We had 1707 sales in May 2009. This is down 19% from a year ago and down 37% from two years ago. The fact that we are down 19% from May 2008 (which was considered a down market) doesn't really fit my definition of the market having "recovered".

So is the Austin market seeing some signs of improvement? Maybe? The stats from April and May of this year are somewhat improved from what we saw in January, February, and March of 2009.

The number of sales in May 2009 is twice what we saw in January 2009. But this has more to do with seasonal variations. There are always more sales in the summer. It's better to look at sales from one month and compare it to the same month from one and two years ago. So for January 2009 we see

Month Sales One Year Decline Two Year Decline
January 839 -36% -43%

Compared to April and May we see:

Month Sales One Year Decline Two Year Decline
April 1,550 -20% -32%
May 1,707 -19% -37%

So there are some signs of an improvement but we are without a doubt in a depressed real estate market.

While we are talking about overly optimistic predictions, here is another one: "Due to pent up demand, once the economy recovers the Austin real estate market is going to be red hot". I don't think this is likely. Basically once the economy recovers mortgage rates should increase, which should slow down the market. (although once mortgage rates eventually start to move back down I expect prices to increase as we talked about in inflation and real estate). So if one is looking to buy, in the short term I would be more concerned with buying before mortgage rates increase rather than before prices increase.

Oh and winner of crazy real estate pronouncements. "The condo market is going to have a scarcity of supply soon". I heard this last week. There is actually some bizarre logic behind this. Basically so many condos are having extreme difficultly with sales that they are moving toward leasing the units instead of selling them. The problem I have with this is that there is such a huge oversupply of condos right now that even taking out some of the condo buildings by leasing them is unlikely to lead to a normal volume of condos much less to a scarcity of condos. The second issue is that a number of out of town investors purchased Austin condos that are still being constructed. Once the condos are completed, it's likely we are going to see a number of these units back on the market.

So is now a bad time to purchase something? If the plan is to buy a property and sell it in a short period of time maybe so. The time on market is pretty high right now. When flipping a property, holding it for several months can eat through potential profit. I would also not be looking at buying land to immediately develop for the same reason. If the plan is to buy and hold for a few years before selling, the outlook is more positive. Prices and mortgage rates are both pretty low. The trick of course is getting a mortgage. While mortgage rates are quite low, banks are more restrictive than they have been in a long time.

So let's look at some other sectors of the market:

Basically the condo, farm, multifamily and commercial markets are all doing worse than the residential market. While part of this has to do with demand, it's also due to lending. While the lending market for residential has tightened the lending market for other property types like commercial and multifamily has seen more restrictions.

As always if you have any questions about the market in general or a property in particular feel free to contact us. If you want to search for properties on market here is our Austin home search]]> tag:www.escapesomewhere.com,2009:/austinblog//1.85 2009-05-26T05:47:27Z 2009-06-04T00:16:41Z

Sales are down 18% compared to last year. This is an improvement over the last few months. For January, February and March we saw one year declines of 36, 29 and 24 percent. But there are two big caveats to that. First, by any other comparison (other than the last few months), the market is still pretty terrible. And second, the increased sales are partially coming from an increased number of foreclosure sales. That said it still seems that the Austin market is in a better position than it was in January. Historically low mortgage rates are part of the reason for this increased activity.

There has been a lot of talk that Austin's prices are not dropping. They are. Part of reason this is not reflected in the official statistics has to do with banking. When the banking industry imploded, financing became stricter. This affected average prices in two ways. First people who got no documentation loans are now routinely denied. This has lowered the sales in the low end of the market. In addition, and perhaps more importantly, rough houses are more difficult to get financing on. Banks are not interested in giving loans for that house with the shaky foundation and a few roof leaks. Since rough houses are not selling as frequently, this is also pushing average prices up. So while statistical average prices are holding steady, a house that is sold today in general is selling for less than it would have 1 or two years ago. So what does this mean for the many areas of the country that have reported average sales prices that are down 20%? In a nutshell they are probably down quite a bit more.

