Austin Real Estate Market Update – Aug 2010 Stats

Real Estate Market Stats

The average year-to-date sold price for homes in Austin is $256K, which just broke through the (peak) year 2007 YTD of $255K.

Now, there is a lot of discussion and caveats that must be considered along with this milestone statistic, but nevertheless, look at the graph below for a visual representation of where average and median home prices in Austin stand right now relative to past years. Further down you’ll find additional monthly and YTD stats and an overview of what Sylvia and I are seeing in the real estate market in Austin as we continue to wheeze through the tax credit hangover and head into the fall/winter months .

Austin Real Estate Sales Graph 1999 thru Aug 2010
Looking at the above graph, one might assume that home prices are rising in Austin. Actually, what’s happening more specifically is that fewer lower priced homes are selling than before, as a percentage of all homes sold. This is dragging the average and medians upward. Nevertheless, the graph remains what it is and to the casual observer, newspaper reporter, or market cheerleaders, this will be fodder for the simple utterance that “prices are rising in Austin”. The real question is, is your particular home worth more today than is was at the peak in 2007?, and the answer is “probably not”, unless it’s a sub $200K home. The graph is really a reflection of segment and price range shifts.

Below is the chart for August sales, YTD sales, a Pending Sales analysis, and some other stuff that I hope you’ll find interesting and useful.

Austin Sales Market Monthly Update – August 2010
Homes only (condos, duplexes, etc. not included) compiled from Austin MLS data

Jul 2010 Aug 2010 Aug 2009 Yr % Change
# Sold 1451 1386 1736 -20.16%
Avg List $302,120 $283,310 $255,966 10.68%
Med List $230,000 $212,250 $195,750 8.43%
Avg Sold $288,920 $271,217 $246,349 10.09%
Med Sold $224,000 $203,000 $190,000 6.84%
Sold/List % 95.63% 95.73% 96.24% -0.53%
Avg SQFT 2353 2282 2201 3.68%
Med SQFT 2161 2066 1975 4.61%
Avg $ SQFT $122.79 $118.85 $111.93 6.19%
Avg DOM 69 72 72 0.00%
Median DOM 48 53 43 23.26%
# Expired 490 609 492 23.78%
# Withdrawn 987 1172 897 30.66%
Not Sold 1477 1781 1389 28.22%
Not Sold % 50.44% 56.24% 44.45% 26.52%

 

Number of sales are down 20% compared to Aug 2009, but, because of a shift in price range segments (see more on that below) average sold price is up to an incredible $270K and the median for Aug 2010 was $203. Homes in Austin in August sold for about 96% of the final list price, median square footage size of the avg home sold in Austin increased 4.6% to 2,066 sqft. Days on market looks stable, even good all things considered.

But take note of the increase in Not Solds, well above 50% now for Aug. This represents sellers who gave up. These were unsuccessful sales efforts. So, more than half the listings (56%) departing the Austin MLS in Aug 2010 left as a “Not Sold” (Expired or Withdrawn). A year ago the percentage was 44%. In a solid seller’s market, the percentage would be in the mid 20s or low 30s.

Bottom line, there is still not enough absorption of inventory to satisfy all sellers, but those who do sell seem to be fairing moderately well both in terms of days on market and percentage of final list price.

Below is the Year to Date stats chart for Austin comparing 2010 to the same Jan-Aug period in 2009.

Austin Real Estate Sales YTD – Jan-Aug 2009/2010
Homes only (no condos, duplexes, etc) – Data from Austin MLS

Jan-Aug 10 Jan-Aug 09 Yr % Change
# Sold 12,514 12,274 1.96%
Avg List $266,599 $256,802 3.82%
Med List $199,900 $199,500 0.20%
Avg Sold $256,099 $245,662 4.25%
Med Sold $195,000 $192,945 1.07%
Sold/List % 96.06% 95.66% 0.42%
Avg SQFT 2207 2190 0.78%
Med SQFT 2017 1985 1.61%
Avg $ SQFT $116.04 $112.17 3.45%
Avg DOM 68 76 -10.53%
Median DOM 41 49 -16.33%
# Expired 3424 3527 -2.92%
# Withdrawn 6124 5531 10.72%
Not Sold 9548 9058 5.41%
Not Sold % 43.28% 42.46% 1.92%

 

In the year to date stats we see a bit of smoothing of the tax credit effect as this chart reflects both the surge and the dip in the 2010 market that the tax credit incentive caused. From a YTD standpoint, average sold price is up 4% and the median is up 1%. Again, this doesn’t mean that your individual home value is in line with the above figures, but it does give us a sense of the overall market, artificial market forces notwithstanding.

