Austin Real Estate Market Update – Oct 2008 Sales

The number of residential single family home sales in Austin took a 28% dip for Oct 2008 compared to a year ago. The number of “Not Solds” (expired or withdrawn) took a big jump also, to 59% of all listings that departed the Austin MLS in October. These are grim numbers, but the remaining metrics that we track are again holding up pretty well nonetheless. In short, fewer homes are selling, but the ones that do sell are fetching prices near or or above last year’s sales. Most sales currently are for homes selling below $200K.

Let’s look at the breakdown:

• Number of homes sold is down 28% (was down 14% last month) from 1,717 Oct 2007 to 1,227 Oct 2008. Last month (Sept) saw a decrease in the slowing of sales, but this month (Oct) headed back the other way again. I think the remainder of this year is going to be very slow as well.
• Average list prices in Austin were up 1.16% over the same month last year to $259,128.
• Average sold prices in Austin were down 0.29% over the same month last year to $247,687.
• Median sold price was up 5.46% to $195,000.
• Average List to Sold price ratio is 95.58%, down from 96.42% the same month last year.
• Avg sold price per square foot is down 2.13% to $115 compared to $117 a year ago in October.
• Avg days on market is up 4 days (6.15%) from 65 last year to 69 this October.
• Median days on market is up 7 days (16%) from 43 days last year to 50 this year.
• Number of “Not Sold” (exp or withdrawn) is up 29% over the same month last year, to 59% of all removed listings compared to 46% for the same month last year.

The stats outlined above are shown in the chart below.

 

Austin Real Estate Sales Market Update October 2008
Homes only (condos, duplexes, etc. not included) compiled from Austin MLS data

Sep 2008 Oct 2008 Oct 2007 Yr % Change
# Sold 1512 1227 1717 -28.54%
Avg List $257,761 $259,128 $256,148 1.16%
Med List $189,900 $199,900 $189,900 5.27%
Avg Sold $248,026 $247,687 $246,978 0.29%
Med Sold $185,000 $195,000 $184,900 5.46%
Sold/List % 96.22% 95.58% 96.42% -0.87%
Avg SQFT 2131 2156 2104 2.47%
Med SQFT 1924 1986 1919 3.49%
Avg $ SQFT $116.39 $114.88 $117.38 -2.13%
Avg DOM 67 69 65 6.15%
Median DOM 48 50 43 16.28%
# Expired 797 666 628 6.05%
# Withdrawn 891 1070 806 32.75%
Not Sold 1688 1736 1434 21.06%
Not Sold % 52.75% 58.59% 45.51% 28.74%

 The Year-to-Date figures through Oct 2008 tell a similar story, though less pronounced than Oct. See the chart below:


 

Austin Sales Market YTD Update – Oct 2008
Homes only (no condos, duplexes, etc) – Data from Austin MLS

Jan-Oct 08 Jan-Oct 07 Yr % Change
# Sold 17406 21393 -18.64%
Avg List $262,500 $262,178 0.12%
Med List $199,500 $189,900 5.06%
Avg Sold $252,713 $254,809 -0.82%
Med Sold $192,971 $187,000 3.19%
Sold/List % 96.27% 97.19% -0.94%
Avg SQFT 2144 2121 1.08%
Med SQFT 1950 1930 1.04%
Avg $ SQFT $117.87 $120.14 -1.89%
Avg DOM 65 57 14.04%
Median DOM 43 33 30.30%
# Expired 5922 4122 43.67%
# Withdrawn 7155 5342 33.94%
Not Sold 13077 9464 38.18%
Not Sold % 43% 31% 39.87%

Let’s look at the breakdown of sales by price range, and we’ll see that 52% of all sales in Austin for October were in the sub $200K price range. Stunningly, there are 503 listings priced at over $1M, yet only 14 in that price range sold in Oct. The $1M price range in Austin is grossley over-supplied at present.
 

