Austin Real Estate Market Update – Nov 2008 Sales

by Steve Crossland, REALTOR in Austin TX on December 22, 2008 · 10 comments

The sales volume in Austin fell of a cliff for November, with only 914 sales of single family homes. That represents a 43% decline in the number of homes sold. The number of “Not Solds” (expired or withdrawn) took a big jump also, to 62% of all listings that departed the Austin MLS in November. If you remember last month’s market update, I predicted the Not Solds will hit 70% in December 2008. November stats haven’t changed my mind.

Let’s look at the breakdown of Austin single family home sales for November 2008:

• Number of homes sold is down 43% (was down 28% last month) from 1,594 Nov 2007 to 914 Nov 2008.
• Average list prices in Austin were down 5.29% over the same month last year to $250,609. This means sellers/agent are doing a better job of pricing the home correctly out of the gate.
• Average sold prices in Austin were down 6.17% over the same month last year to $238,072 from $253,718 a year ago. So, list prices are down 5% but sold prices are down 6%, which tells me sellers are still chasing the market down.
• Median sold price was down 1.87% to $185,000. Last year in Nov it was $188,527. Median prices had been holding their own each month this year, so the downturn in this particular metric is something new.
• Average List to Sold price ratio is 95.00%, down from 95.89% the same month last year, again demonstrating that sellers are still chasing the market down.
• Avg sold price per square foot is down 7.41% to $109 compared to $118 a year ago in November. This is a huge drop.
• Avg days on market is up 12 days (18.75%) from 64 last year to 76 this November.
• Median days on market is up 11 days (24%) from 45 days last year to 56 this year.
• Number of “Not Sold” (exp or withdrawn) is up 43% over the same month last year, to 63% of all removed listings compared to 46% for the same month last year.

None of this is favorable if what we want is a normal, rising market, but in the context of elswhere in the country, it’s actually pretty good.

The stats outlined above are shown in the chart below.
 

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

Oct 2008 Nov 2008 Nov 2007 Yr % Change
# Sold 1249 914 1594 -42.66%
Avg List $258,869 $250,609 $264,601 -5.29%
Med List $199,900 $192,000 $195,955 -2.02%
Avg Sold $247,383 $238,072 $253,718 -6.17%
Med Sold $195,500 $185,000 $188,527 -1.87%
Sold/List % 95.56% 95.00% 95.89% -0.93%
Avg SQFT 2160 2180 2151 1.35%
Med SQFT 1988 1984 1952 1.64%
Avg $ SQFT $114.53 $109.21 $117.95 -7.41%
Avg DOM 69 76 64 18.75%
Median DOM 50 56 45 24.44%
# Expired 667 662 558 18.64%
# Withdrawn 1068 833 810 2.84%
Not Sold 1735 1495 1368 9.28%
Not Sold % 58.14% 62.06% 46.19% 34.37%

So, are these grim numbers cause for alarm? Not at all, and here’s why.

October 2008, when the offers for Nov 2008 closings were written, was dominated by continued financial spiral and economic uncertainty. It’s not suprising that buyers hunkered down. Since Oct 2008 was anything but “normal”, it’s no surprise that Nov 2008 closings are down. I expect Dec will be just as slow comparatively, though the interest rate drops seem to be bringing some buyers out of the woodwork. And the Median sold price in Austin is still up 3% year to date over last year while the average sold price is down only 1%.

Let’s take a look at Austin’s Year to date sales stats:
 

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

Jan-Nov 08 Jan-Nov 07 Yr % Change
# Sold 18375 22985 -20.06%
Avg List $261,853 $262,302 -0.17%
Med List $199,490 $189,900 5.05%
Avg Sold $251,916 $254,671 -1.08%
Med Sold $192,500 $187,000 2.94%
Sold/List % 96.21% 97.09% -0.91%
Avg SQFT 2146 2123 1.08%
Med SQFT 1953 1932 1.09%
Avg $ SQFT $117.39 $119.96 -2.14%
Avg DOM 66 57 15.79%
Median DOM 44 34 29.41%
# Expired 6588 4680 40.77%
# Withdrawn 7987 6154 29.79%
Not Sold 14575 10834 34.53%
Not Sold % 44% 32% 38.08%

 So, while Nov looks pretty darned slow, and December will no doubt be the same, the year overall has held up about as good as anyone could hope. There are few cities in the U.S. who would not trade their economic numbers and real estate market for ours here in Austin.

Finally, let’s look at the November breakdown by price rance for a better understanding of which homes are selling and which are over-supplied.
 