While we are talking about values, the county appraisals have come out with some of the biggest increases we have seen in the last few years. Travis CAD values don't mean anything. In general tax values have more to do with politics than actual values.

The question for the Austin market is of course: What is going to happen moving forward? Do the slightly improving sales numbers point to a slowly improving market?

Personally I don't see prices increasing very soon even with an economic recovery. Once the economy recovers, I would expect to see mortgage rates move up perhaps into the double digits. This should counter the effect of a more robust economy. We have already seen mortgage rates start to rise with a half point increase this week. If the economy starts to recover and mortgage rates start their march up to 10% it would be hard to see prices moving up. (Once mortgage rates/inflation peaks out and start its way down, I could see a rise in prices as I talked about in inflation effects on real estate)

Therefore when I am looking into properties I am not too concerned with buying something before prices move up, but I am concerned with buying something before mortgage rates move up. So I would recommend people looking to purchase to pay more attention to mortgage rates than prices as they are expected to be more volatile in the next few months.

Enough about the general market. How are the different areas of Austin doing? Here are the statistics on the different Austin MLS areas

10N-8E
8W-HD
HH-NE
NW-WW

along with a map of the different Austin MLS areas for reference. In a nutshell, the suburbs are looking better based on sales volume but they have a disproportionate number of foreclosures. For instance Pflugerville has the same sales this month as April 2008. But around 19% of all sales in Pflugerville are from foreclosures.

Let's move on to other market segments.

The condo, lot, and multifamily markets are all doing much worse than residential. Commercial seems to be doing about as equally bad as residential.

I don't like the commercial market. My basic problem is not with the market but with mortgages. One of the main benefits of buying a house now is locking in at historical low interest rates. While mortgage rates are low for commercial properties, in general they are only locked in for 5 years. We looked at a commercial property and this was the main drawback. Especially because I think mortgage rates could be substantially higher in 5 years. It would be pretty annoying in 5 years to transfer from a 6 percent interest rate to a 13 percent interest rate. This could have a pretty negative affect on cash flow. To make matters worse, most of the commercial loans are balloons. I hate balloons. (Balloons basically require you to get a new loan).

I am not much fonder of the condo market. Basically the condo developers overbuilt. So when the market recovers we are still left with a ton of inventory. So after the economy recovers, it will take some time for the Austin market to work its way through the excess inventory of Austin condos. Also for an update on the high end condo market their were 178 condos for sale over 500k. Out of those 1 sold this month.

The market for vacant lots is deader than a doornail. Nobody wants to buy a lot when the market is down. Basically builders are frequently selling houses for less than cost. They are not really in the mood to go buy more vacant lots. So is it therefore a good time to buy lots? I am a little mixed on this. Basically if you have a lot of spare cash and are comfortable waiting out the downturn, the lot will probably be worth quite a bit more. But at the same time the cost of holding a lot can be quite high. So if you buy a lot for cheap right before the market recovers it's probably a good play. But if you buy a lot and have to pay a mortgage and taxes on it for a few years that could wipe out a significant chunk of future gains. And I would expect the residential market to improve before the lot market.

I like multifamily because it's less risky than lots. The length of the downturn is not as problematic as long as the property cash flows. Also we have not overbuilt multifamily properties recently like we did with the condo market.

As always if you have any questions about the market in general or a property in particular feel free to contact us.. If you want to search for properties on market here is our Austin home search]]> tag:www.escapesomewhere.com,2009:/austinblog//1.84 2009-04-24T03:19:27Z 2009-04-27T01:46:46Z

MLS Area 10N-8E
MLS Area 8W-HD
MLS Area HH-NE
MLS Area NW-WW

One thing we have noticed is that the suburbs have more sales than expected. Part of the reason for this is foreclosures.

Recently, we are seeing more activity in the suburbs and a lot of that increased activity comes from an increased number of foreclosures. For instance in MLS Area PF (Plfugerville) there were 259 sales this year but 50 of those sales were properties in foreclosure. Below are a few more mls areas and the number of 1) total sales 2) foreclosure sales 3) % of sales that are foreclosed properties.

