Austin real estate sales last 12 months

I prepared the graph below for a presentation I did last night to a local Austin real estate investor club. I’ve been commenting to buyers and sellers lately that the Austin real estate market has been “drawing W’s”, which is to say that average sold prices have been taking big swings up and down each month. I decided to put the price swings in graph form to illustrate what I’m talking about. Let’s take a look.

Do you see the W? From August to September 2008, Average sold price dropped over $10K in one month (from high $250s to mid $240s), then it rose slightly in Oct (start of W), then dropped almost $10K again in Nov from mid $240s to the $230s, then jumped over $10K in December back into the $250s, dropped over $10K in Jan back to the mid $230s, then up more than $10K again in February back into the $250s.

I asked the audience of experienced Austin investors at the meeting last night if anyone had an opinion about which direction we’ll see it go in March, and nobody claimed to know. Neither do I. But let’s look at some more stats.

I can look at the chart and see that both average sold and median sold prices today are higher than they were 12 months ago. Normally, when I run stats each month and post them here on the blog, I look only at the previous month and the same month a year ago. This is because looking back 1 year at the same month is really the best comparison to a current month, due to the seasonal variance we’ll talk about in a minute. The previous month is interesting to look at, but not determinative of a trend.

But maybe I’ll start including a trailing 12 month chart each month as well, because I think it’s informative to see that, despite these big “headline” swings month to month, and despite lower sales volume and high “not sold” counts, that the general trajectory of the Austin real estate market has not taken the nose dive that it sometimes feels like it’s taken.

The graph above prompted me to create a second graph, which you see below. In this graph, I charted all of 2006, 2007 and 2008 (Jan-Dec) so we can see the trend lines of each year and how they compare to one another. Let’s take a look, and then I tell you what I find interesting about this data.


The group of three lines at top are all Average Sold price lines. The three at the bottom are all Median Sold price lines. I grouped the Avg/Median for each year with a similar color, so I hope it’s easy enough to read.

Here is what I observe.

Everyone agrees that 2006 and 2007 were great years in the Austin real estate market, if you measure “great” by level of appreciation and sales velocity. Appreciation for 2006 was about 10%, and appreciation for 2007 was about 8%. How did 2008 do in comparison? Well, average values for 2008 dropped about 1% overall, while median sales values were up about 3%.

But let’s look at the trend lines and take note of a few things.

– In each year, average sold price dropped month-to-month from May all the way through November. This happened every year for the past three years. I haven’t looked at 2005 and beyond yet. For some reason, this trend was cause for alarm in the news in 2008, but not so in 2006 or 2007. It’s really just a normal seasonal dip.

– In each year, average sales in December spiked upward. I don’t know why this happens, but my initial guess is that fewer low end homes sell in December because those buyers are more strapped for cash than high price range buyers. I’d have to investigate that theory further though.

– 2008 was beating 2007 and 2006 in average sold price from May through November and almost through December. Were it not for a slow start at the begining of 2008, the YTD average sold price would have shown a gain for 2008 over 2007.

– Except for Jan through April, and December, the trend lines are stacked in the order one would expect in a rising market in 2008.

Of course, like I said, it’s hard to predict what next month will bring, or this coming summer. We may be driving in the fog toward a pricing cliff just beyond our headlights, but I don’t think so. The doom and gloomers believe this to be the case, ever since 2007 in fact, they’ve believed this, yet it hasn’t happened.

According to naysayers, 2008 was supposed to be the year in which the Austin real estate market went in the tank. The wheels were going to come off and we’d be in a ditch. Only an idiot would buy in 2008, according to the doom and gloomers. Yet here were are, and the crash hasn’t happened in Austin overall, except for those in higher price ranges or in outskirt areas where we advise against buying anyway.

I still think we could see an overall slide of 3% to 5% in pricing for 2009, but as we’ve seen with January 09 (down 5%) and Feb 09 (up 6%) each month is still a guessing game. And let’s not forget, that real estate runs in cycles. Ups and downs over time are normal.

On a side note, I was talking to a home flipper last night at the investor club meeting who hasn’t purchased anything in awhile, mainly because the good deals are not that easy to find and also because it’s too difficult to predict what we call “After Repair Value” (ultimate sales price) or marketing (hold) time. He’s still trying though.