Sales by Price Range – Oct 2008
Price Range Number Sold Avg DOM Current Active
$149,999 or under 350 51 1688
$150,000 – $199,999 289 65 1748
$200,000 – $249,999 179 81 1255
$250,000 – $299,999 120 77 1049
$300,000 – $349,999 85 72 720
$350,000 – $399,999 62 75 632
$400,000 – $449,999 39 85 392
$450,000 – $499,999 19 75 366
$500,000 – $549,999 22 102 248
$550,000 – $599,999 14 87 245
$600,000 – $699,999 17 73 331
$700,000 – $799,999 8 119 233
$800,000 – $899,999 7 166 141
$900,000 – $999,999 2 282 113
$100,000 or over 14 103 503

So what’s in store for November and December as we ride out the end of 2008? I suspect that sales activity will come to a grinding halt. Removed listings (expired or withdrawn) may top 70% for December as sellers finally give up and pull listings for the holidays. I haven’t researched past stats, but I can’t imagine we’ve ever had a month in which 70% of listings departed the Austin MLS unsold, so it’s not a fun prediction to make, but we’ll see.

As usual, comments and questions are welcome.

Posted by Steve
7 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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Jason - 7 years ago

Thanks for the great and useful insight Steve. Much appreciated for those of us that want to learn more about the Austin Real estate environment and how to evaluate it.

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Leon Fu - 7 years ago

Hey Steve,

With 28% fewer sales than last year, how bad is it for real estate agents now? I guess sellers are just going away instead of dropping prices. I’m sure it must be really, really tough for your fellow real estate agents.

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Teddy - 7 years ago

Steve…could you offer some further insight as to the implications of having so many homes for sale over $600K?

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Steve - 7 years ago

Hi Leon,

Yes, many agents are struggling. We have a lot of vacant offices in the KW building, which I’m sad about because, more than any other major Brokerage, Keller Williams understands and preaches the business models that will help agents power through downturns like this. KW is profitable and has no debt. No other major National real estate Brokerage can say that. So the “lead with revenue” model is pounded into each individual agent, yet many don’t get it.

When I talk to struggling agents who ask how Sylvia and I are doing so well through the soft market, I always ask first “are you spending 3 hours each morning on lead generation?”. The answer is always an assortment of excuses. So the conversation basically ends there. “There’s your answer”, I say. “Get busy”.

Teddy, with regard to the over $600K inventory, the main implication is that we have a buyers market in that range. Many of those sellers will pull off the market in the next couple of months. Those who MUST sell will keep waiting and/or drop prices until a buyer picks their home over the many others to choose from.

I think by summer 2009 Austin will swing back around again job growth will pick up again. Nationally, unemployment should stop falling by June/July 2009, and that will help. I think the national real estate market might take until the end of 2009 or mid-2010 before we can say with certainty that the collapse is over.

But Austin, relative to other markets, is actually hanging in there as well or better than we could hope.

Steve

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Aaron - 7 years ago

Steve,
I don’t have the numbers handy, but wasn’t it around September of last year that the market starting turning bad? If so, then doesn’t a year to year drop from a bad October 2007 to Oct 2008 look much worse than a drop from, for example, September 2007 to Sept 2008.

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Steve - 7 years ago

Aaron,

Yes, this is a bigger drop than we would have expected because we are now about 14 months into the Austin slowdown, and therefore comparing slow year to slow year instead of boom year to slow year as we have been for much of the past year.

Steve

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Observer - 7 years ago

Steve,

What makes you think that the end of 2009 is going to be the bottom? Isn’t the time when ALT-A (read liars) mortgages just start resetting ?
Besides, mortgage rates are not going down with FED rates at 1% currently and I think, they might go up soon. The rising unemployment is another factor which will add to the house for sale inventory.

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Steve - 7 years ago

> What makes you think that the end of 2009 is going to be the bottom?

The last 4 recessions lasted an average of 17 months. This recession began (if measured by rising unemployment) in Dec 2007. If it is to last 17 months, job growth will turn around June 2009. Job growth, more than anything else, drives the real estate market. When jobs pick up, so will buyers, and the excess real estate inventory will start to clear out.

Austin in fact has remained in positive employment growth, though it slowed from 5% to 2%, but our slowdown will be more shallow and shorter than the national slowdown.