Area	Total Sales	Foreclosures	Percent Foreclosures
Suburbs
PF (Pflugerville)	259	50	0.193
LS (Lakeway)	152	25	0.164
RRW and RRE (Round Rock)	474	6	0.129
Central
1B (Central West Austin)	52	3	0.057
8E (West Lake)	29	0	0.000
4 (Hyde Park)	52	1	0.019

So it looks like a decent amount of the sales in the suburbs are happening on foreclosure properties. In Pflugerville almost 1 in every 5 sales is on a foreclosed property. While we are seeing a few foreclosures in central Austin the percent of total sales is much smaller.

The number of foreclosures has increased recently because lenders ended the moratorium on foreclosure proceedings. If you are interested in foreclosures we have a map search of Austin Foreclosures. I expect to see more foreclosures filings over the next few months.

So what is my advice for everyone? First, be wary of "great deals". When I recently looked at foreclosures I noticed that I had researched quite a few of these same properties a few years ago. At the time they were cheaper than average or had extremely high cashflow and therefore popped up on my radar. After some investigation I would discover various problems with them (being in the floodplain, hidden structural problems). Looking at the history it seems the new owners bought it, put it on the market 2 months later once they found the problems, and then went into foreclosure after a year or two.

Although there are a lot of foreclosures in the suburbs I would be wary of those areas. There are a lot of foreclosures because there is lower demand out there. Basically you are getting it for cheap because less people are interested in those areas and in a few years when you sell you will have the same problem.

In most cases I don't think this a good time to buy a property and plan to flip it in the next 6 months or a year. One of the big expenses with flipping is holding time. Holding time is the amount of time you are sitting on a property making payments waiting for it to sale. Currently with few sales the average time on market is pretty high.

I would say if you are looking for a long term investment either for a home or investment property now is not a bad time to buy. We are currently making offers on properties. Prices and mortgage rates are low. So as previously mentioned mortgage payments are significantly lower than they would have been a few years ago. I have heard some people say they want to buy before prices move up. I am less concerned about prices moving up than mortgage rates moving up. While I think eventually prices will recover in the short term, I am more concerned with getting a few properties while mortgage rates are down.

Also I would for the most part avoid the condo market. I don't see it recovering for awhile even after the economy turns around. Single family homes and the multifamily market look like they will recover faster once the economy recovers.

As always if you have any questions about the market in general or a property in particular feel free to contact us.. If you want to search for properties on market here is our Austin home search]]> tag:www.escapesomewhere.com,2009:/austinblog//1.83 2009-04-04T05:08:15Z 2009-04-06T07:54:09Z

This blog started as a response to a few friends. My blogs on the current state of the real estate market are negative. And recently I have been actively making offers on properties. The question they had was: "Why?".

First off, the National Association of Realtors (NAR) has been saying for awhile now the great recovery is just around the corner. And everything is going to return to just how it was a few years ago. I would still pretty much ignore NAR. They are like some bizarre form of adult cheerleaders.

I don't know when the recovery is going to happen. But when it does I don't think it will be a nice clean recovery. I talked about it more in depth here Hyper Inflation is Coming. Basically, since the government has been pouring money into the economy, once the economy recovers, we should experience hyper inflation.

Let's run a few different scenarios. For all the scenarios, let's assume inflation doubles. I don't know if the effects of inflation will be more, or less (I think most likely it will be less), but it is an easy number to work with and it doesn't affect the percent gain or percent loss. Also for this (adjusted) means adjusted for inflation and dollar or (d) means non adjusted dollar value.

First, let's assume one has $100k, and keeps it in cash.

This is what has me freaked out. I don't like the idea of losing a large amount of savings.

I looked at the stock market from 1978 - 1981, which is the last time we experience hyper inflation. In those 4 years the Dow went from 793 to 866 for an average one year gain of 2.3 percent, which is worse than average.

Next, let's assume one buys a house for $100k in cash.

