Everyone wants to know what will happen with our amazing real estate market in 2017.
Many are asking about the slowdown in growth and fewer job openings reported in recent months. In all honesty, is it really feasible for one city continue to grow by 4% per year?
Others have asked about the National trends happening right now. With a change in direction in Washington and a slowdown in some real estate markets around the country, can Austin real estate continue going up in value?
Finally, there are some in Austin that are just ready for a breather. They are ready for our market to take a break and at least feel like they can afford to live here again. I understand this sentiment more than any of the others. One, because we have started to feel the economic pinch. And two, because the pace at which we have to work to keep up with the real estate market is intense.
Supply and Demand
There is only one factor that I have learned to pay attention to in real estate and it is very simple. Supply and Demand dictate what will happen more than any other economic indicator.
When the supply of homes is down… prices will go up.
When the supply of homes is up… prices will soften or go down.
Other factors can manipulate the market in some ways. Interest rates have started to go up slightly. A year ago they were around 3.5% for a 30 year fixed rate loan. Now that same loan is between 4-4.5%.
Schools, walkability, area amenities can drive local niches to be more in demand than others. For example, in Austin the St. Elmo Public market with condos, shopping, hotel, restaurants and office space is set to change the 78745 zip code in a big way. Home prices have been going up steadily in the area in line with the rest of the housing market. Look for a large spike to happen in the next few years as the area becomes more desirable for millennials and boomers alike.
The nitty gritty of our real estate market
As an overall market, the Central Texas 5 county MSA has about 6,300 homes actively for sale on the market. In the last 3 months, about 2300 homes have been selling per month. This is a 2.74 month’s supply of homes. Meaning, if we sold every home on the market and no new homes came on the market, it would take a little less than 3 months to run out of inventory.
As a quick guide, a seller’s market has 3 months or less of housing inventory, a balanced real estate market has around 4 to 6 months supply of homes and a buyer’s market has 7 months or more of inventory.
What is interesting about these numbers and somewhat deceiving is what this “inventory of homes” actually consists of.
Here are a few fun facts to noodle over:
Only 36% of this inventory is in the city limits of Austin. Of which, the average asking price is $750,000 and the median asking price is $460,000.
12.7% of the housing inventory are condos or townhomes. Condos are a little more affordable with an average asking price of $321,000 and median asking price of $258,000
An astonishing 38% of this inventory is new construction. ⅔ of which is not being built in Austin. As per my usual spiel… new homes are selling for a premium over resale homes.
Here is a little more interesting fact:
18.5% of the current housing inventory actively for sale on the market is price below the median price sales of $290,000. Median, meaning in the middle, would indicate that either 31.5% of the current active housing is over-priced. And/Or, a large portion of the properties above the median sales price are not going to sell at all.
Lets look at something a little more indicative of where the market is heading:
11.2% of the the housing inventory has been on the market for less than 2 weeks.
26.5% of the housing inventory has been sitting on the market longer than 2 months… which is when I start to see houses get stale on the market. I.e. Fewer showings, less interest, etc.
This is all relative, because the average days on market is currently sitting at 55 days, while the median days on market is 29.
Do you think Price doesn’t matter?
The average asking price of homes that HAVE NOT SOLD is $629,000. The median asking price of homes that HAVE NOT SOLD is $400,000.
The average asking price of homes that have sold is $382,000 and average sales price is $370,000. The median asking price is $300,000 with a median sales price of $292,000.
Again, these numbers are all relative… I’m not saying that the homes not selling are wildly out of line with the market. I am saying that the asking price matters more than a lot of sellers want to admit.
Lastly, I wanted to include a price band breakdown of what the market currently looks like. This is very much in line with the last several years of Austin’s growth… prime for our market to continue to go up, especially for homes under a million dollars.
It’s amazing how so many people want to hear that the real estate market is slowing down in Austin. The typical assailant to our market is the disgruntled buyer. This is a very short term thought process. Yes, affordability is a very real problem here. However, if you want the market to slow down for personal reasons, it will also be a short term payoff. If the market continues to grow and expand and---appreciate, it would be in everyone’s best interest for the market to continue going up in value.
Yes, there are pockets of our market that are experiencing a bubble and/or have a high supply of homes. Mainly, the upper end of the market has begun to experience a slow down and I still tend to think East Austin is experiencing a bit of a bubble.
For example, on the upper end. There is currently an inventory of 8.2 months supply of homes. Compared to market average of 2.3 months supply of homes, this represents a more balanced market headed towards a buyer’s market.
East Austin still has inventory that favors the seller--2.76 months of housing supply and prices are climbing to new highs every month. I don’t see this slowing anytime soon, I just see it being the first area in Austin to experience a major pricing correction if the overall market slows down.
Nationally… the finance guys on Wall Street are feeling bullish. When they feel confident that the economy will continue to expand, so should you.
If we look at Austin, outside the context of the national economy we are still experienceing record low housing inventory… it has certainly increased at the top of the market with over 13 months supply of homes over $1.5M and up.
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