Price Range # Sold Avg DOM Active Months Supply
$149,999 or under 300 57 1653 5.51
$150,000 – $199,999 215 71 1535 7.14
$200,000 – $249,999 129 79 1108 8.59
$250,000 – $299,999 89 81 944 10.61
$300,000 – $349,999 45 124 604 13.42
$350,000 – $399,999 29 75 575 19.83
$400,000 – $449,999 30 121 339 11.30
$450,000 – $499,999 16 112 343 21.44
$500,000 – $549,999 11 124 216 19.64
$550,000 – $599,999 15 91 213 14.20
$600,000 – $699,999 11 81 301 27.36
$700,000 – $799,999 9 125 197 21.89
$800,000 – $899,999 7 111 133 19.00
$900,000 – $999,999 1 96 106 106.00
$1,000,000 or over 8 184 441 55.13

What does this tell us? It tells us the the seller or buyer of a home priced under $200K is living in a completely different real estate market than the buyer or seller of a home priced above $300K. In the “below $150K” range, homes are selling in less than 60 days and we have less than a 6 month supply, even using the dismal Nov sales volume as the denominator instead of the average of the past 12 months (the other way to do it).

In a balanced market (neither buyer or seller have the economic advantage), 6 month’s inventory is considered the balance point, and home will sell in about 60-90 days, on average. Of the 914 homes that sold in Austin in November, 56% were sold for less than $200K, and a massive 80% of all homes sold in November in Austin were priced below $300K. Homes priced above $300K simply have an insufficient number of buyers to absorb the current inventory.

The “Month’s Supply” column shows the relationship between the number of active listings and the current volume of sales activity in that range. Moving down the price ranges we see the sobering reality that sellers in the higher ranges face. For example, we have a listing priced at $569K. There is a 14 month supply in that price range, with 213 other homes priced between $550K and $600K, and only 15 in that range sold last month. We’ll be riding this one out into the Spring with the seller as the showings have essentially grinded to a halt since October. In this case, dropping the price to the lower $500Ks won’t even create much of a change in foor traffic, because there simply are not enough buyers out looking for homes over $500K, so patience is the only viable option.

Likewise, a buyer qualified for up to $600K has a lot to choose from and if that buyer is flexible in their requirements, can submit agressive offers on many different homes until they find the most motivated seller. Bargain hunters looking below $250K have experienced more frustration, as it’s simply not a buyer’s market in that range.

As usual, questions and/or comments are welcome.

{ 10 comments… read them below or add one }

1 Spook December 22, 2008 at 3:26 pm

If this economic downturn/recession/depression-lite continues — and certain blogs are now predicting that it’s going to persist for more than three years(!) — wouldn’t it will eventually catch up with us and start affecting the market in Austin?

I’m wondering what the possibilities are for an honest-to-goodness 1980s-style, bottom-falling-out real-estate Bust to happen again in Austin.

I’m still kicking myself for not begging, borrowing, and stealing the $$$ to buy up as many properties as I could get my hands on back in the ’80s during the Bust. I was young back then, and I couldn’t get it together in time. I’m a lot more prepared now.

2 Teddy December 22, 2008 at 7:06 pm

Steve… what to you is an “aggressive” offer on a $600K house?

3 Leon Fu December 23, 2008 at 9:14 am

The global collapse continues. Since housing is a necessity, it is obvious that the lower priced homes will hold up more than the higher priced ones.

It is obvious from your data that things are set to get worse from here before they get better. The correct thing to do for first time buyers is to wait, especially for the $300K+ buyers. We are closer to a bottom for the lower end properties, but its still too early.

This is sort of like Christmas shopping. The longer you wait the better deals you will get.

There will be even better deals and interest rates 6 months from now…

4 Steve Crossland December 23, 2008 at 9:26 am

> wouldn’t it will eventually catch up with us and start affecting the market in Austin?

Spook, it already has. But let’s look at things in context. Toyota just reported its first quarterly loss in 71 years, the economy has dragged down countless venerable companies and wreaked havoc, and here in Austin our unemployment has risen from 3.5 to 5% (still below state and national figures) and our median home price is up 3%. No, we are not immune, but given the context of what’s happening outside Austin, we’re weathering this as well or better than any other city in the U.S.

> Steve… what to you is an “aggressive” offer on a $600K house?

That’s up to each buyer to decide. But in general, I think an aggressive offer is one which prices in further value erosion and protects the buyer from equity loss. In other words, if I believe prices will fall 10% more in a certain area and price range, I want to buy a house at 15% below the current market value. That would be an aggressive offer.

The other metric is when a home is at or below construction cost. A lot of the $600K custom homes you find in places like Lakeway only have $100K +/- net profit for the builder, and if that builder is willing to walk away at or below break even, and I know that homes will never be able to be constructed that cheap again in that neighborhood, then that’s probably going to be a good long term buy.