Lastly, let's assume one buys a $100k property with a 20% down payment and an $80k loan. First, look at the value of the property:

Next let's take out the mortgage and see the equity in the property.

In absolute value the equity increased from 20k to 90k. After you adjust for inflation it increased from 20k to 45k.

Next, instead of looking at property values, let's look at the numbers from a rental/cashflow perspective.

So while taxes and rent go up the mortgage (as long as it's a fixed rate mortgage) should stay fixed. Another way of looking at this is that with inflation adjusted values rents and taxes are stable but your mortgage goes down.

In the example we had the value of a house going from 100k to 170k in actual dollars. I don't expect this to happen evenly during a period of hyper inflation. Instead based on what happened during the last period of hyper inflation, I would expect prices to stay even or rise slightly in the beginning. I would expect to see prices experience most of the increase as rates start to come down.

So why don't we wait until then to buy properties. The problem is that currently prices are low and rates are low. After inflation kicks in prices might still be low but rates will be higher.

So, moving beyond real estate, I think hyper inflation could have a pretty negative effect on a large segment of the population. Basically, a lot of people saving for retirement lost half of their life savings due to a falling stock market. Now their already lowered savings could be cut in half again through hyperinflation. Not a pretty picture. It also hurts people who live on fixed incomes as well as causing general instability in people's lives.

I am hoping to get some good comments on what other people think is going to happen. I would also like to hear some other investments that would be a good hedge against inflation.

Another one that might be good is putting money into bonds or CDs when rates hit their peak. In the first example we talked about how keeping money in cash during a period of high inflation might be a bad idea. But if you lock into long term bonds at the peak of inflation hopefully you could recieve a high rate of return even after inflation has subsided.

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.

]]> tag:www.escapesomewhere.com,2009:/austinblog//1.82 2009-04-04T00:42:55Z 2009-04-06T00:02:25Z

The National Association of Realtors has been telling us for the last few years the real estate recovery is just around the corner. I don't know when the market will recover but when it does it's not going to be a clean recovery.

Here is a graph of the monetary base since 1959.

The first time I looked at it, I didn't notice the crazy spike at the end. That is the growth in the monetary base in the last year while the Fed has been trying to stimulate the economy. So why are we not currently experiencing double digit inflation?

A recession pushes down inflation, and a very strong recession has an ever stronger effect on keeping down inflation. During the Great Depression we experienced the opposite of inflation, which is called appropriately, deflation. Here is a historical chart of inflation showing the deflation we experienced during the Great Depression.

Currently we have two powerful and opposite forces: 1. a heavy recession pushing inflation down; and 2. a large amount of money being pushed into the economy, forcing inflation up. When the economy starts to recover, the mechanism keeping inflation in check will disappear.

The question, of course, is how high inflation and interest rates could go. The last time we experienced hyper-inflation was the period from 1978-1982. Looking at the above chart, inflation hit 15 percent. Below we have a chart showing mortgage rates from 1974 to 2009. Mortgage rates hit a high of 18.5 in 1981.

The forces at play currently seem stronger than what was experienced in the late 70s and early 80s, but it's hard to know exactly how high rates will go. Regardless of the exact rates: hyper inflation is coming. Our next blog will look at how this will effect the real estate market.

]]> tag:www.escapesomewhere.com,2009:/austinblog//1.81 2009-03-25T23:11:29Z 2009-04-04T00:06:56Z

So what happened in the Austin real estate market in February? For a recap, the Austin market first slowed down in around August 2007 due to the national subprime issues. The market held steady at its new slower pace...

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So what happened in the Austin real estate market in February? For a recap, the Austin market first slowed down in around August 2007 due to the national subprime issues. The market held steady at its new slower pace for around a year. Then we experienced another slow down in October 2008.

So how was Febuary 2009. Adjusting for time of year, the market improved in February 2009 compared to January. But the market is not what it was 2 years ago or even what it was before the most recent slowdown.

One way of looking at it is that the number of sales. January 2009 has the lowest monthly sales we had seen since January 1998. February 2009 had the lowest sales for a February since February 2001. So while it's an improvement, we are still in a very slow market.

