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.
| Austin Real Estate Sales Market Update | ||||
| Homes only (condos, duplexes, etc. not included) compiled from Austin MLS data | ||||
| Oct 2009 | Nov 2009 | Nov 2008 | Yr % Change | |
| # Sold | 1737 | 1491 | 970 | 53.71% |
| Avg List | $251,148 | $252,650 | $251,828 | 0.33% |
| Med List | $189,900 | $185,000 | $194,950 | -5.10% |
| Avg Sold | $240,730 | $242,131 | $238,915 | 1.35% |
| Med Sold | $184,300 | $180,000 | $186,225 | -3.34% |
| Sold/List % | 95.85% | 95.84% | 94.87% | 1.02% |
| Avg SQFT | 2105 | 2111 | 2170 | -2.72% |
| Med SQFT | 1895 | 1900 | 1973 | -3.70% |
| Avg $ SQFT | $114.36 | $114.70 | $110.10 | 4.18% |
| Avg DOM | 69 | 72 | 76 | -5.26% |
| Median DOM | 47 | 44 | 55 | -20.00% |
| # Expired | 527 | 472 | 675 | -30.07% |
| # Withdrawn | 756 | 832 | 849 | -2.00% |
| Not Sold | 1283 | 1304 | 1524 | -14.44% |
| Not Sold % | 42.48% | 46.65% | 61.11% | -23.65% |
Look at the whopper of a 53% increase in the number of sales for the same month a year ago. That would not have happened without government meddling. This is what I mean about the “market” update being reflective not of ordinary market behavior, but of an artificially stimulated desire to purchase during a traditionally slower time of year. Of course Nov 2008 was a depressed month due to the financial turmoil, and now Nov 2009 is a stimulated month due to tax incentives and low interest rates. So we’re left comparing two abnormal months against each other.
Nevertheless, the average sold price is up 1.35% from Nov 2008 while the median sold price is down 3.34%. The average sold price per square foot rose 4.18% (smaller homes selling for more). The Not Sold (expired/withdrawn) were at 46.65% for Nov 2009, way down from the incredible 61% of Nov 2008.
Let’s see how we’re doing year to date.
| Austin Sales Market YTD Update – Nov 2009 | |||
| Houses only (no condos, duplexes, etc) – Data from Austin MLS | |||
| Jan-Nov 09 | Jan-Nov 08 | Yr % Change | |
| # Sold | 17222 | 18577 | -7.29% |
| Avg List | $255,711 | $262,151 | -2.46% |
| Med List | $195,990 | $199,500 | -1.76% |
| Avg Sold | $244,718 | $252,153 | -2.95% |
| Med Sold | $190,000 | $192,900 | -1.50% |
| Sold/List % | 95.70% | 96.19% | -0.50% |
| Avg SQFT | 2170 | 2144 | 1.21% |
| Med SQFT | 1963 | 1950 | 0.67% |
| Avg $ SQFT | $112.77 | $117.61 | -4.11% |
| Avg DOM | 74 | 66 | 12.12% |
| Median DOM | 47 | 44 | 6.82% |
| # Expired | 5061 | 6656 | -23.96% |
| # Withdrawn | 7906 | 8131 | -2.77% |
| Not Sold | 12967 | 14787 | -12.31% |
| Not Sold % | 43% | 44% | -3.09% |
Year to date number of sales are down 7%, average sold price is down 2.95% and median sold price is down 1.5%. These are not bad numbers given the economy and as compared to just about anywhere else in the U.S. The average price per sqft in Austin is down to $112 psf from $117 psf for the same period last year, about a 4% drop. Our “Not Solds” (expired/withdrawn) are down slightly at 43%.
Below is Austin a graph of real estate since 1999 through Nov 2009.
Knowing that real estate runs in cycles, the appreciation from 1999 through today is not something long term real estate owners and investors are complaining about. That bump in 2007 doesn’t look good for people who bought in 2007 and had to sell in 2009, but your not supposed to buy real estate if you’re only going to keep it 2 years. Note that the former years are full years and while 2009 is through Nov. In a week or so I’ll complete the full year 2009 set of stats, including breakdown by MLS area, and we’ll see how we finished out the year.
I am you on this. The government is artificially increasing demand for housing within a constrained amount of time in the lower end of the market (<250k) by using the 8k tax credit. People who are buying higher-end homes could care less about the 8k credit since it's such a small portion of the total price.
As we know, higher demand results in better prices as competition increases; thus, the 8k credit aims to stop housing prices from falling.
However, this will have the opposite effect once the 8k credit expires because the lower-end market will have no buyers, which will increase inventory, and will probably result in lower home prices. Obviously, people who bought during the 8k credit time frame will see their property values decrease and more people will be under water.
Hi Brett,
Yes, and unfortunately, if your theory proves out, the price drop will be not from a market value but from an inflated value caused by the artificial demand created by the $8K tax credit. Back in Oactober we were seeing a lot of multiple offers on houses that noirmally would not be receiving that much attention. Thusly, many sold for list price or higher as the $8K buyers competed against each other and created a seller’s market in the sub-$200K homes in desirable areas.
Also, unfortunately, the government boondoggle did nothing to help the really struggling areas further out, as those prices continued to fall.
Steve
People are out-bidding each other and end up paying 20k over the market value to get a 8k credit… that math makes no sense!
78745 and 78749 were not always ‘hot’ in the real estate market for obvious reasons, but it seems properties are selling quick and with multiple offers
You think TCAD will be honest enough to subtract the $8K from their comps – yeah I didn’t think so either. I will definitely be pushing that scenario when it comes time to protest again.