There is competition for scarce buyers at that range from downtown condos as well as tremendous in-fill construction in south Austin and north central Austin and east Austin too. Smaller builders and developers in these areas are starting to feel real pain.

There is a real slowdown in real estate activity above 400K but Steve’s larger point is correct — we do not live in Miami or California. Our home prices have largely stayed in line with area incomes, even with a host of troubling national factors, we will not see huge price declines. Some houses with a wishful thinking price of 700K might come down to 500 or even 450 but we still aren’t an LA-like market.

> I also see the possibiltiy (as much as I would like otherwise) for a seismic shift in the rental market.

Believe it or not, our rental rates are still, on average, below the year 2000 rates. We topped out in 2001 and bottomed out in 2005, but the upward move since then still hasn’t caught up to the 2000 averages. And you’re right, the rental market is softening somewhat, though not terribly. It’s very much like the sales market where there are plenty of winners, but a lot more losers. By that I mean the competition for renters is strong and you have to make sure your property competes on price and condition, even if it means offering concessions to get renters in.

Here is my latest rental market update, with a chart that shows the historic rental trends for single family homes.
http://crosslandteam.com/blog/2008/08/23/austin-rental-market-update-july-2008/

Steve

> Perhaps potential buyers are less concerned about a housing bubble than a recession.

Will, the root cause of the economic problems IS the real estate market and all those bad loans. But I think you have a valid point, which would in fact apply to many of the fence sitters. We do however know just from talking with a lot of prospective buyers that the mindset of many is simply that they predict that the Austin real estate market is going to tank, which I think is not likely at all.

> does a withdrawal at the lower end of the housing market reliably predict a subsequent (6 months later?) drop in prices?

The lower end of the market is actually the strongest in Austin at present. The “months of inventory”, which is a barameter of demand, is almost in a perfect straight line relationship with price ranges. In the lower ranges, there is only 3 month’s of supply and prices are rising. The market equals out at around $400K and becomes a buyers marker in the higher ranges. So what we are seeing is rising prises on the low end and soft or falling prices on the high end, which moves the median diffewrently than the average.

Steve

As a buyer waiting on the sideline, I believe your analysis misses a significant consideration. The national economy is rather unstable now, especially with the approaching banking catastrophe which may or may not be averted. As such, many potential buyers have to consider not only whether the trend of Austin housing prices but also the trend of their own wages. Essentially, there are two national factors, the housing market and the overall economy, which can both drag down the local housing market. Perhaps potential buyers are less concerned about a housing bubble than a recession.

The second point concerns recent data (via the Statesman) that show Austin home sales declining 20% but the median drifting up slightly. Those data seem to suggest the bottom end of the market dropping out, but I haven’t yet looked at the price breakdown totals. In your experience, does a withdrawal at the lower end of the housing market reliably predict a subsequent (6 months later?) drop in prices?