I asked where he was prospecting for candidate properties and sellers. He said he mainly contacts out of state owners. His logic being that things are so bad everywhere else, that those owners may be in more need of cash and wanting to fire-sale their Austin properties. I asked how that was going, and the response was interesting.

He said many of the out of state owners view their Austin property as somewhat of a crown jewel in their real estate investment portfolio. They say things like “My Las Vegas property has tanked. My Phoenix property is way under water. But my Austin property is doing just fine. Why would I want to sell it?” Hmm, why indeed?

The perception from outside Austin is that we are sitting pretty and in very good shape. So why are so many local buyers moping around wringing their hands, afraid to buy? All it takes it a few layoffs at Dell and AMD, along with a daily overdose of cable network news, and you’d think the sky was falling in Austin. It’s not.

In the same way that a tiny bit of sleet shuts down all the schools and the entire government complex in Austin and UT, and everything comes to a halt, a few local layoffs combined with bad national economic news seems to throw a wet blanket on buyer confidence and bring out the doomsdayers.

And, some would say, I’m not allowed to say this because I’m “just another Realtor cheerleading the market”, but gosh darn it, interest rates are below 5%, first time buyers (or if you haven’t owned in the past three years) get an $8,000 tax credit until Dec 2009, there is a lot of good housing inventory to pick from, and if you’re willing to look hard for the right seller and not be too picky about your house, you can find a great deal on a home in Austin, right now, today.

Unless your job is in question, or you are financially unqualified, there is no set of market data or emotional logic that can defeat the undeniable benefits of buying a home in Austin right now.

I’ll leave on a final note with something I heard Warren Buffet say during an interview last week. He was talking about how he had no idea where the stock market was heading, and he said “I’ve never made a penny predicting where the market was heading or what it would do next. I’ve made my money by making smart buying decisions and protecting myself”.

Real estate buyers can do the same. Instead of trying to guess and time the market, staying on the sidelines waiting for a “better time”, just go make a smart purchase decision. Everything else will work out over time, unless that is, you think Warren Buffet is an idiot.

20 thoughts on “Austin real estate sales last 12 months”

  1. “All it takes it a few layoffs at Dell and AMD”

    It’s not “a few”. It’s thousands, really tens of thousands by now, Dell, AMD, Applied, IBM, Sun, etc.

    I work at a company that’s interviewing, and the quality and quantity of applicants has skyrocketed, even though we’re using a contract-to-hire model that most good candidates avoid.

  2. I worry that your stats are disguising a significant change in the mix of homes, anything that requires a jumbo mortgage seems to be dead, Austin stats look better because we have a broad mix of homes with a substantial and healthy lower end. It is a very different market for folks trying to buy and sell in between $350-550K and the below $250 market not to mention the crickets chirping at the $750 and above level.

  3. Hi Shireen,
    You’re right, if what you are suggesting is that there are multiple sub-markets within the greater Austin market that are performing much worse than the stats suggest. That’s true.

    I’ve tried to think of a way to report on that statistically. It’s easy to separate areas geographically and see, for example, that MLS Area LS has taken it on the chin because of too many custom builder homes in the $500K+ range, but more difficult to do so by price strata.

    I would need to figure out search criteria that return sales mostly over $500K in 2006/2007, then run the same search for 2008 and see what sort of sales volume decrease and price drop it reveals.

    I’ll add that to my list of stats ideas.


  4. …just to add a little more substance to my prior bullish comment of yesterday and also to the Feb sales uptick.. According to today’s Austin Biz Journal the US Census Bureau reports Austin-Round Rock area as 2nd fastest growing in the entire nation for 2007 to 2008 with population growth of 3.8%

  5. Steve,

    Once again, I think you are way too positive and not advocating enough caution to buyers. As M1EK has said, it’s not a few jobs, it’s tens of thousands of jobs. We’re losing thousands of jobs PER MONTH in Austin at the moment. I can and have cited plenty of statistics, but I think these pictures actually show what is happening around the country. Perhaps many of us don’t understand the implications of the statistics, so pictures from “in field” might explain it better.

    Now we have been fortunate to avoid this so far, but this economic malaise has JUST arrived in Austin. There are fundamental reasons why Austin’s economy is stronger than the rest of the country. But as I have been saying we are not immune. The global economic collapse that is going on is a much more powerful force.

    As you have pointed out yourself, we have already crashed in the higher price ranges and in the outskirt areas. These more resilient parts of the Austin market is so far still holding, but for how much longer? If unemployment goes from 6.4% to 10%, do you think those areas will hold? How about 15% unemployment? Don’t laugh. We might be there within a year or so.