Of course, I could be wrong. We are in uncharted waters with the national economy, but does anyone doubt another stimulous package will be coming next year? Perhaps multiple stimulous efforts intended to create jobs?

Steve

Steve

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Sam Chapman - 7 years ago

I have not verified this, but a reliable source tole me that the Austin Board of REALTORS has gone from around 11,000 licensed agents at the beginning of the year to fewer than 7,000 today. Does that tell you anything about the impact this market has had on agents?

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Teddy - 7 years ago

Steve…. imo this is not going to be an average recession.

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Steve - 7 years ago

> Steve…. imo this is not going to be an average recession.

It certainly may not be, but we’re probably about half way through. But there are certainly plenty of “firsts” happening, so your point is well taken. If the auto industry implodes, who knows what might happen.

Steve

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Leon Fu - 7 years ago

This is a very, very perilous time. I don’t think most people realize that we are on the verge of the next Great Depression. Obviously I don’t have a crystal ball and nobody knows for sure what will happen. But if the wrong decisions are made by the world governments, the current crisis can easily spiral into catastrophic decline across all asset classes. The massive destruction in wealth (real estate, stocks, job losses, etc.) that is going on right now is how World Wars and revolutions are started. Who knows, it there may be no stopping this crisis, but hopefully the world governments will do everything in their power to try to stop it.

There is a massive de leveraging going on right now. The world’s economy runs on credit and that credit is rapidly disappearing. In other words, $1 in reality is $10 or $20 because of the banking system. What’s happening right now is those $10 or $20 are collapsing back into $1. Obviously, there are not enough dollars to go around, so we have a free fall prices and economic activity around the world.

We are seeing links that we have never seen before. For example, home foreclosures in Florida leads to Iceland banking system collapsing. Who would have guessed? Or that run away real estate prices in California, Florida, and a handful of states would bring down the world’s economy?

The last time something like this happened we know what the result was; a complete destruction of wealth, massive unemployment, crazy dictators coming to power in major countries, world war, and ultimately millions of lives lost around the world.

Hopefully it doesn’t come to that, but unless something drastic is done, this is the road we are on at the moment. It’s happened before and there isn’t any reason why it couldn’t happen again.

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Joe - 7 years ago

Steve,

If you were a youngish family with 2 kids which area would you advise is best for long term home appreciation out of the following list – Area 6, 7, 1B, or 8E? Obviously by limiting our selection to these 4 I’m only considering close in as I’m assuming close in equals better appreciation than any others…assuming you agree with that, then I’m further trying to make a call on which close in is best.

I realize there are other factors but I’m looking right now at simple appreciation.

Thanks again,

Joe

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Steve - 7 years ago

> which area would you advise is best for long term home appreciation out of the following list – Area 6, 7, 1B, or 8E?

Joe,
They are all good, central areas and should perform similar to one another. . With small kids, if you want the highest rated schools, I’d look into 8E. Area 6 has no good schools. Areas 7 and 1B are mixed.

Leon, yes, this mess gets more interesting every day. Hopefully it will settle down soon. Americans are going to have to change the way we live, long term, I believe. We’re spoiled. And are we any happier, really, than we were growing up in the 50s and 60s when we didn’t have all this “stuff”? I don’t think so.

Steve

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Teddy - 7 years ago

Leon…. great post. Steve, I’m not sure what “settle down” means at the moment. I think we have to consider that a whole generation of investors have been burned twice with the dot com bubble and the credit collapse. Settling down might mean a paradigm shift in the how families approach their finances. It just might mean they start to actually save more than consume. Our economy has been based on consumption and credit. If we move to a more wealth producing saving and producing economy, I think things will be slow for quite a while.

In any event, I’m particularly interested in the real estate of Lakeway. I have watched this market from afar for over 3 years waiting for prices to come back to trend before I made a purchase. Now, there are many homes for sale in the $600K and up range and yet prices have yet to correct and homes either sit on the market for months or are pulled because the sellers weren’t really serious about selling in the first place. Maybe the sellers didn’t get the memo, but it’s still very difficult and costly to obtain a jumbo mortgage. And, given what I mentioned earlier, buyers may not be as willing to come up with the 20% minimum to finance a house that is still overpriced.

