Buyers often want to know which areas of Austin are more likely to hold value and/or appreciate over time. Not just investors, but home owners who want build home equity. My standard answer to this question is usually “stay as close in to Austin’s core (downtown) as you can afford, in neighborhoods that are established and mature (not brand new), and which attend the better rated schools”.
If a buyer in Austin follows those rules alone, her home will appreciate or hold value as well or better than the greater Austin real estate market, over time, in most cases. Of course a buyer can pick the wrong home in the right neighborhood, or find a great deal in a lesser neighborhood, but assuming she stays in the median to average price/size range with a home that is standard for the neighborhood (not too big or too different), it will work out in the long run.
So how do you, as a reader, know that this rule of thumb holds up? Can I prove it? Yes, I can.
Today I’m going to revisit two neighborhoods that I compared three years ago, Circle C Ranch and Avery Ranch. Circle C Ranch is a Southwest Austin neighborhood that perfectly matches my buyer’s rule of thumb. Avery Ranch is a quality neighborhood as well, but not one I normally recommend to buyers because 1) it’s too far outside Austin’s core, 2) it’s too new, and 3) it was oversold to investors from the outset through 2007 when investors in Austin dried up.
So let’s take a look at the stats for these two neighborhoods and see how they stack up against each other as well the Austin real estate market at large.
|Austin Subdivision Sales Comparison|
|Circle C Ranch (SW Austin) vs. Avery Ranch (NW Austin)|
|Houses Only – Jan through Aug 2008/09 Sales – Data from Austin MLS|
|Circle C Ranch||Avery Ranch|
|2009||2008||% Diff||2009||2008||% Diff|
|Avg $ SQFT||$112.29||$119.18||-5.78%||$102.39||$109.29||-6.74%|
|Not Sold %||31%||30%||4.20%||42%||38%||9.87%|
|Prop Tax Rate||2.18%||2.51%|
The above chart compares the Jan-Aug sales activity for 2009 compared to 2008 for both neighborhoods. What we see is the following:
Number of Sales: Number of sales for the entire Austin MLS is down 17% YTD for 2009. Sales volume in Circle C is down 8.38%, much less than the area average. Avery Ranch number of sales are down 37% for 2009 compared to 2008, more than double the area average. Avery Ranch is suffering disproportionately to the rest of the market during this slowdown, while Circle C remains stable and is holding up in sales volume better than the Austin market as a whole.
Average Sold Values: Values in the Austin market overall for Jan-Aug 2009 are down 3.25%. Circle C is down 3.68%, slightly worse than the Austin MLS average, but not bad considering the average sales price is is in the $300Ks, which has been a slower selling price range. Avery Ranch, even though it enjoys a lower average sales price of $267K, is down 8.17% so far this year, doing much worse than the market overall or Circle C.
Median Sold Values: Median values are similar to the average sold prices. Avery is doing far worse than Circle C with a 6.4% decline in median values compared to a 2.27% decline for Circle C. The overall median decline for all of Austin is -0.72% for Jan-Aug 2009.
Sold/List Price Ratio: Homes in Circle C are selling for 97.02% of final list price. Homes in Avery Ranch are selling for 96.55% of list value. Almost close enough to call a tie, but Circle C still wins. Austin overall is selling for 95.67% of list price, so both Avery Ranch and Circle C are doing better than the overall market in this category.
Average Price per sqft: At $112.20 average sold price per square foot, Circle C has declined 5.78% on this measure compared to the same time period in 2008. At $102.39 psf, Avery Ranch has declined 6.74% on this measure. The Austin market overall is down 5.28%, so both neighborhoods did slightly worse than the overall market on this measure. This may be because in both neighborhoods the average home size is much larger than Austin as a whole, and the larger homes have taken the biggest price hits in the past two years.
Days on Market: Circle C homes sell in 73 days on average, 46 days median, slightly better than the citywide average. Avery Ranch homes sell in 80 days average, 55 days median, worse then the citywide average of 76 avg and 48 median. Circle C takes this category as well.
Not Solds: For 2009 in Austin overall, 43% of the listings departing the MLS are doing so as failed sales efforts (expired or withdrawn). For Circle C, the rate of failure for sales listings is 31%, well below the city average. For Avery Ranch, the “not solds” are 42%, slightly better than the citywide average but much worse than Circle C.
Property Tax Rate: Circle C has a property tax rate of 2.18%, meaning a home valued at $300K will have an annual tax bill of $6,540. Avery Ranch has a tax rate of 2.51%, meaning a $300K home will have a property tax bill of $7,530 per year, or $627.50/mo if you’re paying into an escrow account with your mortgage each month. The home owner in Avery Ranch will pay $990/yr more ($82.50/mo) in property taxes than the owner of a $300K home in Circle C. To be fair, the $300K home in Avery Ranch will be slight bigger due to the average price per square foot in Avery being about $10 cheaper.
HOA Fees: Circle C has slightly higher HOA fees at $472 compared to $408 for Avery, though the exact amount seems to vary somewhat from home to home in the MLS listings. Avery gets the edge for cheaper HOA fees, but it’s more than washed out by higher property tax rates. Most would also say that Circle C provides more amenities, pretty drive in, landscaping, hike/bike trails, etc., though this is subjective.
Conclusion: Circle C Ranch in SW Austin wins the contest based on better stats and market resliliance.
Does this mean Circle C Ranch a “better” neighborhood than Avery Ranch? It depends. If you’re an investor looking to spend $235K to $275K on a good quality home that will attract good quality renters and appreciate well over the next 10 to 20 years, I recommend Circle C over Avery Ranch without hesitation, because of the aforementioned reasons.
But if you’re a young couple with small kids and you work up in the NW Austin Tech Corridor and all your friends and family also live in North Austin, Avery Ranch offers good schools (Round Rock or Leander) and would be a better choice due to factors other than those considered by a pure investor. You just have to be more careful with the exact home you pick, and I’d want you to have at least a 5 year time horizon before reselling.
This my first official “Austin Subdivision Smackdown’. Next up … well, I’m still thinking about it. Suggestions are welcome.