Austin Real Estate Market: 4th Quarter 2009

The Austin real estate market continued on an even keel through the 4th quarter of 2009, with an overall supply level of 4.6 months, down from 5.7 months in the 3rd quarter. We normally see a drop in supply during the last few months of the year, so the market is behaving as expected. Here is a map showing the variations in the Austin market by area: 4th Quarter 2009 Market Report

Sellers Markets: 1 - 3 months of supply

There were 13 areas with sellers’ markets in the 4th quarter, up from 9 areas in the previous quarter. Most of the sellers’ markets were in central core neighborhoods and close-in suburban parts of Austin – both on the south and north sides.

The central core and close-in suburban neighborhoods of Austin 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.

In central core neighborhoods, where upper end homes are available, we see two types of market side by side. For example, in the close-in part of Westake, there is only a 2.8 month supply of homes under $800,000, with a 10.5 month supply over $800,000.

Balanced Markets: 4 - 6 months of supply

There were 22 areas with balanced markets - up from 17 in the 3rd quarter. The balanced markets were distributed through the central core, close-in suburban, and outer-suburban areas. There is new construction in these areas – which increases the supply side. But, readily available mortgages; first-time and move-up buyer tax credits; and low interest rate loans have fueled the demand side. So we saw many neighborhoods with balanced markets in the last quarter of the year.

Buyers Markets: 7 + months of supply

There were 11 buyers markets at the end of the 4th quarter – down from 20 in the 3rd quarter. 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. We attribute this mainly to the more stringent qualification for jumbo mortgages.

Upper End Market:

Areas with homes over $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 building in the high end, the supply has been slow to tighten. This is because jumbo mortgages are not as readily available. Also, buyers in this market are often unable to sell their home in another state, requiring them to rent when they arrive in Austin.

However, you can see from the chart below that upper end inventory dropped by almost 50% in the 4th quarter. We went from an average of 30 months supply in 3rd Quarter to 16 months in the 4th Quarter.

Months of supply on the market for homes over $800,000:

                 1st Q       2ndQ       3rd Q       4th Q

Area 1B    25.1         28.7         27.2       14.4

Area 8E    21.0          21.6         17.8     10.5

Area 8W   22.1         23.7          24.6      15.8

Area W     24.0         25.8          20.7      12.6

Area LN    34.0        40.4          56.6       42.9

Area LS     28.8        38.8          41.1       25.0

Area RN    18.6        20.2          20.9       17.1

Foreclosures:

On average, foreclosures are 4.6% of listings on the market, which is not a significant part of our market. (1st Q - 3.7%; 2nd Q - 3.6%; 3rd Q – 3.1%) However, foreclosures in some outer-suburban areas may be up to 8% to 12% 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.

Conclusion

Texas is out performing every other state in the country. This is clear from this graph, showing appreciation rates during 2008 and 2009. Most parts of the country had their worse decline in 2008, followed by a further slump in 2009. Texas has stayed at par during these two difficult years.

Austin is the crown jewel of Texas. It offers an entrepreneurial culture, employment opportunities, and a high quality of life. Of course Austin has faced a depression, just as any other city. But, our real estate market has had less price depreciation than nearly any other city. Compared to similar “idea cities,” Austin has always been affordable.

Joel Kotkin, whose research appears on Forbes, ranks Austin as the best big city for jobs. He says, “Few places have received more accolades in recent years than Austin, the city that ranked first on our list of the best big cities for jobs.” And, Forbes just listed Austin as #2 in Best Cities for Recovery.

For buyers in all price ranges it is time to take advantage of the best interest rates in a lifetime, plus the first-time and move-up buyer tax credits. It is a great time to own a piece of a great place to live - Austin!

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