This isn’t a full-blown market update, but I wanted to post a few graphs real quick to show current market activity and movement. Let’s start with the graph below showing Average and Median Sold values for homes in Austin for the past 49 months.
So, what looked like a pretty bleak December/January (lowest of lows for past 49 months. See the previous bottoms) quickly turned into an upswing. This isn’t necessarily unusual. In fact, if you look back at every May in the chart, that’s when the price peaks normally occur, and we’re heading that direction again this year. What is unusual is the fast and sudden absorption rate of homes combined with shrinking inventory. This is a sudden “spike”, at minimum, and may develop into a sustained upswing. I’ve been monitoring this and don’t see any let-up yet.
Let’s look at the Active/Pending chart below.
Above, we see the aftermath of the Tech Bust in 2000/2001, and what happened to the Austin sales market in 2003. For 2003 there was an inverted Sold/Not Sold ratio. More listings failed to sell than actually sold. That’s a really weak, sour market when that happens. Dismal in fact. But then it happened again in 2010 in Austin. More sellers gave up (Expired or Withdrew) than successfully sold their homes in Austin. 2010 was the 4th year in a row of declining sales volume.
Then in 2011, we see these lines achieving separation again as the number of failed sales drops and the number of closed sales increases. And the separation is sudden and pronounced, indicating very strong buyer demand.
Now let’s see what that graph would look like for just the first 3 months of 2012.
The Austin real estate market did about what we expected in 2011, which wasn’t much. Basically treading water with some slight improvements, but nothing that represents a notable shift in market activity. Instead, it looks like momentum is building for a breakout year of increased activity and rising prices either in 2012 or 2013.
Let’s start with a look back at the past 12 years for some context.
From 1999 to 2001, you see the effects of the Tech Bubble, as Austin experienced strong job growth, which in turn drives housing demand. From 2002 through 2004 (and most of 2005, though not obvious from the graph), Austin housing prices were flat, as we suffered the hangover of lost jobs after the Tech Bubble bust. Then in 2005 jobs returned as well as a lot of real estate investors who felt that other areas such as Phoenix, Las Vegas, Boise, Florida, etc. (which we now know were in a severe bubble) were playing out. So we had a mini burst of strong buyer demand through about the middle of 2007. After dipping in 2008, prices have slowly climbed since then, though many homes still sell for 2007 prices. By 2010, overall values were back to 2007 prices and have now surpasses the 2007 high. That’s the Austin real estate market in a nutshell, for the past 12 years.
Let’s look at the gains in 2011 compared to 2010.
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.
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 .
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.
The $8,000 buyer tax credit ended April 30, 2010. Take a look at the following graph to see the effect the tax credit had on buyer activity in Austin TX. This shows Pending activity for Austin MLS listings going back to Jan 2005 through April 2010. The green line is 2010. The previous years of 2007, 2008, 2009 are represented by the other colored lines.
I used Pending listings because a lot of the April Pending sales haven’t closed yet, but anything that qualified for the tax credit would have to be Pending by April 30th, so this gives us a sneak peek at what the sales data will look like for May closed sales.
A couple of interesting things to note here. I went back to 2007 because that was the peak year for Austin. As you can see on the chart, April Pending listings exceeded the peak year of 2007 for April. I suspect we’ve never experienced an April in Austin where almost 3,000 homes received accepted offers.What does this mean for the future?
Maybe I should start terming my Austin real estate market update blogs “Austin Real Estate Market, as Influenced by the Federal Government”. Indeed, the word “market” does need an asterisk next to it for the Sept-Nov time frame in Austin. Instead of taking its natural course, whatever that might have been, the lower end of the market was stimulated by government incentives for the Latter part of 2009 through November, and the sub-$200K buyers responded. Thus we see on the graph below the drastic drop in the average and median sold price for November 2009 as the final batch of first time home buyer tax credit sales closed.
It’s not hard to see what the real estate market is doing, but it is hard to know for sure why it’s doing it, or, that is, to what extent the number of sales (way up) and the average/median values (down) are influenced by these the artificially low interest rates and the buyer incentives, both being caused by government intervention in the market. Some economist believe that once these stimulus measures peter out, as they will later this year, the national real estate market is in for another big drop in prices as foreclosures will snowball to the highest levels we’ve seen yet.
So what does all of this mean for Austin? Is Austin real estate in generally good enough shape to ride it out better than most markets? I think so. Let’s have a look at the November stats.