A Closer Look at Failed Listings in Austin 1999-2009

We all know that some Austin MLS listings don’t sell. The reasons vary, but when demand is insufficient to absorb supply, the prettier better priced homes win, and the sellers who love their homes, and express that love and devotion through too-high list prices, get to continue the romance.

Let’s see what that looks like when put on a graph.

This is one of my favorite real estate statistical charts. The relationship between the number of successful sales efforts and the number failed sales efforts in any given market tells us a lot. This graph shows what happened to the relationship of success/failure of Austin’s MLS listings immediately following dot.com boom, 9/11 in 2001, and the subsequent bleeding out of jobs over the next few years. The real estate market became saturated with homes for sale as people had to leave Austin to find jobs, and new people stopped coming.

If you’ve seen the Austin real estate sales history graph that I post every month, you’ll know that home values stayed flat from 2002 through the end of 2005. Volume held steady during that period, but prices were flat while the rest of the country had its massive real estate bubble.

For Austin, there was no bubble. Instead, we suffered with too many homes for sale, not enough buyers, and thus in 2003 the number of listings that departed the Austin MLS as failed sales efforts (Expired or Withdrawn) actually exceeded the closed sales for the entire year. Austin sellers had it rough in 2003.

We’ve recently seen this inverted Sold/Not Sold ratio a lot during recent months throughout 2008 and 2009, but neither year ended with more total failed sales than successful sales. So, in that regard, these past couple of years haven’t been as bad as 2003.

Wanna know what happened to all those unsold homes in Austin between 2002 and 2005, back when foreclosing or short selling was still such a shameful event that sellers knuckled down and figured out how to hang on? A bunch of them became rental properties. This in turn caused a severe over-supply of Austin’s rental home market. Simultaneously, the in-migration that feeds the rental market stopped cold, and the chart below shows the result.

When people can’t sell their homes, and still have to move, and are too proud or unwilling to go into foreclosure, the home becomes a rental. At least, that’s how it use to be. And the above chart explains why 4 bedroom homes that leased to Dell employees in Round Rock for $1,500/mo. in year 2000 were lucky to fetch $1,250 by 2004. Our rental home market in Austin is still climbing back slowly.

Returning to the subject of Not-Solds, in January 2010 we had an inverted Sold/Not Sold ratio. Sylvia and I continue to run into large numbers of over-priced listings as we help buyers look for good values. Some of these listings are actually selling for too much as some buyers operate under the odd believe that it makes sense to pay $16K too much for a home in order to receive an $8K tax rebate. April 30th is going to be a wonderful day, when government meddling in our real estate market ends, hopefully for good, and the over-motivated buyers leave the market.

Meanwhile, I’m not sure what to make of a real estate market that produces a 5% increase in sold prices, and improvement in almost every performance metric while simultaneously giving the finger to 54% of the departed MLS listings, which failed to sell. When more than half the listings in a market cannot find buyers, prices should be dropping, or at least staying flat, not rising 5%.Blame it on the tax credit buyers, bent on trading negative equity for $8K in the pocket.

So it’s with sober caution that we advise current Austin buyers to be willing to walk away from over-priced homes, no matter how frustrating it might feel when it seems inexplicably difficult to find properly valued homes. But it’s not going to surprise me if Austin prices continue to rise through May, then start dropping again, or flatten out, as incentives go away and interest rates rise and we begin the slow return to normalcy in market behavior.

If you’re a seller, get your home on the market, now, and you might get lucky and snag a buyer willing to pay top dollar or more.

Someday in the near future, I’ll be able to post a chart that shows increasing separation month over month of the Sold vs. Not Sold listings. That, to me, will be an indicator that the market might be gaining true, valid strength and returning to normal behavior, where Not Sold equal less than 40% of all departed listings.

5 thoughts on “A Closer Look at Failed Listings in Austin 1999-2009”

  1. Yes, it is an odd market. Two neighboring homes are on the market, both over priced by nearly $40K. One was on the market two years ago for nearly a year, never sold at its inflated price, it was leased for a year and is now back on the market, at 10K less than before but still over priced. Another house has been on the market since October, they won’t lower the price but are now paying to have home managers/stagers live there. Which is silly because at their price they are not getting any showings. The first house is owned by an agent, the second has an agent that has tried to talk them into a lower price but they won’t budge. Now, a third home is coming on the market and it is also agent owned but by a savvier agent, I expect a price much closer to reality and once it sells the low comp is going to shock the other two.

  2. How do you calculate how many homes didn’t sell? In many cases, an expired listing will reappear the next day at a lower price and eventually will sell. Many listings also stay on the market for a year or more before selling or expiring. They were priced according the market in one year, but contribute to next year’s statistics.

    These statistics can be very misleading and are hard to track.

  3. Hi Shireen, your examples sound typical.

    Hi Jim,

    How do you calculate how many homes didn’t sell?…These statistics can be very misleading and are hard to track.

    the Not Sold formula is simple.
    Expired+Withdrawn = Not Sold.
    Sold + Not Sold = Total departed listings for the measured time period.

    We’re measuring listings, not homes, so while a home might be represented first as a Not Sold then later as a Sold, that first particular failed listing departed the MLS as a failed sales effort. Whether it succeeded later as a different listing doesn’t matter, we just look at the *listings* that departed the MLS at any given time.

    In a balanced market the percentage (Not Solds divided into Total Departed) of Not Solds will be down in the 30s % range. When it’s over 50%, that’s a rough market for sellers.

    Hope that makes sense.


  4. “April 30th is going to be a wonderful day, when government meddling in our real estate market ends, hopefully for good, and the over-motivated buyers leave the market.”

    May 1st will definitely be an interesting day… I didn’t take a day off in February. And March has been almost as busy. But the question I continue to raise: How many Sellers would have listed in May/June but moved up the time table to try to take advantage of the Tax Rebate? Is this rush of sellers merely the clients I would have helped later? Or are they new sellers who want to move up and get $6500 credit? Lots of questions… I’m a Cynic at heart – and my heart tells me, don’t bank on things continuing the way they are.

    On the same note, I think it will interesting to see what happens to prices the last two weeks of April. Will sellers drop to get contracted by the deadline? Will buyers run around making low-ball offers? I wouldn’t want to be in your shoes next month.

    Then again…

  5. > How many Sellers would have listed in May/June but moved up the time table to try to take advantage of the Tax Rebate?

    Hi Michael,

    I don’t think the move-up buyers are affected at all by the tax credit, unless by accidental good luck. I don’t think $6,500 motivates anyone to both sell and then buy a home.

    But, as a seller myself, I do think overall the market will be busy in April which is why we have our house on the market now insteaf od waiting untill May. Mainly I think the interest rates will start creeping up and create some late spring/early summer demand. But I can only guess, as we’ve never had this many external factors affecting off-season demand.



Leave a Comment