Austin Real Estate Market – 2010 Breakdown by MLS Area

Real Estate Market Stats

Below is a chart breaking down the 2010/2009 sales comparisons by MLS Area for the Austin real estate market. This time I’m adding a couple of new things. First, there is color coding on each of the summary rows for each area. A green shade indicates “improvement” in the measured metric. I put “improved” in quotes because it’s debatable what that means, and for whom, so perhaps a better word to use would simply be “increase” toward seller’s market. Note that a decrease in Days on Market is an “improvement”, however, as it means homes are selling faster, so a negative number on DOM is coded green and vice-versa, whereas the other negative numbers are red. Confusing enough? I hope not.

Next, I added a new column called SP/OLP which is the Sold Price divided by the Original List Price. I think this is a useful metric to observe as it informs us of the gap between the original list price a seller was hoping to obtain and the ultimate sold price achieved. This is more useful to know than the more commonly reported metric of SP/LP (Sold Price/List Price) because it doesn’t disguise the price drops that occurred before the home eventually sold.

In other words, a home that started at a list price of $300K, was eventually dropped to $270K, and then sold for the $270K list price, would produce a SP/LP ratio of 100%, but a SP/OLP of 90%. The 90% is a more accurate measure of market strength or weakness in a given area. You’ll see below that some areas are right at 95% (which is pretty good) and some are below 90%, which is a tougher market requiring bigger price drops.

OK then, let’s take a quick look at the new format using the cumulative sold data for all of 2010 compared to 2009.

All MLS # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days SP/OLP
2010 17,709 $255,049 $195,000 2,214 $115.20 73 48 93.19
2009 18,636 $245,765 $190,000 2,177 $112.89 75 47 95.2
Change -4.97% 3.78% 2.63% 1.70% 2.04% -2.67% 2.13% -2.11%


So, with the color coding, this allows a “quick glance” gleaning of which areas saw increases/decrease in the measered metrics across the board.  We can see above, looking at the entire Austin MLS market as a whole, that the average sold price increased 3.78%, median sold also increased, by 2.63%, Sold Price Per Square Foot increase 2.04%, and homes sold faster when looking at Avg Days on Market. But we also see that 5% fewer homes sold (lower demand) and that the median DOM and the SP/OLP ratios worsened. This “mixed” market is in fact what most areas produce.

One last aside, if an MLS Area is mostly red all the way across, such as Area 10S, does that mean buyers should avoid that area? Absolutely not. This is a look in the rear view mirror and doesn’t necessarily predict the future or indicate a trend. Same with areas that did well in 2010. This is just a snap shop of what happened in the given year 2010 compared to the year prior. If you own a home in an area that had a dog year, your particular neighborhood or size/price of home may have perfromed differently, and that won’t be reflected in this type of macro analysis of area-wide stats.

OK, the entire Austin MLS is broken down by MLS Area in the chart below. As usual, questions, comments, observations are welcome.

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Austin Real Estate Market – Year 2010 Summary and 2011 Predictions

Austin Home sale statistcs

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.

Austin Real Estate Sales Market Graph

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.

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Will recent low interest rates stunt future Austin move-up activity?

low interest rates

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.

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The Joys of Downsizing to a Smaller, Better Located Austin Home

Downsizing

The Crossland Family has Super-Down-Sized from our nice, big, 2-year old custom home in Oak Hill to a crappy old 1970s house in Westlake. Now Me, Sylvia and our two teenagers are “crammed in” to an 1859 sqft rancher compared to the former 3316 sqft home, and 3701 sqft in the home prior to that.

This new house has a bad sewer line (and slow flushing commodes), aluminum wiring, former slab repairs, cracked sidewalk leading to the front door, termites, small secondary bedrooms, a giant dead tree in back, leaking sprinkler system, old worn out carpet (layered on top, believe it or not, of an older worn out carpet underneath), and a punch list of needed repairs and fix-up things at least 20 items long and growing daily. I’ve had a parade of vendors in and out of the house since we moved in two weeks ago and more on the way. This place was a rental home for 20+ years. I couldn’t move a renter into a house like this without hearing an earful of complaints, but we did it ourselves. And we couldn’t be happier with our new home. We absolutely love it.

Why are we so elated about our move into this dump? Location, first and foremost. More on that in a minute. But, also, we’ve grown weary of maintaining nice big houses on acreage and the accompanying expenses of that lifestyle. I mowed my own lawn 2 days ago for the first time since 1999 after me and my new neighbor spent an hour working on the old mower, taking apart and cleaning the carburetor, and getting it running.

I don’t need lawn service once a week anymore. We don’t need maids to come keep everything clean and shiny every 2 weeks. We don’t need a professional window washer to clean gigantic picture windows twice a year. This new house has 1 A/C filter to keep changed, the old one had 5 filters and I needed a 10ft step ladder to get to them all because of the nice high ceilings we had. The old house had high-end fussy appliances that were expensive to repair. This house has Plain Jane appliances that work surprisingly well, especially the black dishwasher that doesn’t match our white gas range and stainless fridge, all tucked nicely underneath a fabulously 70s seven foot two inch kitchen ceiling with yellowing plastic covers over the fluorescent lights. The new house has 32 light bulbs, the old house had over 100 light bulbs. You get the point. To sum up the lifestyle change in one word, I’d have say I feel “unburdened“.

But our primary motivation in leaving our beloved Oak Hill was location, getting closer back in to the core of Austin and living in a home from which we can walk places and better enjoy the Austin lifestyle.

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Is Rental Property Investing in Austin Still Profitable?

Is Rental Property Investing in Austin Still Profitable?

As someone who’s bought and sold a bunch of rentals, and helped other investors buy, sell and manage investment property in Austin for a number of years, I’m about to ask a question that might seem counter to my professional mission of being in service to real estate investors.

Is rental property investing in Austin still a good way to build long term wealth?

My answer, for a lot of people, is “probably not”.

Let me rephrase the question.

Is rental property investing in Austin a good way to lose money and create financial stress in one’s life?

Absolutely. More so than ever.

So, am I saying you shouldn’t invest in real estate in Austin, or elsewhere? No, I think everyone should consider doing so. But I do think, after careful consideration, a much higher percentage of people should decide against it than would have been the case 15 years ago. The opportunity for mistakes, bad decisions and cash flow disruption for the real estate investor today is much greater than in past years.

In other words, your margin of error is very thin. You better know what you’re doing, or have a good adviser. Success is harder to achieve than if you started in the 1980s or 1990s simply because today’s ratios are thinner. The financial and psychological profile of a good candidate real estate investor today has a much higher bar to clear than in years past. Let’s take a look at why that is.

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