The Austin real estate market ended the 1st quarter of 2010 with a 5.9 month supply of single family homes for sale. This is up from 4.6 months in the 4th quarter of 2009.  Rising supply during the first part of the year is part of the normal real estate cycle.  Homes tend to enter the market in greater volume during first two quarters, and the inventory whittles down during the year.  (The 1st Quarter of 2009 also had 5.9 months of supply.)  This supply level reflects a market that is in equilibrium.    

However, our real estate market varies by area and price range.  We may have frequent multiple offer situations in one area, and see slower movement in another area or price range.  So we looked at the market closely, and checked the median price, foreclosures, and months of inventory for each section.  Here is the state of the market at the end of the 1st Quarter, 2010, section by section:

1st Quarter, 2010, Market Report

Sellers Markets: 1 - 3 months of supply

There were 6 areas with sellers’ markets in the 1st quarter of 2010, down from 13 areas in the last quarter of 2009.  All of the seller's markets are in the close-in suburban parts of Austin – both on the south and north sides. These close-in suburban neighborhoods have always had strong demand and tight inventory. Builders are limited to remodels or some infill construction, so inventory is not being created as fast as it is in areas that have lots available. 

Balanced Markets: 4 - 6 months of supply

There were 23 areas with balanced markets - up from 22 in the last quarter of 2009. The balanced markets were distributed through the central core, close-in-suburban, and outer-suburban neighborhoods.  There is some new construction in these areas – which increases the supply side.  But, readily available mortgages and homebuyer credits tended to bring people into the market.  Also, the concern that interest rates will rise helped to fuel the demand side, and will continue to do so in the coming months.

In the central core neighborhoods, inventories tend to be balanced, except in the upper end price range.  For example, in the close-in part of Westake, there is only a 5.2 month supply of homes under $800,000, with a 14.8 month supply over $800,000.

Buyers Markets: 7 + months of supply

There were 17 buyers markets – up from 11 in the last quarter of 2009.  Generally, these neighborhoods have more new home construction available - which increases supply. And, all sections with upper end homes continue to have higher inventory levels.  

Upper End Market:

Areas with many homes above $800,000 include Central and Northwest Austin, Westlake, Barton Creek, and Lake Travis. These neighborhoods have been popular locations for speculative building or remodeling.

Although most builders have slowed or stopped speculative high end building, the supply has been slow to tighten.  Tight lending requirements for jumbo mortgages have reduced demand for this segment of the market.  And, the recent move-up buyer credit did not stimulate this market because it was capped at $800,000. 

The good news is that upper end inventory in the central areas has moved down - compared with the 1st Quarter of 2009. So we can see that 2010 begins with better numbers in the central neighborhoods - where demand usually begins to tighten, before it spreads to suburban areas.   

Foreclosures:

On average, foreclosures this quarter are 3.3% of listings on the market, which is not a significant part of our market. (2009: 1st Q - 3.7%; 2nd Q - 3.6%; 3rd Q – 3.1%; 4thQ – 4.6%) However, foreclosures in some outer-suburban areas may be 8% to 10% of their local market. These include the Manor, Elgin, Bastrop and some Southeast areas. These areas were popular with first time homebuyers, and were also targeted by investors during the boom market. The good news is that these neighborhoods do not have very high inventory levels. This indicates that their foreclosures are being absorbed quickly and inventory is not building up. 

Although we don’t have a serious problem in Austin, across the nation about 4 million homeowners are behind on their payments, and more foreclosures are predicted to come on the market. Foreclosures are the end of a long pipeline.  When they return to normal levels, we will know that deeper problems have been solved.