    There is at least one more leg of the deleveraging process that will happen this year. It’s commercial real estate (CRE). It’s is the result of collapsing employment, which results in collapsing retail sales, store closings, and foreclosures on CRE. That is the next huge wave of bank losses that will be happening over the next year. It’s the next “shoe to drop” and the result is furthering constraining of credit. This might be enough to drive unemployment to depression era levels the same way residential real estate has driven unemployment to double digit levels in some states and cities.

    Talk to some people in CRE and they will confirm what is going on there…


  6. Hi Leon,

    Which month in 2009 do you think the stats will finally start to support the warnings you’ve been sharing here for so long? The bottom didn’t fall out in 2008. We are thus far ahead of 2008 in 2009. I do expect some slippage in 2009, but no more than 3% to 5% overall. What’s your take on what we’ll see and when we’ll see it actually show up in the data?

    Thanks. I always appreciate your comments.


  7. Leon,

    Once again, you keep chirping that bear mentality you walk around with. Yes, people are losing job and have been for some time. It has escalated in recent months. There is a percentage correlated to those jobs lost, but doesn’t mean that 10K new foreclosures will hit the market. People aren’t upside down in their homes in Austin as they are in most other cities. Who cares if they are upside down at this time if they plan to keep it for 5 to 7 to 10 years.

    You are think too short term for real estate. Rates are extremely low and will rebound to 8% or higher in the coming years to balance out inflationary pressures in 2010.

    The time to lock in 30 year fixed or buy a home is now. Prices will go up, rates will go up and the economy will swing back up soon.

  8. Nice thing about Tech workers, most of them are very frugal, live well below their means, and many buy houses with 50%+ down payments. These people will NOT dump their house at any price, and don’t really need to downsize to save money. They will not contribute to price drops.

  9. Jim,

    As a tech worker myself, I do agree with that. A high percentage of them are of foreign descent and don’t have the spending mentality of mainstream Americas. They make good money and put more of it away than typical Americans. They will be able to hold on for a longer time because they have larger savings to live off of. So yes, that’s a positive.


    The problem is that you can’t get to the long run if you can’t make it through the short run. This recession will test many peoples ability to hold onto their homes. You can’t hold onto your home if you lose your job and run out of savings. Yes, I believe you are right that 8% mortgages are coming. Interest rates will rise when foreigns decide to stop lending money to us. We are living off the good will of others at the moment.

    I am short US Treasuries at the moment via TBT. I may buy TIPS, in an attempt to protect myself from hyperinflation that might be coming.


    Timing is very tricky. The Feds are in all out printing mode; a trillion here, a trillion there. They are trying to get out of this recession by printing money. This will work in the short run. We will probably tick up in the next few months, but can it continue? Do you believe the government can borrow, spend, and print unlimited amounts of money? Obama is taking a huge gamble here that could end very badly in the form of the destruction of the global financial system.

    As to make a guess on timing, I’m watching 3 things closely at the moment. Unemployment, commercial real estate, and interest rates. We are still ok at the moment with 6.4% unemployment. If you want to know what we will look like if we reach 10%+, just look at what is happening in Michigan, which is at 11%…

  10. > If you want to know what we will look like if we reach 10%+, just look at what is happening in Michigan, which is at 11%…

    I think Michigan vs. Texas is apples and oranges. Texas in general and Austin in particular is a desirable destination for a wide cross section of demographics, both employed and not, working and retired.

    Michigan is a rusting and decaying industrial complex attractive to nobody I know. Who wants to move there, even to retire in a house that costs less than a car?

    What you see in Michigan is the more the cause for unemployment than the result.

    Texas meanwhile created 70% of all new jobs nationwide last year, and has 4 of the top 10 cities in economic performance.


  11. Steve,

    I wasn’t comparing Texas vs. Michigan. I fully agree that Texas is much more desirable place to be than Michigan. I was giving an example of what the landscape might look like in Austin if we reached 10%+ unemployment. We would look like what Michigan is today. If Austin did reach 10%, Michigan would be 15-20%. It would be depression style out there. Riots might start breaking out at those levels of unemployment.

    The latest news is scary:

    Signs are about that the government may not be able to borrow the amount of money it needs to pull off what they are trying to do.