Here are sales statistics for the last few years.

Let's look through a few of the numbers. We had 35% less sales than 2 years ago and 28% less sales than last year. Average Price's are up 4% and Median Price's are up 5%. Personally I just don't buy this. Average prices tend to change alot from month to month based on what is selling. If homes under 200k are selling less frequently because of lending restrictions average prices will in turn move up. And in the current market where lenders are changing their restrictions on a regular basis and therefore affecting what price range houses are selling, I would take average prices with a grain of salt.

One positive stat is the number of active listings is roughly steady compared to last year. So while sales are down 28% compared to last year, the number of listings is only up 3 percent.

The next stat is something I get alot of questions about which is list to sold price. Last month we were at 94.6%. This means a house listed for 100k on average would sell for 94.6K. I have alot of people that see a house for 300k and think the market is down so the seller will accept 180k. The short answer is probably not.

[[So what about all these stories of homes selling for next to nothing in places like Detriot, and why don't we see that here. Basically the market is down in Austin but the general expectation is that at some point the Austin market is going to recover. People don't seem to have that expectation about Detriot. Detriot was on a downward spiral before the current national economic mess started. Once the national economy recovers there is no particular reason to think Detriot will be a thriving metropolis. If anything when the national real estate market recovers, Detriot is likely to continue the slow downward spiral it was experiencing before.]]

So lets look at some other property types besides single family houses.

Compared to this time last year condo sales are down 49%. Here are condos sales and inventory for the last 3 years for February

Year	Sales	Inventory	Months of Inventory
Feb 2007	169	898	5.31
Feb 2008	158	1734	10.97
Feb 2009	80	1556	19.45

I am not a big fan of condos from an investment perspective. We simply built way too many condos over a short period of time and it's going to take awhile to work itself out. In addition, even though our inventory levels are currently quite high alot more condos are going to come online in the next 2 or 3 years.

Next let's look at the same statistics for multifamily properties for the last 3 years

Year	Sales	Inventory	Months of Inventory
Feb 2007	99	355	3.59
Feb 2008	41	483	11.78
Feb 2009	25	405	16.2

From an investment perspective I like multifamily alot more. If you simply look at the months of inventory on the market, the condo and multifamily market look pretty similar. They were both low in 2007 and have gone up in 2008 and 2009. But the condo market has an inventory problem. Inventory is up 73% in the last two years. In addition, with all the condos coming online the inventory level is likely to go up more in the next year or two.

In contrast, the inventory in the multifamily market is only up 14% in the last two years. With multifamily we have a problem with the number of sales. Sales are down 74.7% in the last two years. This is basically because over the last year banks have done whatever they can to avoid lending money to investors. These restrictions are in response to the high rate of foreclosures from investor owneed properties. Because of the lending restrictions sales of multifamily properties have plummetted. When the economy recovers it's likely some of these restrictions will be pulled back.

One of the restrictions was recently taken out. For the last year most banks would not give more than 4 loans to a single person. They have recently upped that number to 10. It's too early to tell what effect that will have on the market but I would not be surprised if the number of sales in the multifamily market increased over the next few months.

Here are the stats for the different mls areas. We also have a map of the different Austin MLS areas. For the most part, areas with high average prices had very few sales. This is because the high end of the market has been pretty slow the last few months.

MLS Map

10N - 8E
8w - HH
HS - PF
RN - WW

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.

]]>

The stats are out for January for the Austin real estate market. Sales were very very slow. January 1998 was the last time we saw this few sales in a month. And no that is not a typo.

January is usually the slowest month of the year, and if you adjust for time of the year, November 2008's stats were probably equally as bad or worse. But market stats are usually lower in November on election years. There is no such excuse for the horrible numbers we are seeing this January. Below are the single family home sales stats for the last years:

There were 834 sales in January. It's a 36% decline from a year ago and a 43% decline compared to two years ago.

