Austin Real Estate Market Trends:
Articles By Roselind Hejl

The Austin real estate market is touted as one of the best in the country.  Our strong real estate market is supported by a healthy job market.  Job growth is in turn propelled by a high quality work force, availability of housing, and desirability of Austin as a good place to live and work.  Several studies during the past year have confirmed this:

American Business Journals analyzed employment trends in the nation’s 100 largest labor markets, and placed Austin in the #2 spot.

The Milken Institute, an economic think tank, ranked Austin-Round Rock #4 on their list of top performing cities.  Their study looked at where jobs are being created in America, as well as salary growth, high tech output, and other factors.

Forbes Magazine named Austin #2 on their list of Best Cities to Buy a Home, and #3 on their list of Most Recession Proof Cities.  “This state capitol is a hip area on the rise,” they say. 

Austin did not have the run up in home prices that occurred over the past five years in many cities.  From 2000 to 2004, Austin was recovering from the slow down resulting from the dot.com bust of 2000.  The dot.com implosion was fairly localized, and many parts of the country did not notice it.  However, Austin experienced elevated inventory and flat appreciation levels during that time. 

When the real estate market began to heat up in 2004, there were lots available for builders to increase inventory and balance the demand with supply in suburban areas.  In the central neighborhoods of Austin, where supply of homes was tight, we did see some double digit appreciation.  However, the overall home price appreciation for Austin in the peak year of 2007 was about 7%.  This is up from our usual 5%-6%.

During 2008, the Austin real estate market slowed down in response to the credit crisis affecting the country.  The number of home sales in 2008 dropped by about 20% compared with the previous 12 months.  This needed to happen in order to bring supply and demand back into balance.  Builders have slowed construction, and are working on selling existing inventory.  To be sure, neighborhoods where there is an oversupply of homes will experience longer marketing times for the near future.   

One of the key ways to gage the condition of the market is to estimate the number of months of inventory on the market for sale.  In the Austin area as a whole, we have about 6 months of inventory on the market.  This means that it will take about 6 months to sell the current inventory, given the sales rate of the past 12 months.  Since 1990, the inventory of homes for sale has been in the range of 4 – 6 months, most of the time.  In the peak of the dot.com boom (early 2000) we were down to about 2 months of inventory, and in the worst of the dot.com bust (mid 2003) we averaged just over 7 months of inventory. 

Six months of inventory is considered a balanced market.  Of course, inventory levels vary throughout Austin.  Areas that have higher levels of inventory are often the more popular neighborhoods where builders anticipated lots of demand.  These neighborhoods are going to be buyer’s markets for the near future, but they will eventually come back into balance.  This has happened before.  Austin is a resilient economy.

Certainly, the financial uncertainty that is happening now has created a lull.  But, we can expect to see some pent up demand when the national economy stabilizes.  The important thing is that we have good market fundamentals in Austin.  This is recognized by study after study.  We have had market slowdowns before, and have come back strong.  We are down from a recent peak, but are settling into a normal, balanced market.  There are plenty of people with jobs, good credit, and funds for a down payment who want to live and work in Austin.

See months of inventory data by neighbohoods: Austin Market Status - 2008