Austin 2007 Real Estate Appreciation by MLS Area

February 4, 2008

Below are the 2007 Austin real estate appreciation breakdowns by MLS area. Despite the negative media attention given to the real estate market nationally, Austin continues to see notable value appreciation in many areas. Overall, average sales prices in Austin were up 6.62% to $254,883 (excludes condos) and average sold price per square foot were up 4% in 2007 to $118.

I can’t pull the median sold value on the overall market due to a search result limitation with our
new MLS software, but I can pull medians on the individual areas, and those are noted in the chart below.

As you look at the table below, you’ll see several metrics that I track when looking at market performance in a particular area. The most common we here about in the news is number of sales. I want to comment on that briefly.

All year the headlines have said “sales down in Austin”. This isn’t news. We knew it would happen. It’s no surprise. It peeves me that journalists get hung up on the drop in number of sale without placing it into context.

Do you remember any of the headlines saying “Austin enjoys second highest number of sales ever”? Well, that’s what we saw in 2007. So even though the volume of sales is down from the record year of 2006, don’t get hung up on that number. Austin is doing very well in the number of sales category, even though our number of sales were down 7% from 2006.

Next we look at average and median sales prices, sold price per square foot, and number of days on market. Just because average sales prices have gone up in a particular area, that doesn’t mean the average home will sell for that much more. The introduction of bigger, more expensive new homes to an area, or a higher number of high priced sales in a given year, can create that impression. This is why we also look at median sold values and sold price per square foot.

If all three of the avg, median and psf values are up, that indicates solid performance across the board in that area. Finally, Days on Market provides an indication of how fast homes are selling an an area.

Let’s look at a couple of examples, starting with Austin MLS Area 1B, which is Central Austin. Notice that in 1B, all three price metrics are up more than 12%, and the homes sold 12% faster than they did in 2006. This is a very strong selling area.

Other very strong areas where average price, median price and avg per sqft price were all at or above 10% were MLS areas (1B) 2, 3, 7, 8E, 9, 10N, 10S, HD, SWE. Notice (see MLS map at bottom of chart below) that ALL of these areas are close-in areas less than 20 minutes to downtown Austin. We’ve always advised our investors to buy close in, but far enough out so that the lot values don’t skew your rent ratio too much. Area 10N, 10S, SWE and SWW are the areas we generally recommend for purchasing long term hold properties.

Now, which areas did poorly? It’s no surprise to me that the areas that did most poorly with regard to appreciation are the areas where most newbie investors buy their first investment property. Why do they buy in these areas? Because the houses are cheap. There is no other reason. You get what you pay for.

MLS Area 5E (Far East Austin) saw average sales prices drop 3%, median values up 3%, average price per sqft drop 1.72% and Days on Market increase 19%. If you bought an investment property in one of those starter home neighborhoods for $110K a year or two ago, it’s still worth $110K today and will take longer to see than it would have a year or two ago.

Other areas that underperformed compared to the regional stats (less than 5% appreciation for avg, median and psf) are GTW, HH, HU, MA, and SC . Note that these areas are all more than a 30 minute drive from downtown Austin.

On to the stats. An Austin MLS Map is at the bottom of this page in case you’re not familiar with the area. As always, comments, questions and observations are welcome.