    As for what I think we should do with our money, shorting the commercial real estate stock (i.e. SPG and VNO) on this week’s rally was a good entry point. I believe these guys will be looking like bank stocks (single digit stocks) in about a year from now.

    Once again, I’m shorting US Treasuries as I don’t believe the bond market will allow Obama to borrow the $1.8 trillion he needs and that will eventually send all interest rates higher.

  12. Leon,

    The problems you are running into here are two-fold:

    1) There is no risk to you if what you say is wrong. It’s easy to make anonymous predictions because there is no cost to being wrong. Jon Stewart recently took CNBC to task on exactly this point. The financial pundits there were in no danger from making wild speculations about the market, because there was no cost to them for being wrong.

    2) There are thousands of people on the internet saying thousands of different things. Chances are, some of them are right. For us, the observers, noticing that someone is right does not tell us anything about how good they are at making predictions. It only tells us that there is a huge population of people making predictions.

    To gain credibility, you need to:
    1) Put your money where you mouth is. We do not really care how or where you have invested. Your money, in this case, is your credibility. One method of establishing credibility would be your real name and contact info. I doubt you will give that info, so we will move to step 2.

    2) A long term track record. You have been making predictions here for a few months. That amount of predictions is useless. You need to have been making predictions for a couple of decades to have real credibility. Since that is not an option, consider step 3.

    3) A very precise track record. Saying the market will go down sometime this year takes no great competence. Be specific. Tell us that the national housing prices will decline 3.5% in May 2009, for example, and we can verify that. If you can not be that specific, then you are just being noisy.

  13. OK, Aaron,

    There is risk to me. I have real money positions in various brokerage accounts that reflect what I believe. If you want me to predict precisely how many % an asset is going to move, I can’t do that. I don’t have a crystal ball.

    Yes, we have different people with different opinions. You need that in order to have a market. Someone has to be on the other side the trade. Every buyer has to be matched up with a seller and one them will be proven wrong.

    I don’t mind disclosing some positions I have on and how I’m playing each theme. I don’t see how knowing my real name and address is going to help my creditability.

    Some of the major themes I have discussed here are:

    a) A coming collapse in commercial real estate. I have said I would play this theme by shorting the commercial real estate stocks. I am using VNO and SPG and have sizable short positions in these. I have said to start shorting these stocks when they were in the $40’s and $50’s. They are in the mid $30’s now.

    b) I believe interest rates will go higher as the government tries to borrow a massive amount of money by selling Treasuries. I would go long TBT, which is an inverse ETF. It’s a bet that interest are heading higher over time. There’s 2 ways to win here. A collapse, things go to hell, our country goes bankrupt, or the economy actually improves. In both cases, interest rates should move higher. But if we end up in a Japanese style recession where interest rates stay at 0% forever, then this position may lose money over time.

    c) Inflation will rear its ugly head with the government printing all this money out of nothing. I’m playing the inflation theme with gold, silver, oil, gasoline ETF’s and the stocks of companies that produce these commodities. GLD, GDX, SLV, OIL, DXO, etc. Also, real estate will eventually be good when inflation starts kicking in. It might not be good now because the de leveraging process may not be complete. But I believe the real estate market will eventually turn around, although not in a good way.

    d) Currencies. I believe the US Dollar is being debased. I want to be own the currencies of countries that have economies based on natural resources. I am buying Canadian and Australian dollars. I’m using FXA and FXC at the moment, but I am looking into either opening an account out of the country or simply holding physical currency (including US Dollars) in a bank vault as bank deposits may be at risk in a global collapse. Yes, that’s basically stuffing cash into a mattress, but since interest rates are so low on deposits (0.5% in a money market, why take the risk? I can always deposit it back into the bank if interest rates rise) the cost of doing so isn’t so great at the moment. This part of the portfolio is for liquidity and making sure I have access to my cash in case of a collapse and my money isn’t trapped in the form of a deposit at a failed financial institution. An example of this is Lehman Brothers. Some depositors couldn’t get access to their money for months as the bankruptcy courts try to sort out who gets paid.

    And yes, I’m not so arrogant to realize I could be wrong on some or all accounts. But isn’t that true for any of us? I’m just sharing what I believe, some facts that back what I believe, and some investment ideas on how to play these themes. We all have to make our own judgements as to what to do with our money…

  14. Thanks for the comments. I assume everyone wants the same financial outcome in life, which is to build wealth and preserve it, and eventually reach a financial freedom point, where working is for fun and extra spending money only. There is more than one right way to accomplish that.