In essence, starting in September 2007, the Austin real estate market, along with the rest of the country, slowed down because of the subprime issues. For a year the market held steady at its new slower pace. But in October 2008, the market slowed down again. We are also seeing this slow down in other Texas cities.

All of last year we saw no price declines in the Austin market reflected in "official" stats. This occured because less homes in lower price ranges were selling, which artificially inflated median prices. So, in reality, prices were actually down. Now the official stats are showing price declines. The average and median price both are down 6% compared to a year ago.

All of last year we saw no price declines in the Austin market reflected in "official" stats. This occured because less homes in lower price ranges were selling, which artificially inflated median prices. So, in reality, prices were actually down. Now the official stats are showing price declines. The average and median price both are down 6% compared to a year ago.

The list to sold price is down to 94.4%. That means on average a house listed for $100,000 is selling for $94,400. Clearly sellers are becoming more flexible. But as we have said before, in your purchases, it's best to somewhat ignore listing price. You often hear people around the water cooler saying they got a house for 20k less than list. This is meaningless. If the house was overpriced by 40k, it's still a bad deal. You want to get a house under market value not under list price.

So, I have been getting some questions about the condo market. And, yes, although the residential market is doing poorly, the condo market is doing much worse. In particular the high end condo market is moving very slowly. Below is a graph of condo sales broken down by price range. Last month 1 condo priced over 400k sold. There were 363 condos priced over 400k on the market last month. We are seeing more sales with lower priced condos.

The multifamily market is also pretty slow. Two years ago we had 67 sales and last month we had 22 for a 67 percent decline

As far as different areas of Austin are concerned, we continue to see central Austin outperform the suburbs. Lakeway and Lago Vista are doing particularly poorly. The area south of Ben White is strong. Below are links to stats for the different mls areas along with a map of Austin showing the different mls areas.

MLS Map

10N - 8E
8w - HH
HS - PF
RN - WW

Ok, so what is my advice? First for sellers, I keep running into sellers who are a little nuts. We keep running into sellers who only want to show their house when "it's convenient". If we are calling to look at a bunch of houses on a Saturday, it's convenient for the seller to show it at Tuesday at 3pm. With over 10,000 houses on the market a lot of buyers are going to say thanks, but no thanks. With a lot of sellers and few buyers, it's not the time to ask buyers to come back tomorrow, they probably won't.

Also, we are seeing appointment with agent/office person or appointment with owner houses. As a seller, if you run into a listing agent who wants to personally show your property, you need to run from that person. That tactic can help an agent get more clients (basically by peeling them away from the buyer's agent). But, it's also going to affect a house by drastically reducing the number of showings and the chance it's going to sell. It's more convenient, but it's also more convenient to simply not list the house.

For buyers I would say look at houses that need a little work. The buyers in the market now want immaculate houses. Rougher houses are having a harder time selling which is translating to lower prices. Second, lock in your mortgage rate as soon as possible. Mortgage rates are near 40 year lows. They might go down more, but I am more worried about them going up.

So what are we doing? We are currently looking at putting in an offer on a property. I don't see an imminent recovery in the market. I wish I did, but I don't. But, during the down market, I hope to pick up a few properties at low prices and with low interest rates.

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.

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.

The November statistics are out for the Austin real estate market. There are two major topics this month. First sales are way way down. Second mortgage rates are at 40 year lows. Here are the sales stats for the last few years.

We had 990 sales in November 2008. Compared to last year we are seeing a 40% decline. But I think we need a little more perspective to understand how low that 990 number is. In June of 2008 we saw a 20% year over year decline. But we were comparing the weak market of June 2008 to the strong market of June 2008. So a 20% decline was not really that bad. By November 2007 the market had slowed down. So now when we talk about a 40% decline from last year, we are talking about a 40% decline from last year when the market was already pretty weak. We are seeing a two year decline of 49% (Nov 2008 - 990 sales, Nov 2006 1939 sales). So when was the last time we saw less sales than this? It actually took a little digging. Most of the stats only go back to 2004. But after looking through the archives I found 931 sales all the way back in January 2000. So this is the lowest number of sales we have had in over 8 years.