Note also on the YTD stats that the “Not Solds” are more in line with last year’s. If the Expired/Withdrawn listings remain above 50% for the remained of 2010, we’ll see this YTD number increase though.

Next we have the Sales by Price Range Chart. I’ve added two additional columns so we can verify the assumption that the increase in average/median home sale prices is a result of fewer lower priced home sales. Let’s have a look and see if that hold true.

Price Range #Sold DOM Active Mo. Inv % Sold 2010 % Sold 2009
$149,999 or under 399 62 2,483 5.88 28.79% 27.28%
$150,000 – $199,999 277 75 2,259 7.11 19.99% 25.95%
$200,000 – $249,999 185 64 1,374 6.30 13.35% 13.94%
$250,000 – $299,999 127 68 1,089 6.98 9.16% 10.74%
$300,000 – $349,999 107 83 676 5.44 7.72% 5.79%
$350,000 – $399,999 72 73 662 7.38 5.19% 5.31%
$400,000 – $449,999 45 76 377 6.32 3.25% 2.66%
$450,000 – $499,999 37 64 391 9.38 2.67% 1.93%
$500,000 – $549,999 26 80 197 7.30 1.88% 1.75%
$550,000 – $599,999 22 63 262 10.08 1.59% 0.72%
$600,000 – $699,999 28 120 277 7.91 2.02% 1.45%
$700,000 – $799,999 23 132 187 7.48 1.66% 0.66%
$800,000 – $899,999 7 98 164 16.40 0.51% 0.78%
$900,000 – $999,999 9 39 129 12.90 0.65% 0.30%
$1,000,000 or over 22 135 588 20.51 1.59% 0.72%


I’m not that good at math, but what I see in the two right hand columns above tells me that the spike in average/median sales prices are NOT a result of low price range buyers going away, but rather the return of higher price range buyers. I knew that the increase in higher priced sales was a factor, but it seems to me now to be the main factor.

Starting at the $300K row, ever price range is showing an increase in the number of sales as a percentage of total sales over Aug 2009. At the $1M and above range, the percentage has increased from 0.72% a year ago to 1.59% this year. When the percentage of $1M+ priced homes more than doubles, and it’s being measured against a smaller smaple size (20% drop in number of homes sold), the higher sold prices have a dramatic effect on the overall averages.

True, the percentage of total sales below $300K dropped from 78% in 2009 to 71% in 2010. But the real movement in the averages is caused by the increase in higher value homes, $300K+, from 22% in 2009 to 29% in 2010.

Why the surge in upper end activity? Two reasons, I think. First, the buyers able to qualify at higher sales prices might be more motivated by and able to take advantage of record low interest rates. Secondly, the higher end homes are exceptionally valued compared to 2007 prices, having fallen in many cases $100K or more, and thus, for many buyers in that range, this seems like a good time to go ahead and move up. The discount given on the $400K home to overcome the sluggish market is much less than the discount received on the more expensive home. Couple that with the obtaining of a much lower interest rate, and a well qualified move-up buyer will conclude that it makes a lot of sense financially to do something new.

One final note on the chart above, this chart is really an “inventory level” chart. It tells us whether the market has excess inventory based on current absorption rates. A balanced market has about 6 or 7 month’s inventory, more for the higher price ranges. At present, the Austin market seems to have solid housing inventory levels, neither too much or too little. Of course, tell that to the 56% of sellers who gave up, but those listings have already been removed from the equation. As owners continue to give up, and new listings slow during fall/winter, inventory will stay in balance unless sales pick up.

A couple of additional graphs to wrap things up. First the Monthly sales graph showing the fluctuations in sales values over the past 30 months, and the pattern of sold prices.

Austin Real Estate Sales graph showing last 30 months thru Aug 2010

Not much to say about this. There’s the spike in values the last couple of months. We’ll see if that holds into the next few months as the market tries to rebalance and return to “normal”.

