Are you an Austin Buyer or a Contestant?
If you’ve tried to buy a house in Austin lately, in an area of high demand and low inventory, such as Southwest Austin, you may have run into some competition. In fact, you most likely have. As of this writing, there are 43 Active listings and 84 Pending listings in SW Austin. I won’t go into a breakdown of what that means statistically, but let’s just call it a Mega-Seller’s-Market and leave it at that.
Other buyers want the same house you want, often the first day it hits the market. A new listing in South Austin 78745 that I showed a buyer a few days ago had a parade of buyers waiting in line when I got there, and more when we left. An offer I wrote today for a SW Austin home that came on the market 3 days ago has multiple offers and we’ll see how ours did tonight or tomorrow. It’s really, really crazy out there.
This type of market changes the way you have to approach your home buying effort in Austin. You are no longer “shopping” for a home, you are competing for a home. You are not a home buyer, you are a contestant. You are not trying to negotiate an acceptable offer with a seller, you are trying to beat your opponent(s), the other buyers, by making a better offer. Suit up, game on. And you’re not able to know what it will take to make your offer “better”, you can mostly only guess, then decide how high you want to jump.
This is disconcerting and frustrating for those unaccustomed to the stress. It can tie you in knots emotionally. It’s too much for some buyers, and they simply bow out of multiple offer situations, not wanting to compete at all. Others get it right away, put on a game face, and bring their A Game to the first offer, crushing the competition and “winning” a home on the first try. Still others, go through several failed offer attempts before they can muster up the fortitude and grit to throw down a wining offer. If you’re one who keeps losing, read How to Win Multiple Offers in Austin for some tips that will help you and your agent increase your chances of coming out on top.
Are we in a Bubble?
I’m not ready to call this a “bubble”, but this marks about 12 months now of very strong demand and shrinking inventory in many areas of Austin. Many homes have been driven up 3% to 5% or more above list price. That said, appraisals are putting a damper on some of these, as the home will sometimes not appraise for the sales price. When that happens, buyer and seller will usually renegotiate.
There simply are not enough homes coming on the market to supply all interested buyers, and that’s what’s causing the flurry. This is not true in all areas of Austin, but it is in most ares of Austin where the location and/or schools are deemed “good”. NW Austin is strong. Central, SW, East and South Austin too. And up into Cedar Park, some of the new home builders are experiencing the strongest foot traffic and sales since 2006. Many have waiting lists for new sections not yet released.
So where does that leave you as a buyer? Unfortunately, depending on your specific circumstance and personality, it leaves you needing to step up your game. You may not want to be a “housing contestant”, but the sooner you accept that reality, the more ready you’ll be to “win”.
And you better have a good agent. Sorry if that sounds like “Realtor Hype”, but I’m astonished at the number of Austin Realtors who can’t even write a mistake-free offer, much less offer top shelf strategy advice to their buyers. Don’t hook up with a Dummy Realtor. Find a veteran. A Black Belt Realtor.
Get your financial and loan stuff in order, create the most flexibility possible with regard to your moving time window. Have a “Plan B”. Be willing to offer the seller a lease-back, which is perhaps the second most powerful advantage (next to price) that you can give your offer. Get ready to possibly or probably pay over list price.
It’ll be ok, paying “too much”. We have plenty of running room ahead of us with this upswing in the market, and your low interest rate itself is worth more to you than a lower price would be. Do the math compared to being back at 6 or 7 percent interest rates. Put things into perspective. Decide what it will mean to you to NOT have a new house, and decide if you’re willing to accept defeat. If not, get out there and compete to win.
But is there a Limit?
Yes. All that said, I’m still advising buyers to walk away from some of these deals. Not every multiple offer situation is worth your best effort. Don’t get sucked into the hysteria on every deal. Be prudent. This is a subjective decision you’ll need to make, specify to each home. But some of the older homes built pre-1990s have a lot of embedded condition issue costs. It may not be worth paying over list AND absorbing the near-term expenses of curing what we call “deferred maintenance”. You have to factor in whether the roof, HVAC, electrical, plumbing and foundation represent possible “big ticket” expenses waiting to happen, and add that amount to what you’re paying. That’s when you need an experienced agent who can size up a house and spec out a range of costs for you and help you understand the true costs of a particular home. If the numbers don’t make sense, let someone else win that one.
Good luck! Feel free to comment with your own recent Austin home buying or selling experience.