August Austin Real Estate Stats
The August stats for the Austin real estate market were finally released. I have been waiting for the last week because they are usually released by the Austin board of realtors earlier in the month. In summary the market was really slow in August. Before I get into the numbers I want to give a little background on what is going on.
The lending practices for the last few years in California were crazy. What do I mean by crazy? By crazy I mean that loan officers would advise applicants to print out their bank statements and white out their account balance and type over it (with a much higher number) so they could get a loan. Additionally, people would get approved for a loan for say 300k. Instead of going and buying one house for 300k they would buy 5 the same day so the banks would have no record of other purchases when they ran a background credit.
At some point the lenders started to worry that a lot of these crazy loans were going to end up in foreclosure. In response lenders started to get nervous and tightened up lending practices. This had a huge effect on California since they went from insane lenient / illegal lending practices to conservative lending practices. It also had an effect on Austin which went from normal lending practices to conservative lending practices. For example, clients that may have been able to do 0 down on stated-income are having a hard time finding a loan now. The changes in the lending industry have been referred to as the credit crunch.
So are people being denied loans what caused the low number of sales in August for the Austin real estate market? I don't think so. Basically the credit crunch has been all over every newspaper and media outlet. In response, a lot of people are waiting on the fence to see what’s going to happen.
What’s weird is the fundamentals of Austin are still very strong. We had 4.1 percent job growth from last year and the lowest unemployment in over 6 years. In contrast the country at large saw a job decrease. While the rest of country saw wild appreciation since 2000 the Austin market saw relatively normal appreciation. But whether people will start buying again after sitting on the fence is anyone’s guess. But as of today, we are in a buyers market.
What’s going to happen over the next few months? I have no idea. I wish I had special future predicting powers but I don't. I can tell you what’s been happening over the last few weeks. The government has been doing stuff to try to alleviate the credit crunch. The Fed cut the prime rate to try and stimulate lending and also to show they were serious about averting problems in the real estate market. Also the Senate looks like they are primed to pass something called FHA Secure, which should provide another option for borrowers and people looking to refinance. The goal is to allow people to refinance instead of going into bankruptcy. When people go into bankruptcy, it causes the inventory to go up because people are forced into putting their house on the market.
So is any of this stuff working? I have noticed I have been getting more calls over the last 2 weeks. And I talked to a few other realtors in Austin that noticed the same thing. But I don’t have any hard numbers on this. And even if we had the numbers, 2 weeks doesn’t tell us what the market will do long term.
So moving on let’s look at the numbers. Compared to last year the overall market saw a 21% increase in inventory going from 8137 to 9819. Which is decent increase in inventory but keep in mind last year we had an abnormally low amount of inventory on the market in Austin. Let’s break those number out a little more. The suburbs went from 6870 to 8284 showing a 21% percent increase in inventory. The number of homes on the market in the central Austin real estate market increased from 1267 to 1535 or a 21% increase. This seems like a lot. So I looked through the numbers a little more.
If you break out the east Austin MLS areas 3, 5, 9 and 11 we see that the inventory went up from 266 to 434 a whopping 63% increase of inventory. While if we look at the rest of central Austin we see a 10% increase in inventory going from 1001 to 1101. What is going on in east Austin? A few things. East Austin jumped in price 2 years ago when it went from being know as a ghetto to the next up and coming area. But instead of listing their homes at the market rate for some reason everyone in East Austin thinks their home is worth 500k. While it’s worth more than it used to, it’s not worth 500k. There is also a lot of new construction in the area as people tore down dilapidated houses and built new ones. So a lot of the homes on the market are new construction. But regardless, it looks like central Austin excluding east is seeing a 10 percent increase in inventory.
Let’s look at months of inventory on the market. Generally anything below 6 months is considered a sellers market. Currently the Austin market is at 4.5 months, which by itself would indicate we are in a sellers market. But this is a little misleading. Not much sold over the last month and even though we still have relatively low inventory, it is more than this past summer. So even though months of inventory by itself would indicate we are in a sellers market, looking at everything all together I would say as of today we are in a buyers market.
So what does this mean if you are either buying or selling? If you are selling you need to make sure your home is in above average condition. This summer if you had a messy home it would still get offers because of the scarcity of homes on the market, but those days are over. If your home is overpriced your home is not going to sell. Also in the summer people did something called "pushing the market". Basically if comps said a house was 340k but nothing had sold recently they would try and get 360k-370k. And since things were going up and nothing was on the market if you were central it often worked. That is over. Even in the unlikely event you get an offer when over-listing your property, the banks in their more cautious mode will not fund your loan.
For buyers there are a lot of good deals out there now. If you are looking for a house find a decently priced home. If you run into a stubborn seller that is trying to push the market, you need to keep on walking even if you really like the house.
And as always, here are the stats broken down per MLS area for central Austin: