Since our local news media thinks the Austin Real Estate Market is “cooling”, based on only a 1% increase in number of sales the first quarter of 2007 compared to 2006 (smallest increase in several years), I thought I’d offer another viewpoint of what determines the strength of a real estate market. Namely, the ability of our Austin real estate market to absorb homes that are placed on the market for sale. A market that can absorb its inventory is a strong market. A market that can’t is weak.
The chart below tracks the number of Sold vs. the number of Expired or Withdrawn listings from 2002 through 2006. You’ll notice that in 2002, there were almost as many Austin homes that failed to sell as there were homes that did sell. 2002 was the first full year of our last real estate downturn in Austin.
In 2003, the number of Austin homes that failed to sell actually surpassed the number that did sell. This means that over half of the listings entered into the Austin MLS for sale in 2003 failed to sell. That’s a terrible market for Sellers. You can see where the ratio has been headed since then. In 2006, more than 2 out of 3 homes listed for sale did in fact sell.
Did you know that in early 2004 the local Austin Media reported that 2003 was a “record year” in home sales for Austin? How ’bout that? If you were one of the 50%+ Seller’s who’s home sat on the market without so much as a lowball offer, it didn’t seem like a record year. If you were forced to rent your home in 2003 because it wouldn’t sell, it didn’t seem like a record year in sales.
Number of Sales is not a metric that alone determines whether a real estate market is strong or not, yet our newspaper writers seem to place a high value on that metric. I define a “strong” market as a “Seller’s” market, not simply a market such as 2003 when every renter in Austin got a loan and bought a new home. A good market has rising values and good absorption. We are in such a market in Austin at this time.