Austin Real Estate Market Update – Dec 2008 and Year End

The Austin real estate market for December 2008 ended better than I predicted. The Austin market held up well throughout 2008, all things considered, and within the context of the national economic climate and the fierce headwinds created by fear and negative consumer sentiment. Before we get into the December stats, the YTD stats and the MLS area breakdowns, let’s take a quick look at the graph below to get a perspective on how the Austin real estate market has performed since 1999.


As you can see above, even though 2008 is down a bit from 2007, it’s not anywhere near the nose dive that most of the rest of the country has experienced. In fact, viewed on the 9 year graph, the small dip is no big deal. It has to be noted that both 2006 and 2007 saw price appreciation of just below 10%, both years setting new record high prices in Austin. Each succeeding year cannot be a new record. Real Estate markets do not produce straight upward sloping lines over time, nor should that be the expectation, so it somewhat puzzles me the degree of concern we hear from buyers and sellers when the market does what it’s suppose to do, but that’s what we’re hearing a lot of lately.

Relax, 2009 may be slightly down as well. But real estate is a long term investment, not a lottery ticket or an ATM machine, as folks came to view it during the early through mid 2000’s. Moving on. Below is the December 2008 stats summary as well as the 2008 vs. 2007 sales comparison and breakdowns by MLS area. First, let’s see how December did.

Austin Real Estate Sales Market Update Dec 2008
Homes only (condos, duplexes, etc. not included) compiled from Austin MLS data
Nov 2008 Dec 2008 Dec 2007 Yr % Change
# Sold 930 1191 1586 -24.91%
Avg List $250,087 $266,947 $267,168 -0.08%
Med List $192,450 $189,900 $199,900 -5.00%
Avg Sold $237,523 $251,338 $256,461 -2.00%
Med Sold $185,000 $184,000 $194,000 -5.15%
Sold/List % 94.98% 94.15% 95.99% -1.92%
Avg SQFT 2177 2204 2174 1.38%
Med SQFT 1981 1978 1980 -0.10%
Avg $ SQFT $109.11 $114.04 $117.97 -3.33%
Avg DOM 76 78 69 13.04%
Median DOM 56 56 52 7.69%
# Expired 664 846 1118 -24.33%
# Withdrawn 832 835 620 34.68%
Not Sold 1496 1681 1738 -3.28%
Not Sold % 61.67% 58.53% 52.29% 11.94%

Here is the summary of what you see above.
• Number of homes sold is down 25% (was down 43% last month) from 1,586 Dec 2007 to 1191 for Dec 2008. • Average list prices in Austin were down 0.08% over the same month last year to $266,947.
• Average sold prices in were down 2.0% to 251,338 from $256,461 in Dec a year ago. Sellers are still chasing the market down.
• Median sold price was down 5.15% to $184,000. Last year in Dec it was $194,000.
• Average List to Sold price ratio is 94.15%, down from 95.99% (almost a 2% drop) in Dec last year, again indicating that sellers are still chasing the market down.
• Avg sold price per square foot is down 3.33% to $114 compared to $118 a year ago in December.
• Avg days on market is up 9 days (13%) from 69 last year to 78 this December.
• Median days on market is up 4 days (8%) from 52 days last year to 56 this year.
• Number of “Not Sold” (exp or withdrawn) is up 12% over the same month last year, to 58.53% of all removed listings compared to 52.29% for the same month last year.

I had expected December’s “Not Sold” number to continue climbing from 63% in Nov to more than 70% in Dec, but it didn’t happen and went the other way instead. Perhaps the quitters pulled their listings in November instead of waiting until December. We’ll see if January continues down or remains above 50%.

What the Not Sold figure tells us is that of the total number of listings that departed the MLS, 59% of the removed listings were failed sales efforts that were either withdrawn or expired. In a stable market I’d expect the failed listings to be below 30%. In mid-2006, when multiple offers became the norm, especially in SW Austin, the “not sold” percentage was about 23%.

So even in a hot market where buyers are fighting for homes, there will be listings that fail to sell, but when they reach more than 50% of listings, that tells us that absorbtion is weak and supply is too high for the current demand level. Next, let’s take a look at the final YTD stats for all of 2008 compared to 2007.

Austin Sales Market YTD Update – Dec 2008
Homes only (no condos, duplexes, etc) – Data from Austin MLS
Jan-Dec 08 Jan-Dec 07 Yr % Change
# Sold 19,603 24,571 -20.22%
Avg List $262,057 $262,616 -0.21%
Med List $199,000 $190,000 4.74%
Avg Sold $251,771 $254,786 -1.18%
Med Sold $192,000 $187,682 2.30%
Sold/List % 96.07% 97.02% -0.97%
Avg SQFT 2149 2126 1.08%
Med SQFT 1954 1936 0.93%
Avg $ SQFT $117.16 $119.84 -2.24%
Avg DOM 66 58 13.79%
Median DOM 44 35 25.71%
# Expired 7155 5798 23.40%
# Withdrawn 8821 6773 30.24%
Not Sold 15976 12571 27.09%
Not Sold % 45% 34% 32.67%

We see above that for the year, average sales prices in Austin fell 1.18% and the median sold prices were up 2.3%. Sales volume was down 20%. I’d essentially call it a flat year, from an appreciation standpoint, but remember that “flat” means prices held at the highs that were established in the 2006/2007 appreciation runup. Viewed in the proper context, one way to characterize the Austin real estate market in 2008 would be to say that, despite the slowdown and all the really bad economic news and fear, Austin real estate overall greedily held on to the price gains of the previous two years, giving back only a small 1.18%. Not bad.

Frankly, I know that if more buyers were better educated and better represented in Austin, the prices could have been pulled down more than they were. Many of our buyers obtained excellent deals in 2008 because they followed our advice to keep a broad, open set of criteria. Thus, when we ran into a stubborn seller, we’d simply move on to the next property until we found a motivated seller willing to bargain. But some buyers fall in love with one home, and if that particular home is listed by a stubborn seller not willing to negotiate a better price, the buyer will stick to the deal and pay the seller’s price, or receive less of a discount than market conditions would suggest are attainable.

This is of course the type of buyer we want to attract to our own listings, and we were generally successful in doing so last year (we had zero expired or withdrawn listings in 2008), but buyers who fall in love with one home, and who are not willing to run through 3 to 5 offers on different homes if necessary to find the right home and seller, are giving away all of the advantages of a buyer’s market, and therefore not enoying the purchase pricing advantage that could be obtained were they not so picky. That’s not smart buying.

Below is a breakdown of 2008 sales by price range, as well as the months of inventory available in each price range, based on the trailing three months of sales volume.

Austin Real Estate Market 2008 Sales Breakdown by Price Range
Months of inventory based on trailing 3 month sales volume
Price Range Sold 2008 Avg Days on Mkt Active Jan 2008 Sold Oct-Dec Months Supply
$149,999 or under 5401 52 1543 1024 4.52
$150,000 – $199,999 4978 61 1434 839 5.13
$200,000 – $249,999 2876 69 1059 467 6.80
$250,000 – $299,999 1877 76 896 318 8.45
$300,000 – $349,999 1204 75 553 213 7.79
$350,000 – $399,999 955 79 553 149 11.13
$400,000 – $449,999 591 80 326 100 9.78
$450,000 – $499,999 382 77 324 58 16.76
$500,000 – $549,999 259 88 210 48 13.13
$550,000 – $599,999 212 90 201 37 16.30
$600,000 – $699,999 283 89 300 44 20.45
$700,000 – $799,999 159 104 198 26 22.85
$800,000 – $899,999 133 94 137 21 19.57
$900,000 – $999,999 61 116 91 7 39.00
$1,000,000 or over 232 133 428 40 32.10
Total 19603 3391
Sold per month Avg 1,634 1,130

Using the common rule of thumb that says anything over 6 months supply of homes is a Buyer’s Market, we can see from above that in Austin currently it’s a buyer’s market above the $200K price range. The higher you go in price, the better the market for buyers. This is why moving up to a more expensive home is a smart thing to do in this market. You get a bigger discount on the home you buy than you have to give on the cheaper home you sell. Add to that the fact that interest rates are at the record low of about 5%, and there is ample inventory to pick from, and these metrics tell us that buyers, especially move-up buyers, should be out seeking bargains in Austin … but they are not doing so in the numbers we’d expect.

The things that normally drive buyer behavior – interest rates, affordability, and supply, are being trumped by fear. This is the same fear that is keeping investors on the sidelines in the stock market, though there is no dispute that very good bargains exist with certain American stocks as well. Everyone one is waiting, to quote Warren Buffet, “for the robins to come out”. But by the time the Robins come out, Spring is over and the best entry point has passed. Nevertheless, the economic news is so chocked full of doom and gloom, that it’s left the average American willing to simply sit on their hands and postpone their real estate purchase for a “better time”.

The smart buyers are out seeking bargains though. These are the long term buyers and investors who understand cycles and the fact that the best time to buy is when everyone else is afraid. Let’s look now at the breakout of sales by Austin MLS Area. If you are not familiar with the Austin MLS map, there is one posted at the bottom, or you can clik here to open one in a separate window (then hit your Alt and Tab keys simultaneously to toggle between windows).

There are some interesting things to observe as we break out the sales by area. The old adage “real estate is local” can be carried further down to a micro level, to say “real estate is local, right down to the neighborhood”. To the doom and gloomers who thought 2008 was a rotten year in real estate for Austin, let’s look at some specific facts:

I have tracked 42 MLS areas in the chart below. (I don’t track the far flung rural MLS areas that have been added to the Austin MLS in recent years).