Finally, the Pending Listings graph. Note the green line representing 2010. We can assume based on the low number of listings that went Pending in August, that the number sold for Sept is going to remain very low compared to recent historic norms. What will be more interesting to see in coming months is whether the trajectory of the green line joins up with the historic lines at the end of the year, possibly marking the return to normal sales volumes to start Jan 2011. If not, if the green line remains well below the others, we’re going to be seeing the lowest sales volume in Austin in more than a decade.

As usual, comments and questions are welcome.

Graph of Austin Pending Sales Report Aug 2010

Posted by Steve
6 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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Woody - 6 years ago

Steve:

I genuinely enjoy your blog but forgive me for saying that you exhibit the most common inconsistency amongst Austin realtors:

1) Prices are at all time highs and still rising (yes, I know you qualified that a little).
2) Why are these crazy buyers sitting on the fence in the face of such wonderful deals? (per your last blog about buyers needing a therapist instead of a realtor)

Whenever I hear this, I say wait a minute, how can there be any deals in a market that is hitting new highs? The only answer, and it is not a very good one, is low interest rates. Those can only help a buyer who is absolutely certain they will be in their home a very long time (7 years minimum) and won’t suffer any financial distress during that period which would force them to sell. That is a very short list of people, particularly today. Steve, as a long term investor/landlord, you are a very different breed from the average buyer.

Another crazy thing I keep hearing is: wait until interest rates and home prices rise, then buyers will really be kicking themselves! That is a load of realtor hooey I’m afraid. If interest rates begin a sustained rise, there may be a short spike in buyer interest but then economic law will kick in (higher rates = average buyer qualifies for lower loan amount) and home prices will go down, probably a lot.

The other reasons buyers say they are waiting are kind of obvious, but never mentioned in the Austin realtor community:

1) Inventories are extremely high in Austin. Not just the ones listed. I’m talking about the number of failed or withdrawn listings (those will come back next year and add to the growing inventory), the number of foreclosed but not listed homes sitting in the bank’s inventory, and the huge number of distressed loans – that in normal times would have been foreclosed upon but the bank can’t handle at the moment because their existing REOs aren’t selling. Yes those are very real and not just a California thing or some kind of media conspiracy. I have analyzed a number of mortgage backed securities recently so I know a little about this. There are a lot of distressed home owners in Austin. You don’t hear much about them, but the average buyer I know seems to sense it.
2) We are in a government subsidized market. Freddie and Fannie are responsible for about 96-97% of home loans today. The private mortgage market is on life support – to the extent that one even exists, rates are 6-8% with brutal qualifying standards. This country doesn’t have a never ending line of credit to support such behavior indefinitely. Nobody knows when it will end, but it will end, and it will bring much higher interest rates and push home prices down.

Bottom line, I don’t think Austin realtors are doing themselves any favors by saying we are in a healthy market. We are not. All this rhetoric does is to give sellers false hope and so they list their home prices too high and dig their heels in. It will only make things worse for sellers when the inventories pile up and a race to the bottom ensues. At best, if the government can prop things up far longer and inflate more than I believe they can, then we are most likely facing the longest stretch of flat prices in recorded history. It can only be so after a run-up like we’ve experienced in the last 10-15 years. You don’t get a party without a hangover, it’s that simple. We keep drinking bloody mary’s to keep the pain away but it has to come. We are not there yet.

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Rick - 6 years ago

So Woody, by your logic home prices would never rise in the long term. Half the time they’d be driven up by low interest rates, and then come crashing as rates go up? You think that’s the only factor here?

How about the fact that Austin has a growing population and increasing number of jobs coming here. The stories about it are all over the internet. That’s why prices went up here to begin with–California and other out of state buyers moved here. And they’ll move up eventually for the same reason, more people coming here.

Second, you have no clue just how many foreclosed homes are sitting there waiting to be sold, and no one does except the people working at the banks. Please don’t take sensational stories you read online and present it as some personal research you’ve done. I’m a realtor myself and out of curiosity I’ve tried to see how many bank owned homes there are in popular parts of Austin, like SW or North / Northwest, or West Lake. There aren’t that many. I noticed the most foreclosures in Austin in the east where people with low, unverifiable incomes took out subprime loans to buy starter homes. That’s where most HUD foreclosures are as well.