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Steve - 7 years ago

Hi Teddy,

I agree. As Leon says, this is the deleveraging of America and the American consumer. But do we really think a nation of spending addicts can be cured by one trip to rehab? Most junkies relapse very quickly, and I imagine the American consumer will be no different.

That said, what I mean by “settle down” is that emotion has taken over many aspects of what we see. Good grief, there are some stocks selling for LESS than the annual dividend! When we look at the three most reliable metrics in Austin real estate, or anywhere for that matter, they are job growth, interest rates, and months of inventory. Austin actually looks good on all three of those (except in the $500K+ ranges), and should therefore have an even stronger market than we do, but we don’t because of emotion and fear.

I’m not saying the emotion and fear are not well founded, but unless they become the new leading indicator of market activity, things will eventually settle back into the more predeictable behaviors.

Steve

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Leon Fu - 7 years ago

Hey Steve,

I don’t think it’s the current crisis is because we are a nation of spending addicts. Yes, Americans don’t save. But let’s think about why it has become this way. First of all, taxes are much, much higher than a generation or two ago. It is much more difficult to save when the government is taking such a large share of our incomes. OK, then why have taxes gone up so much? As a society, we have demanded social programs to protect those that have fallen through the cracks. Other countries don’t/can’t do that.

When my dad immigrated to the U.S. one of his coworkers asked him what if someone got sick in Taiwan and didn’t have money or insurance. He told her that that person would die. When my grandmother got breast cancer, my mom and to go up and down the street to ask neighbors to loan her money for surgery. She had to pay 20%+ interest on that loan. People that didn’t have money or couldn’t borrow money died (and many people did die). The reason people in other countries save 50% or more of their income is because it’s a matter of survival. The people that don’t save that much simply die when an accident happens if they don’t have a social network (i.e. family) to support them. That does not work here because families are not as tight knit (i.e. the divorce rates) as in other countries. So we rely on the government and social institutions (wellfare, social security, medicare/caid, the military, etc) to protect us.

There isn’t anything wrong with this, but the problem right now is our institutions are at risk, because the backbone of our institutions is the financial system and the credit it provides. This is collapsing right before our eyes. What is ironic about this situation is that what got us into this problem is what will get us out. The cause of the Great Depression in the 1930’s was too much spending with credit in the 1920’s and that credit eventually collapsing. What finally put the nail in the coffin of the Great Depression was World War II. FDR had the right idea with the “New Deal” when he tried to spend our way out of the Depression. But at the time, nobody had any idea of how massive (fighting a World War) the spending had to be in order to stop the de leveraging that was happening. The spending had to be so massive that only the government could accomplish it.

That is what need to happen now to stop this catastrophe. Hopefully it won’t be a war and we can do something more peaceful and productive like massive infrastructure projects (i.e. Hoover Dam that was built in the 30’s). But unfortunately, wars seem to be the only way to stop something like this as it causes countries to pull out all the stops and spend since the destruction of the country is at stake. I never thought we would see something like this again, but I am shocked that it is happening…

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Teddy - 7 years ago

Steve… I went through some of the ~$1M homes in austinhomesearch and was astonished at the high property taxes. I had no idea and was completely surprised as I thought property taxes were at least reasonable in Texas. These property taxes surpass those I’m familiar with in the northeast! Could this be another obstacle to selling a home in the higher end Austin market? i know.. no income taxes..but at least those can be hedged or mitigated through tax planning…property taxes you just have to pay.

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Steve - 7 years ago

Teddy,
Property taxes range from 1.8% to 2.7% in and around Austin, depending on the exact location. It probably affects the purchasing ability of lower income buyers more than the higher price range buyers.
Steve

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Teddy - 7 years ago

2.7% on a $1M is $27,000 in property taxes. So to get into this house you’ll need ~$250K in equity for downpayment and fees. You’ll need another $50K-$100K min for moving expenses. Outside of that you’ll pay at least 8% on a mortgage of $800K if you qualify. I think this explains why there is a glut of higher priced homes in Lakeway.

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