  • Of the 42 Austin MLS areas tracked, 27 experienced an increase in average sold price. That’s 64% of the Austin MLS areas with rising average prices in 2008.
  • Of the 42 MLS areas tracked, 25 experienced an increase in median sold price. That’s 60% of the Austin MLS areas with rising median sold prices in 2008.
  • Of the 42 MLS areas tracked, 23 experienced an increase in average sold price per square foot. That’s 55% of the Austin MLS areas with rising sold prices per square foot in 2008.
  • Of the 42 MLS areas tracked, 17 experienced an increase in ALL THREE of the above metrics – average, median and per sqft sold prices. That’s 40% of the Austin MLS areas with rising metrics in the main three performance measurments.
  • Of the 17 Austin MLS areas that experienced price appreciation in the three core measures, 13 (MLS areas 2N – North Central, 3 – East Central, 3E – East, 4 – Central, 5 – East, 6 – South Central, 9 – East Austin, 10N – South Austin, 10S – South Austin, N – North Austin, NW – Northwest, SWE – Far South Austin, UT – UT Area) are within 10 miles of downtown Austin. The core close-in areas are holding up and still gaining in value in Austin. Of the remaining 4 (MLS areas CLN – Leander, GTE – Georgetown, HH – Kyle/Buda, RRW – Round Rock West), all are established areas with good schools within 15 to 25 miles of downtown Austin. This data supports what we tell buyers which is to stick as close in as you can afford and/or buy homes that attend quality schools. Do that and your home value holds up better during the downturns.

For the worriers who were, in 2007, commenting on how 2008 would be a bad year to buy real estate in Austin, and that it would be better to wait until prices fall, that might have been a good idea in some areas, but not in any of the 17 areas listed above, and others also, which are really most of the best and most desireable areas of Austin in which to live.

And for 2009, for those still waiting to buy, I ask this; in which Austin MLS area do you wish to purchase, and with interest rates at 5%, what exactly is the upside of waiting? If you want to buy in one of the more desireable closer in areas, or a community with well rated schools, waiting will not reward you. If you want a crackerbox starter home, in an under-developed area with poor schools far from downtown Austin, and in which many foreclosures are occuring and values are falling, maybe waiting will pan out, but why would you want one of those homes anyway, at any price?

I’m not a market timer. Never have been. 2008 broke mine and Sylvia’s 14 year streak of buying and/or selling personal real estate in Austin every year since 1994. Which of the past 14 years, 1994 through 2007, was the “wrong” year for me and Sylvia to buy or sell our properties? None of them. We don’t think that way. The only reason we didn’t buy in 2008 is because we are frozen out by the 4-loan limit imposed on investors. We can’t obtain a real estate loan to purchase more investment property because the government now thinks it’s a bad idea for investors to own more than 4 properties. If not for that, we would surely have picked up one or two more homes this year.

But I don’t want to drift off to onto a rant about the futility of trying to time real estate and stock markets. I’ll end by simply saying that it’s the deal that has to make sense, not the month or year of purchase.

Let’s get on to the MLS Area breakdown chart below.