    I don’t spend as much time as you Leon trying to “play” the market. I have Roth and SIMPLE IRAs for both me and Sylvia, all in low fee Vanguard funds that automatically adjust the allocations as we age. I don’t even think about or look at the performance very often. Google is the only stock I own outright in an after tax account.

    Everything else we do and have ever done is real estate investing and building and selling businesses. Our stocks are worth less than the total lifetime invested amount while our real estate has done well. That shapes my opinion on how best to build wealth.

    Maybe stocks will beat the pants off of real estate over the next decade, who knows. I think real estate will always be the best vehicle for growing rich slowly and I don’t think it matter when people buy, just how much you pay and whether that was the right amount for when you bought.


  15. Leon,

    You are missing the point. You have frequently made doomsday scenarios here, but there is no reason anyone should pay attention to you. In order to have credibility, someone has to:

    1) Have someone on the line. In a anonymous public forum, the only one who has credibility is Steve, because it is his blog. (stating that you have investments means little here, because we have no hard evidence to back it up)
    2) Have made generally correct predictions for a really long time. This forum has not been up long enough for that to be the case.
    3) Have made really correct predictions for a shorter time. Since no one is making specific predictions, that is not applicable

    Let’s say you are right and the market crashes (even more) in a few months. That doesn’t prove that you were making good predictions. That only shows that you could have been (at least) making lucky predictions. Maybe you have fantastic insight, maybe not. You have not been doing it long enough to prove anything.

    Let’s say you are wrong and the market gets better and better. That doesn’t prove that you are bad at making predictions. Even the best weathermen and investors (i.e. Warren Buffet) are wrong sometimes.

    By all means, make predictions and back them up with facts. We all like to learn as much as we can about the economy. Just try not to come across as self-righteous about your economic views, it demeans your position and credibility (see #1-3 above).

  16. Aaron, I have found his ‘doomsday’ scenarios to be based in logical facts about the economy – and no more or less self-righteous than your views. It’s not that the default position is “real estate yay!” and anything else must be self-righteous, after all!

  17. Aaron,

    “By all means, make predictions and back them up with facts. We all like to learn”

    Haven’t I been doing this all along? My conclusions come from data I’ve cited from the Texas Workforce Commission, other state labor agencies, Bureau of Labor, Steve’s stats on his blog, and various statistics from various news sources. Instead of being self-righteous, I’ve advocated caution and patience as I believe things may still get worse from here.

    I disagree with Steve that this is a good time to buy because

    a) The macro economic picture has been terrible and is still deteriorating. I think we all can agree on that, even the bulls that are among us.
    b) Unlike in California, Nevada, Florida, Arizona, prices in Austin on average have not dropped by a whole lot. In these other states prices have dropped 40%-50%. I don’t think Austin needs to go down 50% because we never had the run up in those other states, but…
    c) According to Steve’s stats, prices are actually UP for the first 2 months of the year. According to Steve, it’s not really easy for buyers to get a great deal.

    Now we know that the economic picture in Austin is deteriorating along with the rest of the country, but prices are the same or up on average according to Steve’s stats. Paying a higher or the same price when the economic fundamentals are deteriorating doesn’t sound like a good investing strategy to me.

    In fact, if you want to bet that real estate has bottomed, I feel California and Florida real estate might be a better buy than Austin at this point even though their economies are far worse at the moment because prices there have come down so hard. It’s easier for buyers to get better deals because there are more desperate and forced sellers in those markets.


  18. I very much agree with Leon too. I’m short commercial real estate and I think the worst is far from over with the ecomony. I think the resource rich countries’ currencies will recover against the USD 1st and USD will eventually plummet. There were people that predicted the current stock market/real estate cricis except their timing was off–meaning they were teling us that the sky was falling for 3-4 years–and for the right reasons–i.e. credit expansion of an unprecedented level around the world.

    As about Austin real eatate….I’m still wondering what to do with them because ours is not underwater, and with the $8000 tax benefit for the new buyers it may pick up a bit this year. I like the tax deduction (paper loss) we enjoy and it costs 7% to sell. It’s a terrible feeling not being sure what to do. Hopefully it’ll stay somewhat flat for the next 3-4-5 years and it starts to pick up again. We’ll see.

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