Austin Rental Market Update for 2008

The rental market for single family homes in Austin continues its march upward. Rent prices increased about 6% in 2008 over 2007. Remember though that the 2008 average rent amount of $1,424 per month in Austin is still less than the year 2000 average rent of $1,497/mo. and the year 2001 peak of $1,524/mo. The graph below shows the historic average and median rent values for Austin from 1999 through 2008. The big dip you see in the chart is a result of the tech bust, 9/11 and the resulting job losses, weak economy and over-supply of rental homes that resulted in all the failed sales efforts from 2002 through 2004. You can see that our rental market bottomed out in 2005 and turned upward in 2006 and has continued that trend for three years now. But most rental homes in Austin still rent for less than they did in 2000 and 2001, so renters have had a good run.

2008-ytd-rental-graph

Will the Austin rental market continue its upward climb in 2009? It’s hard to know for sure, but I think it might level off a bit for 2009. Demand for rental homes will increase due to the non-buyers who are choosing to not buy a home and instead becoming or remaining renters. But that is offset by the slower job market, and the increased rental supply provided by sales listings converted to rentals after not selling, as those sellers refuse to lower the price further and instead decide to simply hold off on selling for a year or two until the sales market rebounds. Also, although the rental stats look really good for landlords, those of us in the business of renting properties know that we are not always able to increase rents and not all homes rent as quickly as the stats suggest.

Finally, apartments are over-built again in Austin and there will be a large number of just completed new apartment units coming online in Austin in 2009, as well as new condos converted to rentals due to slow sales. The move-in deals and concessions offered by apartments tend to siphon away at least some of our home renters who ordinarily might not consider an apartment but can be swayed by economic incentives such as three month’s free rent, $99 deposits and free washer and dryer. So, while demand will increase, supply will be increasing by even more.

I just mailed lease renewal notices out for 4 rental properties I manage, and we did not raise rent on any of those particular properties. It’s much cheaper and more prudent to retain a tenant at the current rental rate than to cause them to think about moving because of a $50 or $100/mo rent increase.

December rental stats, Year to date rental stats, and a breakdown comparing 2008 to 2007 by MLS area are all posted below.

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Black Friday for the Crossland Team

Austin Real Estate Agent
Sylvia at our Whiteboard - No Pending Closings at top. Yikes!

Yesterday was not a good day for the Crossland Team. In our office Sylvia and I have a whiteboard mounted on the wall where we write our listings and our pending closings. After yesterday’s closing, we have no more pending sales written on our board.

We have listings, but the showings are slow and we have no offers in the works and nobody threatening to write an offer on any of our listings.

We were discussing this morning when the last time might have been that we didn’t have at least one closing on the board, and we just don’t remember. But it must have been 2005 when we returned to the business after selling our former real estate company and then taking a hiatus/sabbatical. Since we’ve averaged 3 to 5 closings a month, there is always something up there on the board waiting to close. But not since yesterday – our “black Friday”.

What does this mean?

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Nuwire Investor’s interview with me and Sam Chapman

A Nuwire Investor reporter interviewed me recently about the Austin real estate market. Me and Sam Chapman (another Austin KW agent and blogger) were quoted heavily in the article.

Nuwire Investor focuses mainly on alternative investments. On their website, they describe an alternative investment as “any investment that falls outside the realm of traditional stocks, bonds and mutual funds. The most common alternative investment is single family real estate. However, there are many other alternative investment options”.

All together I think it’s a pretty good write-up. You can ready the full article here.

These interviews have slowed down lately, though KXAN Channel 36 was at our local investor club meeting last night interviewing people, and I saw some friends of mine on the 10PM news last night. But I showed up when the reporter was packing up and leaving so I thus missed the opportunity to pontificate and have my ego stroked by being on TV as a purported “expert”. The investor club meeting was good and one of the members put on an economics presentation using cobbled together graphs and charts from a vast number of sources. I’m going to try to get a copy and post it up on the blog here. 

The general sentiment of the meeting goers, many of whom are hardcore Austin real estate investors?:

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Austin Real Estate Market Update – Dec 2008 and Year End

The Austin real estate market for December 2008 ended better than I predicted. The Austin market held up well throughout 2008, all things considered, and within the context of the national economic climate and the fierce headwinds created by fear and negative consumer sentiment. Before we get into the December stats, the YTD stats and the MLS area breakdowns, let’s take a quick look at the graph below to get a perspective on how the Austin real estate market has performed since 1999.

sales-graph-1999-2008


As you can see above, even though 2008 is down a bit from 2007, it’s not anywhere near the nose dive that most of the rest of the country has experienced. In fact, viewed on the 9 year graph, the small dip is no big deal. It has to be noted that both 2006 and 2007 saw price appreciation of just below 10%, both years setting new record high prices in Austin. Each succeeding year cannot be a new record. Real Estate markets do not produce straight upward sloping lines over time, nor should that be the expectation, so it somewhat puzzles me the degree of concern we hear from buyers and sellers when the market does what it’s suppose to do, but that’s what we’re hearing a lot of lately.

