Austin Real Estate Blog

The stats are out for October for the Austin real estate market. In a word, the stats are bad. This is probably one of the worst months I have seen in the last few years.

Ok let's look through the numbers. Here is a breakdown for the last few years.

The one number that stands out the most is the number of sales for October which is 1331 (looking at the bottom column). This is down 25% from last year (October 2007) when we saw 1770 sales. A few months ago in May of 2008 we saw a year to year decrease of 22% in sales. So why is this month so much worse?

Basically in May we were comparing sales in May of 2008 during a weak market to sales in May of 2007 during a strong market. The market slowed down in September through October of 2007. We are comparing October of 2008 during a weak market to October of 2007 during a weak market. So a 25% decline in sales is pretty substantial. Another way to look at it is to compare sales to two years ago instead of one year ago. Pretty much the entire year of 2006 was a relatively strong real estate market in Austin. In May of 2008 we saw a 19% decline compared to 2 years ago (May 2006). In October of 2008 we say a 2 year decline of 36%.

For other general market stats the median price and average price is up. This is basically because less expensive houses are not selling. Regardless of what the median price says, prices are down. The fact that cheaper houses are not selling is just artifically pushing the median price up. The inventory is up 5% from last year. This is slightly more positive than the sales statistics. Since houses are not selling but inventory is not up substantially I think this means that people are simply pulling their houses off the market.

Let's break out the market in a few different ways. First let's look at the stats by price range. This data includes all the sales from January 2008 to October 2008. So basically we see that houses under 150k or so are not selling. In addition to houses under 150k, houses over 500k are doing worse than the market in general.

Here are the stats for the different market segments.

To say multifamily is down is an understatement. This is a market that is virtually dead. The reason is basically it's very difficult to get loans for multifamily properties. Banks simply don't want to give loans for investment properties. I personally like the investment market these days for a few reasons 1) prices are down 2) interest rates are down 3) properties are cashflowing. The trick of course is getting a loan. Banks are looking for people with steady jobs and have stopped giving out the no documentation loans they gave out over the last few years. Also when I say I like the investment market, I like properties in central Austin. I have seen some ads for "great deals!!" in Pflugerville and Lakeway. I would pretty much avoid these properties. There is too much inventory so these properties are hard to sell and hard to rent out. Also central Austin over the long term tends to have better appreciation. There are also some "good deals" up in the town of Rockdale right now. The reason for that is that the Alcoa plant in is closing. There are 1420 households in Rockdale. The Alcoa plant employs about 1000 people. My basic point is that if something seems to good to be true it probably is.

The condo market at first glance looks ok because the number of sales are just down 5%. But if we look at the stats, there were 133 sales and 1691 properties on the MLS. That means the months of inventory on the market is 12.75. While this is better than the condo market in Florida where cities are seeing months of inventory on the market in the range of 50-70, it's much worse than the single family market in Austin which is at 7.47. As I have said before although both the condo market and the multifamily market are weak, I like the multifamily market more. When the market recovers the multifamily market could recover quickly if banks start lending because that is the main thing dragging down the multifamily market in Ausin. Converseley the condo market has an oversupply problem that is going to take awhile to work itself out. The commercial real estate market in Austin is still pretty weak. When the residential market started to slow, a few commercial brokers were saying they were immune. But that market has weakened and is now doing worse than the residential market. The farm / ranch market is down as well; I don't know how many of my readers are into farms.

So what is my advice for sellers and buyers. Obviously sellers need to price aggresively and their homes need to be pretty much spotless. Don't plan on leaving junk out in the living room and hope buyers simply look past it, there are simply too many choices for a small number of buyers. Also talking to agents some sellers are rebuffing showings saying its "not convenient". Either they are not interested in selling or somehow they have missed reading any news outlets over the last year. Buyers agents are frequently not going back to the houses because 1) there are other options and 2) they are not interested in working with sellers who are not realistic about the current market.

Now for buyers this is some of the same advice we have talked about before. Don't get caught up in "how much under list" a property is. I am hearing more reports of people talking about getting a house for x percent under list. This is pretty much meaningless. I would rather get a good price than get a house under some arbitarily set "list price".

Obviously there are alot of factors that come into play when looking for a house like proximity to work, friends, and favorite locales. I can't speak to that so purely from an investment perspective in Austin this is what I am seeing. Alot of these points reflect the analysis we did above.

The central Austin real estate market is outperforming the suburbs. I would expect that trend to continue. There is simply too much development on the outskirts of Austin. Lakway and Lago Vista are particularly hard hit. For October 2008 in MLS area LN (where Lago Vista is located) we saw 15 sales and 249 properties on the market. So for investment purposes central Austin still makes more sense. I would avoid the condo market. Regardless of what condo reps are saying I see a lot of supply on the downtown condo market for the next few years.

Lastly let's say you are really freaked out about the real estate market and the economy in general. You really want to find a way to get as low as possible of a mortgage payment but don't want to live in the middle of nowhere. My advice would be to buy a duplex. To see how this works let's run the numbers. Take a neighborhood like Crestview. Right now the cheapest house is 215k and the cheapest duplex is 250k. So what would the payment be on these two places.

215k House (around 1000 square feet)
$1479 (20% down 6 percent interest)
final payment $1479

250k Duplex (around 2000 square feet)
1785 (20% down 6.5 percent interest)
rent $900
final payment $885

If you want to see what is currently on the market you can look at houses on our Austin home search. Also if you have any questions about the market in general or a particular house feel free to contact us