Austin Real Estate Blog

The December Stats are out for the Austin real estate market. The December stats were an improvement over November but that is not saying much. If you were here last month you might remember that November had the lowest monthly house sales in 8 years.

Let's look at the sales for the last few years.

First let's talk about the number of sales. I generally think this is probably the best indicator of how the market is doing. Other data points like average price can be pushed up or down based on what segments of the market are doing well.

I want to look at the 2 year change because the end of 2007 was pretty unstable due to the sub prime issues starting to mess with the market. Since 2006 was more stable, it makes more sense to compare current sales to 2006 as a baseline.

In November we saw an incredible 49% decline in sales compared to 2 years ago. The December stats showed an improvement with a 35% 2 year decline in sales.

To put the last 2 months in context, let's go back a little farther. Although all of 2008 was slow, the market seemed to slow down in August of 2008. From January 2008 to December 2008 on average we saw a 2 year decline of 18%. Since August 2008 every month (besides November) has seen a 2 year sales decline from 30% to 36%.

Ok so what does all this mean? Basically we are in a slow market. The market slowed down even more in August but November still seemed to be kind of a freak slow month. This is partially due to the election. (We actually ran statistics on sales in October, November and December for the last 24 years. Sales usually dip in November on election years but this only accounts for about half of the drop we saw in November 2008). Based on preliminary data, we are seeing more activity since January 1st which should mean we should see more sales in February (although this doesn't mean we are headed for a recovery just yet but we will get to that later).

Ok let's look at some other data points. We have been seeing year to year price declines for the last few months and this month is no exception. The Average and Median prices are both down this month. Average prices are down 2 percent and Median prices are down 4 percent.

Basically it looks like sellers are starting to negotiate more in the Austin real estate market. The Sold to List Price (basically on average how much less sellers are taking than list price) is 94.1 percent. This is the lowest we have seen in the last 3 years of data.

The number of houses on the market came down in November which was a good sign. We actually have less inventory on the market now than we did this time last year. This is probably due to sellers simply pulling their houses off the market without selling them. But it's still good because the market can't recover with everyone trying to sell at the same time.

If you are interested in how the single family market is doing in different part of Austin we have the breakdown by mls area here MLS Area 10N - 8E 8W - HD HH - NW OT - WW and here is a map of the different mls areas.

Let's see how the market is doing for different property types.

So while the single family market is down in Austin, the commercial and multifamily are all much worse. As we talked about before the market for single family homes is down 30% from 2 year ago. Here are the numbers for commercial and multifamily.

And yes, you are reading that correctly. The multifamily market saw a 83% decline in sales compared to 2 years ago. So what is going on here? Banks for the most part don't want to lend to investors. They have implemented a rule where investors can only get 4 loans regardless of credit scores. In addition, mortgage rates for loans to people that will not occupy the property are much higher than typical loans. And most banks are requiring investors to have 30% down payments. All this is basically because banks don't want to deal with investors.

Ok so now back to the question of what is going to happen with the market moving forward. I want to first put in a disclaimer I don't have a crystal ball and all my predictions could be wrong.

Based on preliminary data and talking to various realtors at different companies, it looks like January and February should be stronger months in the Austin real estate market than December.

On the one hand sales are improving. Even if you factor out the election and seasonal effects (by comparing to 2 years ago) December was a better month than November. We are also seeing a drop in inventory. So does that mean the market is turning? I don't think so for a few reasons.

There was a poll done recently of economists working in different industries.

Basically although there were different ideas about how bad the first quarter of 2009 would be and how much improvement we would see by the third quarter of 2009, there were a few things that were constant. First across the board, economists didn't see the economy recovering until the third quarter of 2009.

And it's not just economists, no one (except for realtors) is expecting the economy to recover in the beginning of 2009. And because expectations often influence realty that would make it very difficult for a recovery to materialize in the next few months

Second like the rest of the country, Austin is experiencing a lot of layoffs. I don't see the real estate market making a strong recovery right after we just shed a bunch of jobs.

Ok so why was December stronger than November and January stronger than December. I think there are 3 words that led to this: "low mortgage rates". Mortgage rates have not just been low. They are the lowest they have been since 1972 when we first started tracking them. They went up last week. So as of today they are the lowest they have ever been except for the 2 previous weeks.

But unless mortgage rates keep dropping (they won't) I don't think we are starting a true recovery. Instead I think low rates spurred a bunch of buyers to get into the market.

Ok so what is my advice. First it's probably a good time to think about refinancing. Mortgage rates are still pretty low. You might want to run the numbers and see if it's worth it.

If you are thinking of buying in 2009 it might be a good idea to start looking now. When the market recovers I don't expect prices to shoot up. But the general expectation is that when the market recovers we are going to see a spike in interest rates. So before that happens it makes sense to start getting a feel for the market and different neighborhoods.

As always if you want to see what is currently on the market you can look here Austin Property Search. If you have any questions about the market or a particular house feel free to contact us.