Relax, 2009 may be slightly down as well. But real estate is a long term investment, not a lottery ticket or an ATM machine, as folks came to view it during the early through mid 2000’s. Moving on. Below is the December 2008 stats summary as well as the 2008 vs. 2007 sales comparison and breakdowns by MLS area. First, let’s see how December did.

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The Increasing Uselessness of the American Tradesman

I’ve been using repairmen and vendors to repair rental and rehab properties in Austin for almost 20 years. It is with increasing disappointment I must report that the percentage of useless dimwits is increasing. Most recently I’ve spent a great deal of time facilitating “do-overs”, or return calls to properties to fix things that were not done right the first time.

This is one of the hidden time wasters that our property management clients are rarely aware of, but which we do behind the scenes on behalf of clients. While we still have a lot of good, quality Austin vendors available to work on our properties, they are thinning out as the years go by and the older ones leave the trades. The replacement ranks coming up behind them are notably inferior in both skill level and work ethic.

For example, I had to replace a leaking shower pan in the tile shower of a rental property recently. This required tearing out the ceramic tile three rows up from the shower floor, including the shower floor, replacing the pan, then installing new tile. The tricky part on a job like this is getting the new tile to match the existing so that we don’t leave behind a mismatched looking shower, and thus a crappy looking tile job.

I met the tile guy there in person to look at the job and make sure he understood what I wanted. My instructions were:

“If you can’t match this tile exactly, so that any difference in color is virtually undetectable, than I want a designed look, with an obviously different color in a band around the bottom with a deco border”.

What we ended up with was this crappy looking tile job where part of the tile was replaced three rows up and part of it replaced four rows up, and the color doesn’t match, leaving an unprofessional appearance. All I could think of as I stood and looked at the finished job was, “somebody thought this was good enough”.

Would this be the photo you’d want of your shower when putting the home on the market for sale or lease? Of course not. It’s unacceptable.

So, this required another trip to the house, my fourth (first to look at the leak, second to meet the tile guy for a bid, third to view the crappy tile job, fourth to meet the tile guy again), to tell the tile guy the job was unacceptable and find out why the heck my instructions were not followed. The tile guy agreed it was a poor job (done by his employee)  and agreed to fix it.

I told him to go ahead and take out the rest of the 4th row, and that we’ll add an accent colored band to break up the color change between the old tile and the new. This still won’t be optimal, but it will at least look like a purposeful, intentional design instead of mismatched tile job, and it’s a lot more economical than retiling the entire shower.

Other things I dealt with recently:

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Austin Real Estate Market Outlook for 2009

Well, 2008 is behind us and it seems like every Realtor in Austin except me and Sylvia are saying “good riddance”. For reasons I won’t fully go into in this blog post, Sylvia and I actually did better in 2008 than in 2007, by almost every measure. It was another record year for us, which I know isn’t fair to all those other Realtors who are suffering and dropping like flies, but we work hard. So, most agents are looking forward to 2009, expecting an upturn in Austin real estate sales activity by this summer.

Yesterday was the Austin Economic Housing Forecast, and here are some quotes from the panel members and todays article about the forecast in the Austin Statesman:
“The Austin-area housing market took a big hit last year, and more pain is in store for 2009”.
“Things are probably going to get a little bit tougher before they get better”.
“Austin-area builders started construction on slightly more than 8,000 houses last year, according to Metro-study, the lowest number since 1997”.
“home starts will plunge by another 25 percent this year to about 6,000. That would be down 63 percent from the peak in 2006”.
“Expectation is that we will continue to see a decline in pricing through 2009”.
“The 990 sales (in Nov 2008) were the lowest number for November since 1997”.
“The area will lose more jobs than it creates in 2009, much as it did in the tech-bust years of 2002 and 2003”.

Jeez, was there any positive news? Yes, a small bit.

“Austin’s housing market remains healthier than many across the country”.
“Austin’s economy also continues to outperform most areas of the country, but the number of jobs in Central Texas grew by 2.2 percent in 2008, about half the growth rate experienced in 2006 and 2007”.

So what does all of this mean? Well, it depends on who you are, whether you’re a buyer or seller, the price range of your home, location, whether you are moving up, down or out, your credit score, and a number of other factors. There is no one label that can properly describe the Austin real estate market as “good” or “bad” for all people, so let’s try to break it down and see which categories are the winners and which should be the waiters.

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