is the second complaint I’ve received in 2+ years of writing 300+ blog articles. It’s the second time I’ve respected the wishes of someone with concerns. The other instance was an article about an MLS photo that was so crappy (the photo that is) I just had to share it. It was a photo of a house with an SUV parked smack in the front yard (in the grass) and a trash can sitting in front of the garage door. I wondered why the agent couldn’t have had the SUV moved and pulled the trashcan out of the way before taking the photo. Someone saw the blog article, recognized the house, sent a link to the Seller who in turn informed his agent, who in turn demanded that I remove the photo, which I did.
Again, in that instance, I didn’t understand why the agent was upset. It was in fact the actual photo he took and placed in the MLS. Every agent and buyer who saw the listing would see the same photo.
Where should real estate bloggers draw the line in writing about our everyday experiences, observations and viewpoints about the real estate industry and the people in it? Some of the best material pokes fun at the stupid things agents do. It’s hard to ignore all that material. But is this unprofessional? Is it mean? Is it arrogant? Is this sort of brutal honestly damaging to the real estate industry and demeaning to other Realtors? I don’t think so.
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So you want to take the leap and become a Realtor
October 16, 2007
When I was a small boy, 9 years old, my family was traveling on summer vacation and we stopped at a campground that had a huge pool with a high dive. It was 1972. There were a ton of older kids lined up to jump and dive off the high dive into the pool. I had never made such a leap but wanted to try, so I put on my swim trunks and got in line.
After reaching the top of the board, and walking to the end, it looked much higher than it had from the ground. I became scared and didn’t want to do it anymore. I turned to head back down the ladder, but the other kids were lined all the way up the ladder, waiting. The next kid in line, a fat red-cheeked bully-looking type, stood at the top staring me down. He said, matter of fact, “you can’t go back, you have to jump”.
I was paralyzed and frightened. The other kids became impatient and started heckling me. “Hurry up”. “Go!” “Come on, chicken”. I almost started crying. I wanted my Mom. There was no way to get down unless they all backed down the ladder and let me off, which wasn’t going to happen. I had to do what I climbed up there to do. I walked back to the end, and jumped.
The fall down seemed long. I was off balance, arms flailing, legs peddling. I hit the water on my side and felt a painful sting as the water spanked my skin hard. Ouch! Under water seemed other-worldly as I tumbled, disoriented. I realized I was ok, kicked a couple of times, resurfaced, and let out a war-whoop of triumph waving my fist at the other kids, who were now cheering and laughing at my ungraceful plunge. I scurried out of the water, my side burning with pain, and got back in line, hungry to do it again.
I had made the leap. I had survived. And I never felt so ALIVE and full of confidence.
I wasn’t old enough to interpret what that plunge represented at the time, but I now know it was one of many instances in life where we are all called to face our fear, step through, and take a leap. I was learning how to approach life with fear in front of me. I was learning that I can do scary things and come out ok, even if it wasn’t perfect. I was learning to feel absolute terror about doing something, then doing it anyway.
Can you take the plunge into real estate?
For many who make the decision to go into real estate sales, they climb the ladder, but never climb back down nor take the plunge. Instead, they remain in the safe place of doing neither. There is not a crowd of people yelling at them to hurry up and do it, the bills are still being paid by the job, so they remain in limbo, having neither failed nor succeeded at becoming who they want to become.
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Diary of a Busted Austin Real Estate Deal
October 11, 2007
Well meaning Agent blows deal for Buyer
Recently a buyer on one of our listings terminated the contract, and then threatened to sue us and the Seller after the property was placed back on the market and a new offer was accepted. As is often the case with deals that go sideways, the buyer’s misfortune can be directly attributed to her real estate agent and her lack of understand about the sales process - particularly the importance of observing contract dates and deadlines.
Let’s take a look at the string of bizarre events in this deal and see how the agent’s lack of attention to important aspects of the deal cost his buyer a house that we later learned she desperately wanted.
Agent failed to ensure timely delivery of the Option Fee.
His excuse was that the “traffic was too bad at 3PM on a Friday” for him to drive the funds to our office. Instead, he chose to leave the Option Fee and Earnest money at the front desk of his office to be picked up by a courier, even after being told by the Title Company that a courier would not be able to pick up and deliver the funds that day, thus it would be Tuesday before it happened (due to a Monday Holiday).
The agent then chose to leave town the next day, Saturday, without personally delivering the Option Fee to our office, which would have ensured timely delivery and compliance with the Termination Option provisions of the sales contract. The agent knew or should have known from the outset that his actions regarding delivery of the Option Fee would result in his buyer not having an Option Period. This was the first red flag for me, and a head scratcher. How could an agent not make delivery of the Option Fee and Earnest Money top priority?
The Option Fee was received by the Seller on the 5th day of the contract, three days late. I discussed with the Seller the fact that the Buyer actually had no Option Period due to the fact that delivery of the Option Fee did not happen as required. I discussed the pros and cons of accepting or rejecting (mailing it back) the Option Fee.
The Seller decided to treat the delivery of the Option Fee as if it had been timely, thus providing the buyer with the benefit of having an Option Period to which she was not entitled. The buyer, as far as we know, did not know that this “near miss” occurred.
The agent chose to place his personal convenience and holiday travel plans above protecting the interests of his buyer. It was only the Seller’s good nature and pragmatic approach to working the deal that prevented this from becoming an issue of contention.
Agent failed to deliver Buyer’s loan pre-approval letter as promised
Buyer’s Agent promised upon delivery of the offer to provide buyer’s loan approval letter “within a few minutes”. Though not a critical element of the written contract, the loan letter was requested, delivery was promised, and the buyer’s agent failed to follow through and provide the letter as promised. Normally, when an agent tells us they have a letter in hand and it will be sent in a few minutes, it happens. This time it didn’t.
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Quantitative vs. Qualitative Data Analysis and Real Estate
October 9, 2007
Never has so much real estate data been so available to so many people. Most large US Metro areas have most Realtor listings online for public search (Austin has AustinHomeSearch.com). States that have mandatory disclosure on sales prices (Texas is not one of them) offer consumers a lot of sales data to peruse via aggregators such as Zillow and Trulia. Real Estate bloggers like me post all sorts of stats and information about real estate markets. People like stats, myself included.
What I’ve noticed though is that a lot of people look too much at stats and numbers and not enough at other factors when making a real estate purchase or sales decision. Case in point is the large number of investors who I DIDN’T work with over the past several years because I wouldn’t sell them a home in Hutto, Kyle, Manor, or other outskirt starter home areas. Some were truly shocked at this, but I’d simply tell them it was a bad idea and they’d need to find a different Realtor if they wanted to buy in those areas.
I personally knew these areas were not good investment areas, even though the “numbers” suggested otherwise from a strictly “cash flow” basis. In other words, to an investor who plugs everything into a spreadsheet to decide which house to invest in, it’s hard to pass up the home with better “numbers” in favor of a home in a better location.
It’s better, I argued (and still do), to stay closer in to established Austin areas with good commute times, better schools and convenient amenities, even though the “numbers” might not look so good.
A recent article by Angelou Economics makes the point about over-reliance on data better than I can. Though the article is not about real estate, it does do a great job of illustrating the ways in which over-reliance on quantitative data to the exclusion of qualitative data can produce bad information, and thus bad decisions.
Here is a clip from the article.
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