Austin Real Estate Market Sales for 2008 by MLS Area
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
All Areas 2008 19603 $251,771 $192,000 2,149 $117.16 66 44
2007 24571 $254,786 $187,682 2,126 $119.84 58 35
  Change -20.22% -1.18% 2.30% 1.08% -2.24% 13.79% 25.71%
MLS Area YTD-Apr # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
1A 2008 200 $500,217 $467,125 2,735 $182.89 61 40
  2007 262 $495,054 $451,500 2,698 $183.49 49 26
  Change -23.66% 1.04% 3.46% 1.37% -0.32% 24.49% 53.85%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
1B 2008 228 $714,443 $567,000 2,421 $295.10 54 37
  2007 355 $720,783 $610,000 2,524 $285.57 57 35
  Change -35.77% -0.88% -7.05% -4.08% 3.34% -5.26% 5.71%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
1N 2008 416 $294,236 $265,000 2,131 $138.07 43 24
  2007 566 $301,708 $271,000 2,191 $137.70 33 13
  Change -26.50% -2.48% -2.21% -2.74% 0.27% 30.30% 84.62%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
2 2008 314 $262,764 $255,000 1,435 $183.11 51 34
  2007 398 $256,560 $245,450 1,401 $183.13 32 14
  Change -21.11% 2.42% 3.89% 2.43% -0.01% 59.38% 142.86%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
2N 2008 275 $153,516 $147,700 1,555 $98.72 48 30
  2007 308 $148,706 $142,000 1,541 $96.50 35 18
  Change -10.71% 3.23% 4.01% 0.91% 2.31% 37.14% 66.67%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
3 2008 283 $224,518 $210,000 1,544 $145.41 62 42
  2007 342 $201,317 $195,000 1,446 $139.22 41 23
  Change -17.25% 11.52% 7.69% 6.78% 4.45% 51.22% 82.61%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
3E 2008 137 $156,843 $145,000 1,602 $97.90 69 48
  2007 210 $122,911 $117,279 1,437 $85.53 70 50
  Change -34.76% 27.61% 23.64% 11.48% 14.46% -1.43% -4.00%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
4 2008 271 $362,922 $330,000 1,533 $236.74 58 39
  2007 357 $341,729 $310,000 1,479 $231.05 45 22
  Change -24.09% 6.20% 6.45% 3.65% 2.46% 28.89% 77.27%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
5 2008 263 $185,383 $170,000 1,213 $152.83 67 48
  2007 371 $176,424 $158,000 1,180 $149.51 51 24
  Change -29.11% 5.08% 7.59% 2.80% 2.22% 31.37% 100.00%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
5E 2008 84 $110,940 $109,250 1,643 $67.52 49 36
  2007 92 $108,373 $109,900 1,509 $71.82 52 28
  Change -8.70% 2.37% -0.59% 8.88% -5.98% -5.77% 28.57%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
6 2008 192 $362,147 $336,500 1,507 $240.31 66 41
  2007 266 $349,912 $325,000 1,484 $235.79 44 20
  Change -27.82% 3.50% 3.54% 1.55% 1.92% 50.00% 105.00%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
7 2008 105 $439,809 $375,000 1,798 $244.61 57 35
  2007 135 $397,110 $377,000 1,676 $236.94 46 20
  Change -22.22% 10.75% -0.53% 7.28% 3.24% 23.91% 75%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
8E 2008 170 $863,817 $720,000 3,340 $258.63 76 44
  2007 257 $906,276 $725,000 3,538 $256.15 59 27
  Change -33.85% -4.68% -0.69% -5.60% 0.97% 28.81% 63%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
8W 2008 220 $634,798 $475,000 3,308 $191.90 77 49
  2007 293 $703,223 $536,000 3,442 $204.31 65 37
  Change -24.91% -9.73% -11.38% -3.89% -6.07% 18.46% 32%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
9 2008 40 $193,527 $173,401 1,574 $122.95 58 50
  2007 91 $169,231 $157,574 1,526 $110.90 36 24
  Change -56.04% 14.36% 10.04% 3.15% 10.87% 61.11% 108%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
10N 2008 251 $193,173 $175,000 1,460 $132.31 40 22
  2007 321 $185,652 $165,000 1,447 $128.30 25 12
  Change -21.81% 4.05% 6.06% 0.90% 3.12% 60.00% 83%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
10S 2008 616 $178,506 $173,000 1,625 $109.85 41 27
  2007 803 $174,337 $167,500 1,633 $106.76 26 12
  Change -23.29% 2.39% 3.28% -0.49% 2.90% 57.69% 125%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
11 2008 207 $117,160 $113,000 1,416 $82.74 51 36
  2007 313 $118,439 $116,000 1,404 $84.36 46 27
  Change -33.87% -1.08% -2.59% 0.85% -1.92% 10.87% 33%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
CLN 2008 1057 $177,405 $155,624 2,020 $87.82 59 38
  2007 1288 $168,791 $150,000 1,963 $85.99 51 33
  Change -17.93% 5.10% 3.75% 2.90% 2.14% 15.69% 15%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
CLS 2008 976 $237,478 $217,650 2,380 $99.78 68 49
  2007 1164 $235,948 $210,000 2,360 $99.98 55 37
  Change -16.15% 0.65% 3.64% 0.85% -0.20% 23.64% 32%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
EL 2008 212 $123,212 $116,421 1,778 $69.30 65 47
  2007 294 $136,994 $124,500 1,807 $75.81 72 47
  Change -27.89% -10.06% -6.49% -1.60% -8.59% -9.72% 0%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
GTE 2008 274 $165,063 $155,000 1,849 $89.27 69 46
  2007 355 $156,233 $138,078 1,758 $88.87 54 33
  Change -22.82% 5.65% 12.26% 5.18% 0.45% 27.78% 39%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
GTW 2008 775 $249,076 $215,000 2,230 $111.69 89 62
  2007 855 $256,988 $219,000 2,279 $112.76 73 49
  Change -9.36% -3.08% -1.83% -2.15% -0.95% 21.92% 27%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
HD 2008 368 $360,618 $345,590 2,922 $123.41 102 77
  2007 404 $372,110 $345,000 2,889 $128.80 92 69
  Change -8.91% -3.09% 0.17% 1.14% -4.18% 10.87% 12%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
HH 2008 924 $181,027 $156,000 2,102 $86.12 65 46
  2007 1167 $171,610 $152,630 2,004 $85.63 64 42
  Change -20.82% 5.49% 2.21% 4.89% 0.57% 1.56% 10%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
HU 2008 470 $151,567 $141,056 1,975 $76.74 59 41
  2007 666 $148,238 $139,837 1,899 $78.06 65 49
  Change -29.43% 2.25% 0.87% 4.00% -1.69% -9.23% -16%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
LN 2008 188 $300,582 $215,500 2,123 $141.58 83 60
  2007 262 $313,534 $206,500 2,178 $143.96 93 67
  Change -28.24% -4.13% 4.36% -2.53% -1.65% -10.75% -10%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
LS 2008 693 $473,131 $359,000 2,856 $165.66 103 75
  2007 846 $484,771 $370,000 2,783 $174.19 87 60
  Change -18.09% -2.40% -2.97% 2.62% -4.90% 18.39% 25%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
MA 2008 271 $143,026 $129,000 1,951 $73.31 72 42
  2007 320 $153,991 $133,490 1,919 $80.25 75 50
  Change -15.31% -7.12% -3.36% 1.67% -8.64% -4.00% -16%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
N 2008 359 $189,603 $184,000 1,846 $102.71 41 26
  2007 504 $186,338 $180,000 1,889 $98.64 30 16
  Change -28.77% 1.75% 2.22% -2.28% 4.12% 36.67% 63%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
NE 2008 306 $154,506 $153,250 1,825 $84.66 55 41
  2007 373 $153,176 $155,000 1,782 $85.96 55 35
  Change -17.96% 0.87% -1.13% 2.41% -1.51% 0.00% 17%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
NW 2008 558 $253,157 $211,000 2,262 $111.92 43 25
  2007 707 $247,067 $203,000 2,284 $108.17 33 16
  Change -21.07% 2.46% 3.94% -0.96% 3.46% 30.30% 56%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
PF 2008 1211 $166,217 $155,212 2,027 $82.00 62 44
  2007 1532 $166,241 $155,775 2,058 $80.78 60 41
  Change -20.95% -0.01% -0.36% -1.51% 1.51% 3.33% 7%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
RN 2008 450 $524,756 $407,500 3,358 $156.27 94 70
  2007 563 $542,713 $450,000 3,417 $158.83 80 56
  Change -20.07% -3.31% -9.44% -1.73% -1.61% 17.50% 25%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
RRE 2008 1280 $186,282 $160,550 2,215 $84.10 68 46
  2007 1616 $183,984 $157,500 2,149 $85.61 59 39
  Change -20.79% 1.25% 1.94% 3.07% -1.77% 15.25% 18%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
RRW 2008 1200 $245,363 $229,000 2,572 $95.40 69 50
  2007 1451 $241,807 $224,999 2,537 $95.31 57 35
  Change -17.30% 1.47% 1.78% 1.38% 0.09% 21.05% 43%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
SC 2008 159 $183,603 $156,740 2,122 $86.52 52 34
  2007 205 $197,390 $167,000 2,203 $89.60 59 35
  Change -22.44% -6.98% -6.14% -3.68% -3.43% -11.86% -3%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
SE 2008 169 $125,295 $126,500 1,847 $67.84 59 41
  2007 195 $122,602 $119,505 1,740 $70.46 43 29
  Change -13.33% 2.20% 5.85% 6.15% -3.72% 37.21% 41%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
SWE 2008 645 $235,671 $219,500 2,170 $108.60 52 36
  2007 676 $232,418 $218,000 2,166 $107.30 46 29
  Change -4.59% 1.40% 0.69% 0.18% 1.21% 13.04% 24%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
SWW 2008 576 $303,832 $280,000 2,507 $121.19 54 35
  2007 734 $303,227 $283,650 2,516 $120.52 46 29
  Change -21.53% 0.20% -1.29% -0.36% 0.56% 17.39% 21%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
UT 2008 44 $471,690 $419,750 1,866 $252.78 54 37
  2007 43 $458,382 $419,000 1,906 $240.49 75 36
  Change 2.33% 2.90% 0.18% -2.10% 5.11% -28.00% 3%
MLS Area Year # Sold Avg Sold Med Sold Avg SQFT Avg PSF Avg Days Med Days
W 2008 252 $451,611 $334,500 2,809 $160.77 73 45
  2007 303 $547,025 $353,000 3,051 $179.29 63 35
  Change -16.83% -17.44% -5.24% -7.93% -10.33% 15.87% 29%