The withdrawn / expired listings are probably people who don’t really need to sell but try their luck anyway and overprice. Steve, I think it would be interesting to make a chart or table to see how many unsuccessful listings had price drops before they sold, what percentage are vacant, and what the ratio is of listing price at time of listing cancellation to the original listing price. This will indicate how motivated they are to really sell.

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Steve - 6 years ago

Hi Woody,

Thanks for your comments.
> … you exhibit the most common inconsistency amongst Austin realtors:

I don’t see any inconsistencies in what I offer. I simply report the actual stats and offer my take on things. Differing opinions are welcome. I readily admit that the market is haywire and hard to predict. I do think buyers exhibit an over-dramatic amount of hand wringing and worry, and I explain why that happens, based on my observations.

If I’m being “inconsistent”, I’m not sure I understand where you’re seeing it.
Steve

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Woody - 6 years ago

Steve:

Fair enough, and thanks for your response. I really do enjoy your blog.

Rick:

Austin’s job growth is thin at best. If you look closely at the numbers, 100% of the recent job increases can be accounted for by the Leisure sector. Those jobs tend to be low paying, unstable, and without healthcare benefits. Not exactly the kind that lead to household formation and home buyers. The other area of growth has been Government. If you saw the front page article in the Statesman today about 9800 state government jobs disappearing because of our $21 billion budget deficit, then you know that sector is going to be shrinking instead of growing pretty soon. Some of them will have nice pensions but others will join the ranks of stressed homeowners.

The sectors where we really need to see job growth to support this housing market are not doing well. I am not making this up. It there for all to see, on several government websites and at the Chamber of Commerce.

Also, our property taxes are likely going up. $21 billion is roughly $4000 per household in Texas, every year, to put it into perspective. 9800 government jobs won’t nearly close that gap so we’re going to have to raise tax revenues. Since we don’t have an income tax and it would be suicidal to our future growth to implement one now (“no income tax” is the main draw here), where do you think the money will come from? My guess is sales & sin taxes, and property. This is a very real problem and not some figment of my imagination. What will that do to home prices?

As to making things up from articles on the internet, I don’t invest that way. I look at all the facts available to me, good and bad. You’re right that nobody knows the full extent of the loan problem in Austin but it is not trivial. Don’t delude yourself about that.

Anyway, you can see it however you like. I just don’t think we are doing this market any favors by pretending it’s all good. Sellers and buyers will dig their heels in, transactions will be low and inventories will keep rising until they are unstable. Why do this?

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Rick - 6 years ago

The problem with that mentality is it’s never a good time to buy. When the market is down and unstable, they’re too afraid to make a move. When it’s going up, they think it’s too late to get in and refuse to overpay.

Alternative is to rent and that’s what these people do, except when the population increases, and it will, rents will go up as well. Job creation may be tenuous but it’s there and that’s more than most cities can claim. It can only get better.

Right now probably is as low of a bottom as it’ll be. Woody, you may not notice it but any realtor who’s worked with enough habitual lowballers will tell you it’s a frustrating process in Austin. Most of the time they don’t get any concessions of the sellers and end up missing out. You can do what you want but if you plan to buy, especially a single-family home in affordable popular suburbs, might as well do it now. It won’t get cheaper and there won’t be any more significant volume of foreclosures.

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Steve - 6 years ago

> you may not notice it but any realtor who’s worked with enough habitual lowballers will tell you it’s a frustrating process in Austin.

Rick,
This is exactly what we see a lot of. Big gap between the discount off list that buyers want and what sellers, who already feel too low, are willing to give.

Like I said in the previous blog article about buyer emotions, everybody seemed happy in a seller’s market.

Steve

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Woody - 6 years ago

Rick, at least give me some facts to consider. I can’t invest based on the rhetoric and blind hope that your industry keeps doling out. It may work to get an emotional buyer off the fence, but most buyers today either understand the world we are in or at least sense that something is wrong. There are simply way more sellers than buyers at current prices in Austin. I’m sure you see this every day in your work.

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Alison Shuman Masis - Austin Real Estate Appraisal - 6 years ago

Fantastic detail on the stats for August for Austin. In particular I think it was important to note the number of expireds or withdrawn listings being higher than what we would expect to see in a seller’s market.

