Austin Real Estate Market Update Aug 2018

The Austin real estate market has begun to level off and slow down a bit, but that fact is not yet fully reflected in the market statistics, other than Days on Market creeping up. Nevertheless, Median Sold price is up to $322K, an increase of 8% over August 2017.

I see more price drops coming across the listing update feeds I follow as well, and I also see more “back on market” listings.  This softening of the Austin real estate market may more fully appear in the September through December stats as I expect Days on Market to keep rising and price increases to slow.

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How to Save for a Home Purchase In Austin TX

Austin median home values 2008-July 2018

Historically in Texas, homes have appreciated at 4.5% annually (according to Texas A&M Real Estate Center). This is the expected appreciation we use when making real estate investment assumptions as well. For example, a $200,000 home would increase in value to $209,000 if appreciation was 4.5% for that year.

If you wanted to save for 1 year a 5% downpayment for a $200,000 home in Austin, you would save 5% of the future value of the home, not the current value. You would save for a $209K purchase, $10,450, not $10,000, if saving just for 1 year.

Starting in about 2012, homes in Austin have appreciated at a much greater rate, closer to 8% annually. This makes it harder to save for a down payment, like chasing a vanishing horizon. Also, there are no more $200,000 homes. The median value of a home in Austin is now about $400,000 if you want to actually be in Austin itself, versus the greater Austin outskirts areas.

So, today, if you want to save for a $400K median value Austin home, and you want to buy it in 3 years with a 5% downpayment, for example, and 8% annual appreciation rates continue, you will need to assume the median value Austin home will cost $503,885 in 3 year. That really sucks doesn’t it? If you are trying to live cheap and save for a downpayment? Waiting 3 years will cost you another $100K in purchase price.

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The Growing Acceptance of Real Estate Value Inaccuracy

What is my Austin Home Worth

What is your Austin home worth, right now? When considering a sale, it’s generally worth “market value”, defined loosely as the highest price a buyer would pay, and that a seller will accept in an open, competitive market. This assumes neither buyer nor seller are under any undue stress or duress external to the transaction itself.

Many homeowners want to know their home value even when not considering a sale. Such as when protesting assessed property value at Travis County. Or maybe you are just curious, or you want to update your Net Worth spreadsheet with a current value.

If you don’t want the “market” to determine your home value, because you don’t want to sell, there now exists a plethora of “Automated Valuation Model” (AVM) tools that will tell you the supposed value of your home online based on mathematical algorithms and data. The most well know is perhaps the Zestimate on Zillow.

Let’s take a look at these AVM tools and see how accurate they are. I’ll use a home I own in SW Austin as the subject property, as I am preparing to sell it and in the process of determining the best list price.

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Your Austin Real Estate Investment and Wealth Building

Value rising

I receive regular inquiries from prospective investors about investing in real estate in Austin. At the outset I try to determine the objective of the investor by asking some questions. Usually it will be an open ended question like “Why do you want to own investment property in Austin TX?“.

Then I just listen.

It’s amazing how many prospective Austin real estate investors cannot articulate a coherent reason for their interest in investing in real estate. The responses vary from wholly uninformed dream seekers, kicking tires and “researching” on a whim (which is fine!), to incredibly informed wealth builders who really do know their numbers and what they hope to accomplish with a real estate investment over time.

It’s the latter we seek to help, though I like to think I’m always helpful and friendly to the ones with unreasonable hopes and expectations by discussing it a bit, or directing them to our Investing in Austin Real Estate page.

The most striking disagreement I have when talking to prospective investors comes about with the ones focused solely on “cash flow”. They want to buy a “property that cash flows at least a couple of hundred a month“.

I don’t personally care about cash flow, so I’m unsympathetic to this requirement. I’m not tuned in to it, because it’s not how I think about wealth building. Cash Flow is meaningless to me. Many are confused when I say this.

I just think it’s the wrong thing to focus on because that’s not what ultimately determines the success or failure of a real estate “buy and hold” investment, over time. I’ll explain further below with an actual real life example of a property I actually own.

What I do want from my real estate investment is that it produce a slow, steady, reliable increase in Net Worth over time. That’s it. I’m patient, as this is something that happens over decades, not a quick flip. I am a “Buy and Hold” real estate investor, and that’s who I specialize in helping as well. I help people seeking wealth accumulation, not income.

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The Austin MLS Now Has a ‘Coming Soon’ Status

Coming Soon listings shown in pink

Update August 2018: The Austin Board of Realtors has Discontinued use of the Coming Soon Status. It caused more trouble that it was worth.

Austin Realtors can now enter For Sale listings into the Austin Central Texas MLS before the listing is ready for showing. For up to 14 days prior to the “Active” date. And, therefore, buyer agents and buyers can get a “heads up” on listings that are (supposedly) about to come onto the market live in the MLS.

What Problem Does This Solve?
During Austin’s red hot seller’s market of the past 5 years, it had become increasingly frustrating for Buyer Agents and Buyers trying to operate in a low inventory market. We heard tales of buyers literally driving zig zag through neighborhoods looking for “Coming Soon” signs. Every new listing that popped up live in MLS became a Red Alert fire drill, as I wrote about previously, saying Every Offer is an Emergency Now, pointing out that as a buyer, you have been largely “competing” for homes for sale in Austin, not buying them.

The “Coming Soon” in MLS idea is to move that physical “Coming Soon” sign from the front yard into the digital space where every Realtor can see it from a screen, instead of driving around. This is no doubt a more organized way than yard signs, or the myriad Realtor Facebook groups where agents announce an upcoming listing, but which has no search or alert capabilities such as the MLS.

Does it Actually Solve the Problem?
I don’t know, you tell me. You’re the Buyer. Instead of a new listing in the MLS that you and your agent can immediately go see and write an offer on, it’s a “Coming Soon”. It may NOT be showable, and seller may NOT be accepting offers just yet. There may not be photos or any actual detail. The required fields to enter a Coming Soon into the MLS are very few, only about 10 or so data fields. But you will have a “heads up” that it is “coming soon”. 

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Is Live Answer Worth the Investment for Businesses?

Do missed calls cost money?

As the owner of a business where 100% live answer is not possible or cost effective, I do receive my fair share of angry voicemails from people wanting to talk to a human right now. It’s kind of interesting actually. I received this one just recently.

Many would just delete it, as I usually do with rude voicemail tirades. We receive all manner of unbelievably incoherent, garbled and plain crazy voice messages from people.

But as a blunt-spoken no-BS type of person myself, I appreciated this voicemail. I played it proudly for my wife. And I played it for my assistant, “listen, … this is great!” And now I’m blogging about it.

The caller scolds me with the blunt, to the point assertion, “if no one is available you get no sales“.

Listen to it again yourself. It’s perfect! It’s the kind of communication I respect. Clear, concise, to the point. No fluff. I like people who communicate like this.

So, is he right? Am I losing sales?

Of course I am. I just don’t know how many, or if setting up a 24/7 live answer would capture enough lost sales to offset the cost of outsourcing to a live answer call center. To dig into the question a bit more, I’ll go into my call logs for my phone system and dig up some stats, then discuss the pros and cons of live answering services.

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