Summary Prices may slide a bit further in Austin during the first part of 2009, and possibly for the entire year. But that will be a citywide average decline and there will continue to be areas that do better than the average – probably most of those same 17 areas listed above that did well in 2008, which are the closer-in core areas of Austin. If you are ready, willing and able to buy real estate in Austin, and you have secure income, waiting is a poor bet.

Below is the Austin MLS map. As usual, comments and questions are welcome. Especially comments that disagree with my take on things.

22 thoughts on “Austin Real Estate Market Update – Dec 2008 and Year End”

  1. Steve,

    Thanks for the great summary. As usual, you present information in a clear and concise manner that makes it easy to understand the market trends.

    Are you going to be preparing a similar summary for the rental market?


  2. Hi TH,

    Thanks. Yes the Rental market version will be next. I haven’t started on it though. Requires a late night with some coffee to pull all the MLS area data and code it in to a spreadsheet. I wish there was an easy way to export and pull it in but there isn’t.


  3. Do you really think that buyers are motivated primarily by fear? We’ve been in the market for a house for a little while, and I believe we are acting in the most rational manner possible. I like the idea of shopping around for the best buy, but all the sellers we’ve come across, in our price range, seem to be living in a market from 2 years ago.

    I have read some well thought out pieces on the economy lately that argued the only reason the economy recovered in 2001 after the dot-com bubble burst was because of a flood of mortgage related debt that the average consumer took on. The underlying bases for a sound economy, such as a reasonable trade gap, strong manufacturing base, low public and private debt, simply were not and are not there. Hopefully, I’m wrong, but dismissing the cautious buyer as being afraid seems to be ignoring the fact that they could well be right.

    Regardless, I appreciate the effort. It’s always interesting.

  4. Steve,

    Of the “marquee” 17 areas, I notice 1B, 7 and 8E are all absent. 1B and 8E are typically (Tarrytown, West Lake, etc) thought of as great places to buy and 7, to some, is as well….ideas as to why they didn’t shine in 2008?


  5. >And for 2009, for those still waiting to buy, I ask this; in which Austin >MLS area do you wish to purchase, and with interest rates at 5%, >what exactly is the upside of waiting?


    Thanks for the stats. I’m sure all of us here really appreciate your efforts.

