Austin Real Estate Market: 4th Quarter 2010 | Roselind Hejl's Austin Real Estate


Austin Market: 4th Quarter 2010
A Rebuilding Year

The collapse of the subprime bubble in 2007 began a chain of events something like this: Sudden loss of loan funds = fewer buyers = unsold homes on the market = price reductions = loss of equity = foreclosures = more loss of value = fear of even more loss of value = buyer hesitation. This is a difficult chain to break. But, I think the chain was broken here in Austin, and the tipping point was late 2009. Price Appreciation: In 2010 we saw a gradual reduction of housing supply. This was fueled by newcomers moving into the city; investors buying foreclosures; incentives for first time homebuyers; and low interest rates. With the market in balance, prices stabilize. Here is the average sale price for a single family home: 2010 $253,151 Up 4% 2009 $242,690 Down 2% 2008 $247,767 Down 1% 2007 $250,436 Up 6% 2006 $235,738 Up 10% 2005 $214,946 Up 6% Number of sales in the Austin area: In 2007, the sudden loss of funding for loans greatly reduced the number of homebuyers. Naturally, the number of transactions declined to a new normal. Often the newspaper reports that fewer transactions are happening - therefore prices will fall. This is not necessarily so. The market will re-balance. Sellers and home builders control the market by reducing the number of homes available. Right now the builder inventory is at 1993 levels! Lot development has also been very slow in recent years. So, in the near future we may reach a point of real shortage of new home inventory. Here is the trend for number of sales in MLS: 2010 17,905 Down 5% 2009 19,005 Down 6% 2008 20,199 Down 20% 2007 25,245 Down 7% 2006 26,958 Up 10% 2005 24,539 Up 18% Months Inventory for Single Family: “Months of inventory on the market” reveals the balance point between supply and demand. It is the number of months that it would take to sell ALL homes on the market, using the sales rate over the past 12 months. This metric is best looked at in small geographic areas because there can be a lot of variation. Here is a look at the Austin market:
Months of Inventory by Areas
The big picture is this: At the end of 2010, the overall Austin market remained balanced, with 5.1 months of inventory. At year end, 10 sections had seller’s markets; 9 had buyer’s markets; and 27 had balanced markets. Foreclosures: The number of foreclosures rose during the 4th quarter – to 7.8% of listings. This is a relatively low percentage - some cities have dealt with up to 46%. Foreclosures are the residual of market issues. The bursting of the subprime bubble in 2007 generated the conditions for foreclosures. From time of default, they take about a year to come on the market for sale. They must come through the pipeline. Clearing the market of foreclosures is a pre-condition for recovery. When that pipeline is clear, our market will rebound – and it will rebound fast. I saw this happen in 1989 when Austin was hurt badly by the savings and loan crisis. Here is the trend on foreclosures: 2009 Q1 - 3.7% Q2 - 3.6% Q3 - 3.1% Q4 - 4.6% 2010 Q1 - 3.3% Q2 - 3.9% Q3 - 5.0% Q4 - 7.8% Upper Price Range: Upper end inventory has been the slowest part of our market to balance out, although we now see some tightening in central areas. Here is the trend on homes over $800,000: 4th Q 2009 4th Q 2010 Months Supply Months Supply Area 1B 14.4 7.5 Area 8E 10.5 9.9 Area 8W 15.8 14.7 Area RN 17.1 17.9 Area W 12.6 13.3 Area LN 42.9 31.4 Area LS 25.0 21.9 Looking Forward to 2011: With prices down, new buyers and move up buyers are in a great position. We also see investors coming into the market. Not just professionals, but everyday people. They are planning for long term appreciation; hedging against inflation; and locking in these great rates. Austin is a perfect place for home ownership for the long term. Here’s the reason why: “For sheer economic promise, no place beats Texas. Though the Lone Star State’s growth slowed during the recession, it didn’t suffer nearly as dramatically as the rest of the country. Businesses have been flocking to Texas for a generation, and that trend is unlikely to slow soon.” (Newsweek - Joel Kotkin, 11/8/10) (Also see my interview with Joel Kotkin.) If you have a real estate question, please feel free to call or email. A big thank-you to all of you who have sent us friends and associates who need to buy or sell houses! Keep sending! Join me on Linkedin and Facebook