I am glad to see you break out the numbers at each price point because it gives a much better picture of the market than when they’re just all averaged together, which doesn’t shows how the sales at the higher end can impact the numbers.

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Sam - 6 years ago

From what I am seeing, we are back to 2006 prices at almost all price ranges. Unless something pretty dramatic happens in a negative sense I don’t think we will drop more except at the very high end.

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Ray - 6 years ago

Tow comments:

1. To Woody… The impression I get from reading your comment is that you would very much like to find better buying opportunities than you are currently finding in Austin… you wrote “I have analyzed a number of mortgage backed securities recently so I know a little about this.” This leaves me with a picture of a market which is not at all weak as despite going to the lengths you have you are apparently having a hard time finding fire sale bargains in Austin. Maybe better look in a bubble coastal market?

2. General comment: Having sold properties FSBO including recently and studied that area extensively I do know this is an increasingly active sector. Numerous independent studies along with my own experience reveal that most closed sales via FSBO fetch prices higher than what realtors would list properties for (folks, it really isn’t hard or complex to sell your own house just find a good closing agent). In conclusion, when reviewing data presented by realtors be aware that a significant number of closed deals are not represented via the MLS or realtor databases. I appreciate the forum for letting me post this.

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Woody - 6 years ago

Ray, I am not that interested in what happened in the past or what sellers hope their homes are worth. I am looking at the future. Inventories are building, pendings are dropping, withdrawals are increasing, the economy is poor, taxes are going up.

The higher end is looking particularly bleak. Even the good areas are very unbalanced right now. In this economy, the only way we are going to find buyers for all those homes is through much lower prices. There was a bubble in the high end here even though everyone is too proud to admit it. We are not much different than California or Nevada in that regard, just a couple of years behind the trend.

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Steve - 6 years ago

Hi Woody,

Austin is a far cry from the bubble markets we all think of (Florida, California, Arizona, Nevada). See the tiny little blip on the graph at the top of the article? That’s our “bubble”. Compare that to the same chart for the real bubble areas. Ours is but a pimple in comparison.

Steve

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Woody - 6 years ago

As an entire market I would agree. Steve. It’s a lot easier to build here to meet new demand than in California and Austin’s lower end never rose too far above affordability levels. But I disagree that there was no bubble in Austin’s mid to high end, particularly the luxury new home sector. Look at all those largely empty $2 to 4 million listings around Marly Way and in Seven Oaks, that are surrounded by even more empty lots. Those look exactly like the California, Nevada and Arizona suburbs did a few years ago, with prices to match and then some. But those states are much further along in recognizing their problems and prices have corrected a lot (although that correction appears to be ongoing still). We have a long way to go there I’m afraid.

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Steve - 6 years ago

Hi Woody,

The upper price ranges, I don’t disagree with you. Lakeway, Eanes, Bee Cave areas were over built by over-optimistic spec builders and developers. But we’re still talking relatively small numbers compared to bubble areas. Percentage of price drops were fairly steep in some local Austin areas, but our blip didn’t cause the economic disruption that real bubble areas experienced.

Steve

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Woody - 6 years ago

I understand Steve, just pointing out an obvious example. You can add a few downtown condo buildings to that group. The overall problem though is much more widespread. I would guess that you know an expert or two in the local foreclosure market – ask them for an update on foreclosure notices issued to Austin homes above $250,000 assessed value, and how much higher is that number from a year ago. You’ll see that it’s not just a HUD or luxury home problem.

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Nick - 6 years ago

There’s totally a bubble in the mid-range here. Explain the sense in this: a currently listed house in Hyde Park at 300K sold for $150k in 2004. In even “normal” circumstances, housing appreciates at best 4% a year. But we had a bubble burst and now we have 7.5% unemployment. I might be moved if that same house was priced at $200K given Austin’s relative affluence, but come on! Even if they sunk $50k into the damn thing, it boggles the mind. And the problem is, they’re all like this.

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Steve - 6 years ago

Hi Nick,

If you email the address of the house in question (don’t post it here) I’ll tell you why it doubled in value from ’04 to ’10. Doesn’t seem far fetched to me but I’ll bet it was rehabbed or improved in some way that accounts for a portion of the the appreciation.

Steve

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Woody - 6 years ago

I agree Nick – it’s not any one house. That’s the problem.

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