    If real estate is a long term investment, what’s the downside of waiting another 6 months to a year for something we will own for 5 to 10 years? If the market has really turned, it will not be “too late.” So what if we miss the bottom by 5 or 10%?

    Here’s the upside for waiting. We already know unemployment is getting worse and the job loses are accelerating (check the stats that came out this week). We know that as more and more people lose their jobs they will be forced out of their homes since most Americans do not have several months of savings to ride things out. We also know the government will try to force the market higher by giving us more tax incentives and lower interest rates even further in the coming months. We know that the buyers like yourself and buyers with poor credit are frozen out of the market, limiting demand. We also know the market in Austin is drying up as sales have collapsed. The fact that prices have not fallen is a sign that the balance sheets of the owners in Austin are better as they can simply hold on and choose not to sell.

    That’s about the only positive at the moment.

  6. Joe,

    > Of the “marquee” 17 areas, I notice 1B, 7 and 8E are all absent.

    Those are solid areas, but none of them hit a “triple” on the three stat metrics I was looking at. Doesn’t mean they are not good areas to look at though. I’d just pay attention, as a buyer, to the price point.

    Aaron: Yes, I think fear is the main driver right now. Any time we don’t do something we are ready and willing to do, it’s because we are afraid of the outcome. In your specific case, as you’ve described it, prudence and patience are the main drivers as you’re simply waiting for the deal that makes sense. That is different behavior than the many buyers we talk to who have simply removed themselves completely from the market and are afraid to buy no matter what.

    Leon: Instead of rehashing the same points with you that I usually do, let me ask you this. Do you think people who currently own real estate should be selling right now? Why or why not?


  7. Interesting. Since I don’t speak with many other potential buyers, and I’m sure you do, I’ll take your word on that. For my benefit, and I’ll say this with a nod and a wink, hopefully these buyers stay out of the market until after we finally find the right house.

    The areas Joe was curious about are also some of the areas we have been looking at buying in, so I suppose your advice to him agrees with my position. Pay attention to the price.

  8. I’m so glad that you are able to pull this information and put all in a way that someone like myself can understand Steve. Thank you for your hard work and dedication. This kind of hard work is often uncommon. I am looking forward to the rental market information as well.

    Thanks again!
    Tony Tovar

  9. Steve,

    If real estate could be traded like stocks, then the answer is yes. Sell now and buy back lower later. But real estate are not stocks. Stocks are very volatile, but can be bought and sold for very little commissions. There will always be a buyer and seller at every price in the stock market because it is designed to always maintain liquidity regardless of the price.

    Also, we can live in real estate. We can’t live in our stocks. People that already own are in a tough spot. First off, the market has dried up so much that many owners can’t get a reasonable offer anywhere near the market. They may not be able to sell at ANY reasonable price. Second, they may not be able to move because of personal reasons.

    So for people that already own real estate, it may not be wise to sell right now. But not selling does not necessarily mean one should be buying. The risk/reward ratio for a buyer is not the same as it is for a seller. An owner may be trapped in his property or he may need to property for his own use. For him the property may not be an investment, but a consumable or expense. For example, you will still buy gasoline if you need it today (your car is empty and you need to go somewhere right now) even though you know it will be cheaper tomorrow.

    A buyer is never trapped because he holds cash which is always liquid. He may miss opportunities, but he will never run into trouble by holding cash.

    The reason I keep rehashing the same points is because you keep stressing how great the deals are without addressing the bigger economic backdrop, which is bad and still deteriorating. There’s a very good reason why prices are so low. It’s very likely that they will go still lower in the coming months. In fact, the only reason you say now is a good time to buy is because prices have already dropped so much. But that’s not a valid reason. Just because something has dropped X% doesn’t mean it can’t drop another X%. I don’t see you citing any data or facts to back up your opinion of why you prices should go higher or even stabilize here.

    Another point of data that came out this week. Retail sales in December dropped a stunning 2.7%. That’s twice what Wall St. was expecting. The numbers are horrific.

    This is going to hit the commercial real estate market very soon. More stores will close as the owners of these properties don’t bring in enough rent to cover their mortgages. Also, most commercial loans are not 30 year loans like residential. When it comes time to rollover their mortgages, they may find that banks aren’t willing to loan to them (because of all the store closings) forcing them into bankruptcy and foreclosures. This will trigger another round of bank losses, further limiting banks ability to loan money to anyone. A bank can not make new loans if they are suffering large losses on their existing loans. They need the cash to cover the losses they are taking on the other loans, further limiting credit.

    We must stabilize retail sales and unemployment. The real estate market will not stabilize until these stop going down…


  10. Hi Leon,

    Thanks for your comments. It sounds like you believe that the Austin real estate market is simultaneously bad for both buyers and sellers. That’s not how markets work. When it’s bad for sellers, it’s a buyer’s market. You propose that buyers should wait until the market becomes more favorable to sellers again, and then buy. That’s called missed opportunity, or coming late to the game.

    I don’t advocate that every buyer should buy either. Some should not. But qualified buyers with stable income who know they will own the property long term, should get off the fence and start looking for bargains.

