Have you ever woken up on a Friday morning with no intention of moving and by 5PM that day have submitted an offer on a home? That’s what Sylvia and I recently did, and it’s not the first time.
We really thought our current place in Westlake would be our “forever” retirement home. We’ve slowly improved and updated it, but still had a major kitchen and master bath redo and expansion in our future. The location is, in my opinion, the best in Austin for both our current working/family and future empty-nester lifestyles. 8 minutes to Town Lake, Zilker or Downtown, easy access to Mopac or 360, walking distance Trianon Coffee, FroYoyo, a Thundercloud Subs and more. Even a Cap Metro bus stop 6 minutes walk from our front door goes through Zilker Park and into downtown.
Our daughter can walk to Westlake High, and we’re within even closer proximity to the elementary and middle schools, which is what draws so many families and gives the Woodhaven neighborhood such a good mix of great people. It’s really perfect. A geographically “central” location without the quirky annoyances and absurdities of the 78704 areas.
But …Prices in the ‘hood have gone through the roof. It’s not going to be affordable or practical as a retirement home. If we make the contemplated improvements, our “retirement” home – a basic 1970s rancher – would be transformed and more highly valued and thus produce an annual property tax bill bigger than I want to swallow for the next 30 years. Sure, we’d be building equity, but still, property taxes seem to have gone too high already.
When you read a news article about Austin real estate that reports average and median home prices, the values quoted are often those from total Austin MLS sales. Those sales figures are compiled from the entire Austin MLS service area, including suburbs, nearby cities as well as some far flung areas. The “Austin MLS” might more accurately be referred to as a “Central Texas MLS”.
Therefore, you might read in one of the “Best of” articles about Austin, that “The Average Sold price for single family homes in the Austin Metro area for 2013 is $314,300 and the Median Sold price is $235,000”.
Those values are represented in the green bars in the graph above. To those thinking of moving to Austin, a median price of $235K sounds pretty affordable. It means half of all houses in “Austin” sell for less than $235K. A buyer with good credit earning the Austin median family income of $65K annually, can qualify for a mortgage payment of $1,950 per month at 5%, or a $266K home. Austin seems like a sweet deal and a great place to live to an outsider reading about it.
Below are the Austin housing market stats for October 2011 and year to date.
|Austin Sales Market Update – October 2011|
|Homes only (condos, duplexes, etc. not included) compiled from Austin MLS data|
|Sep 2011||Oct 2011||Oct 2010||Yr % Change|
|Avg $ SQFT||$113.57||$115.78||$116.04||-0.23%|
|Not Sold %||44.39%||45.79%||58.29%||-21.45%|
As shown above, average and median sold prices are down 2.3% and 3.6% for Oct 2011 compared to Oct 2010. The number of homes sold increased and the number of failed sales efforts (Withdrawn or Expired) decreased. The sold to list price ratio increased a bit and the Days on Market improved.
Nothing really suprising or new here. The Austin real etstae market is still moving along somewhat, treading water for the most part. See the Year to Date and 44 month graphs below.
The Austin real estate market finished 2010 with increased overall sales prices. The market is roughly a bit higher than the peak 2007 values. See the graph below for an illustration of Austin home sales values from 1999 through 2010.
The graph can be deceiving though. It simply represents the cumulative data from all MLS sales. Certainly, most homes in Austin are at or still below the 2007 values. Some are significantly below the 2007 values, especially in the high end at $500K and above. For the entire year of 2010, 48% of all MLS listings departed the MLS as a failed sales effort (expired or withdrawn). Anytime half the listings are not finding buyers, it’s a tough market for sellers overall.
On the flip side, 2010 was not exactly a “buyer’s market” in Austin. There was little to no “low hanging fruit” to be plucked from the market. Sellers were, for the most part, not crying Uncle and were not dropping prices drastically. Yes, we have anecdotal examples of some good deals that were had by some buyers, but most buyers were simply frustrated at the difference between the perceived “buyer’s market” and the actual reality of trying to find a great home at a great price.
The only winners in 2010 were the sellers who were fortunate enough to sell quickly at an acceptable price, and the buyers who allowed for themselves enough flexibility and patience to eventually find the right combination of motivated seller and acceptable home. It was not a good year for picky buyers with narrow parameters, as they kept running into stubborn sellers unwilling to negotiate to the degree buyers thought warranted by market conditions.
Year 2011 will be more of the same in the Austin real estate market, but volume will pick up and I believe sellers will start enjoying a slightly better market. 2012 is the year that things will really bust loose again, in my opinion, but we’ll see. 2011 may have a surprise upswing in store if job growth continues to pick up in Austin. More market stats below.
One of our buyers closed last month with a 3.87% interest rate. We saw many sub-4% loans the past several months, though rates have now climbed back above 4.6%.
Let’s imagine hypothetical first time buyers with a toddler who closed this year with an interest rate below 4%. Fast forward 5 years to 2015 and imagine they now have a 6 year old and a 3 year old. The career is going well, income is up, savings account is healthy, cars and student loans are paid off, the economy is good and the house is starting to feel a bit small.
This is the profile of a typical move-up buyer in Austin. Move-up buyers play an important role in the real estate market by providing resale housing stock for first timers to buy and, simultaneously, providing demand for the mid and upper range homes in Austin. We need this “move-up churn”. It’s good for the real estate market and Austin’s economy.
But now let’s also imagine that in 5 years from now that the best interest rate available on a new mortgage is an unfathomable 6.75%. Don’t think it will go that “high”? That’s not ever a “high” interest rate! And yes, it will get that high again – eventually. How hard will it be for a move-up buyer to let go of that 3.75% loan on the current home? Very hard, I’m going to bet.
I think the psychological urge to hold onto that loan is going to be very strong. And I think it will factor into the move-up decision more than we may currently realize.
Sales volume continues to drop year over year in Austin while prices continue to rise. Let’s have a look at the chart below.
|Austin Real Estate Sales Monthly Update – Oct 2010|
|Homes only (condos, duplexes, etc. not included) compiled from Austin MLS data|
|Sep 2010||Oct 2010||Oct 2009||Yr % Change|
|Avg $ SQFT||$113.12||$116.53||$114.18||2.05%|
|Not Sold %||58.63%||59.98%||42.14%||42.34%|
The number of homes sold dropped 36% from Oct a year ago, but remember, a year ago in Oct we all thought the government tax credit for new buyers was going to end in Nov 2009, so we had artificially increased demand for the fall/winter selling season. Nonetheless, it’s a 36% drop, which is huge. We’re going to see similar year over year drops in the March-Jun stats in 2011 too. In fact, it will be more than two years from now before I can run stats that don’t include the caveat “remember a year ago the government was meddling in the real estate market, or we were in the tax credit hangover, and thus …”
Let’s talk about the color coded right column. This is the first time ever that the spreadsheet I pasted into a blog article maintained the color coding that I have programmed in. Essentially, green indicates a metric that moved in a positive direction, and red is a metric moving in the negative direction. We could have a long debate about whether and why higher prices are “good”, because for buyers maybe lower prices are better. But for the economy in general, jobs and growth, the real estate market needs to be appreciating and growing, so for the purposes of my stats, “good” means it’s good for the owners and sellers of real estate because values are rising.
Don’t give too much credence to the high upward swings in the green rows. Those are distortions. The typical 4 bedroom 2,000 sqft 10 year old home in Austin is not worth 11% more than it was a year ago. We’re simply seeing more expensive properties sell while last year it was the lower priced homes driving the market because of the tax credit.
Let’s have a look at the year to date stats.