Austin Real Estate Blog

The stats for August are out for the Austin real estate market. Home sales are down 20% from last year dropping from 2497 to 1992. The number of listings is up 5 percent rising from 9819 in August 2007 to 10348 in August 2008. Below are the stats for the last few years.

Some might see the year over year 5 percent increase in active listings as a positive sign since over the last few months the year to year increase in listings has been running around 20%. But personally I don't think things have improved. Why? This time last year was when things first started to go bad for the Austin real estate market. So last year in August we saw a large jump in the number of listings. So for the last few months we were comparing the stats for this year in a bad market to the stats for last year during a good market. But over the next 2 months that is going to change and we are going to be comparing this years stats in a bad market to last years stats during a bad market. The year to year sales statistics will start to look better next month as well. So if you see in the paper next month a big headline along the lines of "September Year to Year Sales Improve 50% from Last Month" know that it's not a sign that the market is improving.

So when we look at the sales for August 2008 why do we compare it to August 2007 instead of last month (July 2008)? Basically real estate is very cyclical. We tend to see the most sales and listings during summer and the fewest sales during the winter. An interesting side note during the initial downturn in areas like Phoenix when the market was moving into summer they cited that sales were increasing and saying the market was improving. Of course this was simply nonsense.

According to the stats average prices are up. We have been seeing this all year and I think it's pretty misleading. Prices are not up. Cheaper houses are simply not selling because when no doc and sub prime loans disappeared houses priced under 200k started selling much less frequently. This of course drove up average prices. But if you take any particular house in the Austin market it's probably worth less than it was this time last year. I have noticed some literature from the Austin board of Realtors that talks about prices are increasing. I have no idea why they are saying this. I think they think it will make people more likely to buy. But it doesn't make any sense. "The market is bad but prices are up therefore now is a good time to buy". Huh? I bought an investment property in the last few months. But I bought because it was priced lower than it would have been last year.

So in summary we are in the same position we have been in for several months. The Austin market is doing worse than it was in 2007. But that said Austin seems to be one of the more robust markets around the country. Why is that? Basically Austin didn't see the huge rise in values from 2002-2005 that other markets did. In Phoenix at one point people talked about 5% appreciation a month. The same thing happened in Florida. That simply never happened in Austin. Therefore during the downturn Austin is faring better than most.

OK moving on let's look at how different property types are doing in the Austin real estate market.

Single Family sales are down 19%. Condos are down 24%. This doesn't sound that bad but the problem is that the number of listings is up 63%. Sales for multifamily properties have dropped 45%. I talked to another realtor recently that said the multifamily market has died and I think that's a pretty good assessment. The market has been hurt by the fact that banks are pretty reluctant to give out loans for multifamily properties. So if someone is able to get a loan it might not be a bad time to look at multifamily properties. But I think it only makes sense to buy properties and plan on holding them and making positive cash flow. I would not buy multifamily properties with the idea of remodeling them and flipping. A lot of people have been flipping multifamily properties for the last few years.

The other idea with multifamily properties is instead of simply buying a multifamily property as an investment you could buy it instead of a house. I am a big proponent of this because it can substantially lower your mortgage payment. Now that the multifamily market has died often the cheapest property in a neighborhood is a duplex. So instead of buying a house for 200k you could buy a duplex for 180k. Then your mortgage is lower and you get rent from the other side. This of course only works if you don't need a lot of space.

Also while I like the multifamily market I don't like condos. Basically the multifamily market is down because of banks are not lending (something that should change when the market comes back) condos are down because there are too many condos (something that wont change when the market comes back).

The only part of the market that seems to be doing ok is the lease market. Leases and Commercial Leases are doing the same or slightly better than last year. Additionally rental prices have increased compared to last year.

Now let's look at the different segments of the Austin market. Here is a map for the Austin MLS boundaries

No real surprises here. Cental Austin continues to outperform the market in general. The East Austin real estate market has actually recovered a bit. Earlier this year it was by far the worst performing segment of the market. Now it has for the most part pulled even with the suburbs.

Now let's look at the different mls areas. Below in the table are the central Austin MLS areas.

The only thing that jumps out here is that areas 10N and 10S continue to be pretty strong. As always if you have any questions about the market in general or a particular property feel free to contact us. Also if you want to search properties currently for sale here is our search of the Austin MLS.