    You know, Leon, ships in harbor are safe, but ships were meant to sail. People don’t build wealth by not investing and keeping all their assets in cash. The world is ruled by risk takers and investors, not fence sitters.

    Real estate investing has been good to me and Sylvia and I’m simply telling anyone who asks what the secret to our success has been that there is no secret and that it’s had absolutely NOTHING to do with predicting the market or timing our purchases and sales.

    We don’t care about market conditions, we buy in all markets. So do many of our investors. So I practice what I preach. What market conditions do tell us is whether opportunity is easier or harder to find. In a market like this, bargains are easier to find for buyers than they are in a Seller’s Market.


  11. Steve,

    What’s going on right now is just plain bad for everyone. Wealth is being destroyed for both the buyer and the sellers. You are thinking real estate and the economy is a zero sum game like playing poker without a rake. But it is not zero sum. Everyone can win and everyone can lose simultaneously.

    It’s bad for BOTH sellers and buyers, but for different reasons. A market that is going down is bad for everyone unless you are able to sell short (like the stock market) and profit for the downside. The current market is bad for the seller for obvious reasons. It’s bad for buyers because they are losing their ability to borrow, they are losing their jobs. Even if they are one of the lucky ones that still have their jobs and access to credit it’s bad for them as the market moves against them destroying any equity they might have put into the house. The seller who sold it to lost. The buyer who bought also loses as the value of the property further deteriorates.

    Steve, the “too late” to buy is a classic gimmick sales people use to scare buyers into thinking they are going to miss the boat. If the market has truly turned for the better, it will not be too late. Just because you missed the bottom doesn’t mean you are “too late”. Let’s say you have a property that drops from $100K to $80K (a 20% decline). Buyer A buys it at $80K, trying to catch a falling knife and be a hero. Buyer B decides to wait until things turn. The property continues to fall and lets say it goes to $60K. The economy finally rebounds and the price returns to $80K and Buyer B buys it. Both buyers got in at the same price, but Buyer B took far less risk because there were signs of a the economy turning before he pulled the trigger. Meanwhile Buyer A was exposing himself to a bottomless pit of losses. What if the economy didn’t turnaround at $60K? Who the heck knows where/when the bottom is?

    What if things kept getting far worse and lets say it drops to $40K, then rebounds to $60K, where Buyer B buys it. Not only did he avoid the drawdown to $40K, but he still got in at a better price than Buyer A, even though he missed the bottom. Was Buyer B “too late”? Yes, he missed the bottom, but he wasn’t “too late” compared with Buyer A. Once the economy gets going, it tends to keep going in a certain direction from the momentum.

    Yes, ships are meant to sail, but you check the weather before you head out. You do not take take a ship out to sea when you know there is a hurricane out there that is strengthening from a Cat 2 to a Cat 4. There is a time for taking risk and there is a time for hunkering down. I am not advocating sitting in cash forever. What I am advocating is waiting at least until the summer as the further economy deteriorates. I’m not denying there’s a lot of bargins today. But be patient because there will be a better deal or a safer time to buy in the future.


  12. Steve,

    Congratulation and thank you for all the information. I am following your website and your articles for the last couple of months. They are very good!

    I was one of the fortunate person in 2008. I was able to sell my house 4 months ago and I am looking for the right house with a good price. I am not in a hurry. I intend to buy a house in the next months. I am not a realtor but I have watched very closely the house market for the last 12 months.

    I understand your numbers. They are facts!
    But I dare to say they are misleading. The fact that the average price of the houses sold in 2008 is 1.18% lower than 2007 is correct but it does not mean that an average house price is almost the same compared to one year ago.
    It is very easy to see with a good example. In Jan/2008 my house was professionally evaluated by a experienced realtor. Six months later, he did the same again with the new MLS information. The new price was 6% lower than before and I think he was correct (I did my own research). And that house is probably another 8% lower now in Jan/2009. And I see the same across the board in different regions of Austin. All houses that I researched reduced their value, at least 10%.

    If my observation is correct, then I have a question.
    Why the “average sold price” in MLS was higher for most of the months of 2008 when compared to 2007?
    I asked this question to several realtors. Not a single one was able to answer, and they agreed that the house prices are falling in Austin.
    I have my own theory but I would love to hear your expert opinion about that.


  13. I think I can add a little color to what Leon Fu is saying about being bad for both buyers and sellers. We currently own, but a bigger house would be nice, since a 2nd child is on the way. However, we don’t need a bigger house, and we don’t want to live in an apartment or a rental house while waiting for prices to fall. We live close relatively close in, and I don’t want a drive any longer than ~10min to work.

    If we did put our house on the market, we have to endure a lot of stress in selling alone, and also start looking for a replacement. Since we are careful, any offer we make would be contigent on sale of our house. Other sellers might not like a contigency. I’d estimate that home prices in our area have fallen ~10% (maybe even 15%, depending on home price), but our subdivision only had about 6 sales all last year. We’d look for at least that much of discount on another house, but not all sellers are aware of falling prices. Since we have a 2nd child on the way, we’ve decided to be very prudent with increasing expenses. So, we’ll sit and wait, happy with what we have, knowing that it’ll work fine.

  14. Larry,

    Not to preempt Steve, but I do a little work in statistics, so I may be able to give some generally useful insight.

    There are many ways to measure markets, and average price is just a single measure. Steve does a good job to also include the median price, as that gives us a second useful, related but distinct measure.

    Differences in average price might be misleading between two years, for example, if fewer low cost houses are selling, but the more expensive ones are selling cheaper. The average might go up, because of the change in sales distribution, but the price for similar homes year-to-year may actually go down. Alternately, if the value of expensive homes holds steady but sales decline, the average price will drop, when in reality people are getting the same price but just waiting longer.

    Breaking it out by price range helps, as it gives us a better idea of the sales distribution, but we still do not know if a house in the $200k range did not sell, or actually was sold as $195k and so it is now showing up in a different slice of the distribution. The inherent problem is that people do not resale their house every year, so we have to compare performance (value) between different houses, not by measuring the price of the same house each year.

    The more detail you can have for your analysis, as Steve so generously does the grunt work for us, the better understanding you will have.

  15. Thanks Aaron for breaking it down like that. Yes, stats can be misleading and slippery, which is why I came up with the area breakdown chart and report all the different metrics that inform us. Looking at only average or median prices isn’t enough. We also want to see price per sqft and days on market and then look at all of that together.

    Ultimately, it’s a different market for each individual house. Even homes in “hot” areas during a seller’s market will fail to sell, for a variety of reasons. And even in the slowest area during a down market, some houses in that area still attract buyers. This is why a seller might report a 10% drop in the price they had to accept, while the area as a whole reports a slight increase in average and median sales prices. Not every home participates in the same direction of movement.

    But we have no other way to predict market behavior than to try to study and understand what is happening across the board, and then drill down into the smaller segments.

    Think of it like this. Let’s say a cruise ship with 1,000 people returns and it is announced that the average weight of the passengers increased by 5 pounds, and the median weight increased by 2 pounds. But then we hear that the majority of passengers LOST weight, and we’d wonder “how can that be”.

    Well, it can be. The gainers gained a LOT, while the losers lost a small amount. Furthermore, it could be determined that certain decks of the ship produced numbers that conflict or don’t line up with the averages. Same with age ranges, ethnicity, etc. But the overall average is still what we look at first, before drilling deeper.

    Real estate markets are similar, yet it is in fact very valuable to know which way the trends are heading and which segments are feeling the trends the most and which are bucking the trend. Austin as a whole, has held up better than almost any other city in the U.S. with regard to our real estate market. Certain areas of Austin are holding up better than the rest of the city, while other areas and price ranges are suffering a lot worse that the averages would indicate.

  16. Great blog, guys!

    One thing I would like to see (and I think is a MUCH better analysis) is for you to analyze everything in cost per SF. Average cost for real estate is essentially worthless, since there is no true “apples to apples” comparison.

    Now, if you could show that 2008 avg price per SF was only X% lower than 2007, you would have a valid argument. But I’ll bet dollars to donuts that isn’t the case.

    Look, unemployment in Austin is about to rise very dramatically. The tech companies are going to be hit very hard, and rumors of layoffs are flying. The supply of homes is going to shoot through the roof, especially in suburban areas. No matter how low interest rates go, when supply outstrips demand, prices will fall.

    Finally, we should all throw away the mentality that “prices for real estate will rise over time”. Hogwash. We could see a period of flat or down pricing that could extend for 5+ years. The market will need to fully absorb the overbuilt supply, which won’t happen until the economy turns and employment gets stronger.


  17. Lee, you must have missed it but there is ample psf data in the charts provided. You’re wrong about the market also. Austin will soon have a housing shortage, by 2011 or 2012, due to the builder pullback and pent up buyers remaining out of the market. When that happens, the cycle will swing back to a seller’s market and those who are waiting for the seller’s market to return, so they can feel smarter about buying, will be punished with higher prices and higher interest rates than those currently available to the savvy buyers who are out in the market buying homes now.


  18. Steve:

    Yes, after I posted, I took a second look and noticed the PSF data. My apologies.

    As for the market predictions, I guess time will tell. However, unless you’re timing at the absolute bottom right now, you would be foolish to purchase now vs. 6 months or a year from now. There will be lower pricing (at worst, similar pricing) and less risk since the economic outlook will be a bit more predictable and stable (hopefully).

    We all know that commercial and residential building comes in dramatic cycles, but I don’t share your optimism about demand in the near term. By 2012 (3 years from now) I agree that supply should be absorbed by then, given no new supply coming onto the market. However, I think the times of double-digit annual appreciation in housing has gone the way of the dodo bird in the short term (next 4-5 years).

    As an investor, still too much unknown in the market, and not enough return (in the short term) to compensate at this point.

  19. Hi Lee,

    Thanks for your comments and opinion.

    > As an investor, still too much unknown in the market, and not enough return (in the short term) to compensate at this point.

    Real estate is a long term investment. I don’t worry about short term factors when investing. Perhaps this is the main difference between how I approach acquiring assets and building wealth versus those of you who have your eyes fixed on today’s headlines. It’s just a different set of decision criteria.


  20. Steve, great data! Thanks for sharing. You have the MLS zone DT on your map, but you do not show the data for that zone in your summary. Any reason?


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