What's Up with Austin, Texas Real Estate?

What's up with Austin real estate, you ask? Well here is the scoop:

It has been past few months for the Austin real estate market. As you know the first-time home buyer tax credit was in full force the spring. The market was active and we saw buyers in all price ranges. Although, much of the activity was not from first-time home buyers the electric feeling and excitement was in the air and people were buying. Then mid-June activity dropped off and the 30th rolled around and the tax-credit expired (there were plenty of transactions closing in June, especially from the tax credit, but new buyers were very scarce).

Almost at once the breaks were applied and traffic slowed and buyers seemed to disappear. For most of June and through the month of July things tended to be on the slower side, but as the 1st of August came and went we started seeing inquiries and buyer activity pick up again. As the month progressed the middle and upper-tier markets started coming back to life. The first-time buyer market was artificially empty, but the buyers in the $400k to $1m+ were getting back into the market after some time on the sidelines. Additionally, calls on beach and ranch property also increased during this time as investors and the like looked for creative and safe ways to park money as well as estate plan.

It seems that the typical summer demand was experienced prematurely in the Spring for first-time home buyers and the pent up demand in the mid to high price ranges finally started to show itself at the close of the typical buying season.

The market has "recovered" nicely, and continues to slowly progress. People still can't believe Austin fared so well, the problems may not be over, but Austin is once again showing its' resilience and fertility for growth. I have worked with several Californians this fall who have expressed disbelief that our market hasn't been knee-capped like theirs. I remind them that we never experienced the run-up they experienced, we were fortunate not to have the 24% appreciation a year and 100 year mortgages. Even so it's often hard to fully understand without seeing the hard numbers. I have included a graph below that shows the Austin Real Estate Market's performance since 1979.

As you can see, in 2008 and 2009 the market contracted by -1 and -3% respectively. So far this year we have seen an increase in the average price of homes by 4% and the median by 2%. While there is some explanation for both the decline and the increase, these numbers are still solid indicators of general performance. Now, a little more on the explanations: The 2008 numbers are fair and signify instability during the recession. The numbers for 2009, in my estimation, are a bit misleading. During this period activity in the luxury market was very slow and the posted sales were down significantly. Conversely, the first-time home buyer credit was initiated and demand under $200k soared. Because of this phenomenon the average price fell because of less demand in the 750k+ market and a sharp increase in the under $200k market. Similarly, this year the Austin market has appreciated, but I fear 4% is too generous. These numbers add up, but the reemergence of the luxury market has skewed these numbers higher.

Now for my Warning:

As Mark Twain once said, "there are lies, damned lies and statistics." Over the next 6 to 8 months be prepared to see some dismal "year over year" sales numbers for the Austin market place (not every month, mind you, but I suspect several). As I mentioned above, last year at this time the first-time home buyer credit was well underway and caused an un-natural increase in demand, especially during the winter months and early spring. This fall and next year's sales numbers do not have the benefit of tax credits and we all anticipate the real estate market will start to quite down as the holidays approach and re-awaken next Spring. So...when you hear that sales are down from last year take solace in the fact 2010 and early 2011 do not have the benefit of a tax-credit, that our market has re-bounded and is doing just fine!

Best,

Marcus Cox