Many of the small custom builders are already at that point, and can’t/won’t walk away, which is why we are seeing brand new $600K custom homes being rented for $2500/mo to $3200/mo. instead of sold. When that happens, the builder is essentially saying “at this price, I’ll buy (keep) this home because I know the market will come back”.

Steve

5 Jose Tovar December 23, 2008 at 9:38 am

Hi Steve,

I’m currently a student at UT studying economics. I know that the economy would see a lot less folks trying to get their Realtor’s license, but I find it a good opportunity to get it for when things look up again. I’m actually getting because I hear it might be tougher to get it later with the kinds of requirements one might have to have before even going forward with it. In any case, I should be receiving my license during mid semester this Spring as I plan to take the course work online through UT.

What would you suggest for a lad like me for the coming year to do with my license before the possible next boom? I was thinking that leasing might be the w ay to go for the short term. Any suggestions?

Respectfully,
Tony

6 Steve Crossland December 23, 2008 at 10:08 am

Hi Tony,

You could do what a lot of licensed agents are currently doing. Here are a few things that I know licensed agents in Austin are doing with their real estate licenses:

- Become a substitute school teacher.
- Work part time at Dillards.
- Sign up at a temp agency.
- Start a home staging business.
- Go back to school to get another degree.
- Hang Christmas lights for your neighbors for $200 per house.

Tthis isn’t a business to dabble in. It’s a career decision. Having a license just to have one isn’t a good investment of your time or energy. It would only be a distraction. Find something at which you are 100% committed to excelling and being the best; not something in which to dip your toe or test out when the market is good.

If you feel a deep passion and an interest in real estate as a career, then decide to make it a career. Start by reading the “Millionaire Real Estate Agent” so you’ll understand what the business is really about day to day.

Otherwise, you are not needed and would simply be yet another uncommitted, non-producing licensee who provides no value to the real estate industry or its customers. Sorry, but that’s how I see it.

Steve

7 Tony Tovar December 23, 2008 at 10:43 am

Hey Steve!

Thanks for the prompt reply! I’m very thankful for your honesty. However, I’m actually 100% committed to making this a career, not a business opportunity. Forgive me if I might have given you that impression. With that said, I’m actually getting my degree as a fall back (Rich Dad, Poor Dad). So you see, I’m not looking at this as something else to do but as the primary career path. My concern was merely to get an inside scoop, from you, of where a lad like myself might best start on this path. I’ve yet to go through your archives but plan on doing so. I came across your blog searching about whether my vehicle is an important asset as a future realtor, you see…I’m actually in the market for a vehicle. I was thrilled to see that someone had written about this because I want to prepare myself as best I can.

I have not read the book you suggested but i will go and grab it this evening. Thank you for the advice!

8 Steve Crossland December 23, 2008 at 11:09 am

Tony,

Thanks for the clarification. Your best start is to read the book. It lays it all out, your entire business plan and how to figure out what you need to be doing each day. This business is mostly grunt work. Facilitating transactions, knowing the market, having good communication skills, etc. are of course required, but that’s not what most of the time is spend doing.

It all boils down to leads and appointments. For example, Sylvia and I have a goal for 2009 to close $15M in real estate sales. To do that, we know we simply need 6 listing appointments per month and 4 new buyers signed up per month. Without those appointments and those buyers, nothing else will happen, so the business is one of lead generation first and foremost. Those who understand that and can translate it into daily activities succeed, the rest might do ok in a seller’s market, but fail in a market such as we are in now. It’s as simple as that.

Read the book and you will understand. And what DOES NOT matter are the endless trivial things most new agents obsess on, such as their business card design, the car they drive, which phone number to put on their rider, what contact software to use, etc. I watch new agents time and again putter away day after day on these things all while doing ZERO effort that will directly result in a new listing appointment or new buyer.

Read the book, twice to start with, and you will get it and be way out in front of the others. Real estate is a lead generation business, and if you don’t plan on being in the business of generating leads, every day, non stop, you will have no clients and it won’t matter what your business card looks like or what car you drive.

Contact me or Sylvia off-line and we’ll be happy to meet with you and give you a tour of our office.

Steve

9 Dave December 24, 2008 at 11:08 am

Steve,

What is the percentage change from original list price to final sales price? I think that number is more telling than the final list to sales price.

Thanks,

Dave

10 Mike B December 24, 2008 at 8:39 pm

Steve, one thing to keep in mind regarding construction costs is: they’re going down, possibly way down. Commodity prices of all sorts are in a free fall, and a huge chunk of the unemployed are related to the construction industry indicating that construction wages also have a lot of room to fall. I’d say this indicates the replacement value of these homes is also going down and to levels none of anticipated was possible.

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