So in summary the sales market is very very slow.

This is also the first time we have seen a decent drop in prices from the official stats. Average prices are down 3 percent. As we have talked about over the last few months even through the official stats showed median prices up they were actually down. This was because less expensive houses were not selling. In a similar way I think prices are down more than 3 percent compared to last year. The 3 percent decline is significant for 2 reasons. First people that believed the stats are now going to feel prices are declining which is important. Second I think it shows prices are coming down a little more.

Ok now that their is no doubt sales and prices are down lets look at different market segments

Condo and Townhouses are down 39%. If you are worried about resale I would avoid the condo market. And in addition, I would especially avoid the high end condo market (500k+). That market is way overbuilt. The multifamily market is down 41% compared to last year. While this is comparable to the 40% drop in single family sales the multifamily market was much weaker this time last year. To illustrate this lets look at multifamily sales for the last 3 years.

Nov 2006 - 94 Sales
Nov 2007 - 49 Sales
Nov 2008 - 29 Sales

This kind of illustrates what people in the industry have been saying about the multifamily market. It's not just weak. It's dead. Compared to 2 years ago we are seeing a 69% decline.

Last month I talked about how of all the markets I liked the multifamily market. I am beginning to swing toward the single family market more for 2 main reasons. Prices have come down more in the single family market over the last few months. Second mortgage rates are extremely low. We have not seen mortgage rates this low by some measurements since 1959. And yes that is not a typo. Mortgage rates are incredibly low. But they are only low for single family homes not for investment properties. So with low prices and low mortgage rates the payments one would make on a single family house are much lower than they were a year ago. We are going to come back to rates in a little bit because it's a complicated mortgage market. Mortgage rates are low but only for certain situations.

Now let's look at areas.

Also here are detailed stats on all the different mls areas along with a map of Austin MLS areas

So besides East Austin moving pretty slowly this isn't that interesting. (Months of inventory is the amount of months it would take to sell everything currently on the market. It's basically inventory/sales. Low numbers indicate a strong market).

And it doesn't paint a good picture of what is going in. Central Austin is 8.40 and the suburbs have a months of inventory of 9.29. But if we look at the different mls areas in the central market we see a wide discrepancy. 10N is 5.78 and 1B is 37.00. So what is going on? Here is a chart showing the market broken down by price range.

In general more expensive houses take longer to sell. But in the current market that trend is accelerating. Basically the Austin market for homes over 300k has really slowed down. That is why 10N, with an average price of 194,500, has a pretty low months of inventory at 5.78. It also helps explain why 1B with an average house price of 790,000 has a much higher months of inventory at 37.00.

So earlier we touched on mortgage rates. Mortgage rates are very low. In 2002/2003 rates were low for pretty much everything. Today rates are low but banks are pretty selective. This is what they are looking for.

1) Single Family
2) Owner Occupant (basically not buying a house and renting it)
3) 20% Down
4) Stable Job

I want to touch on these a little more. The first one is obvious. They like single family homes over duplexes and fourplexes. A lot of investors that owned 3 and 4 properties are getting foreclosed on. Basically banks really don't want to loan to investors. We are seeing rates for investors in the high 6s. For down payments you can get a house with 3 percent down. The rate is going to be high. The days of No Doc loans where you state your income and expect the bank to believe you are dead. But if you are self employed and can prove your income for the last 2 years banks are still willing to give loans they just require a lot of documentation.

As always if you have a question about a specific house or neighborhood feel free to contact us. Also if you are interested in looking at what is currently on the market you can look at our Austin Property Search.

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

The statistics are for September for the Austin real estate market. The statistics are a little weird this month. First let's look at the general stats.

The line we obviously want to pay attention to the most is the last one September 2008. First the total number of sales was 1670. This is down from 1942 last month. As we move into the winter this is pretty typical. Compared to last year sales are down 8 percent. At first this looks pretty good considering for the last several months we have been seeing a year over year decrease over 20%. But before we get too excited last year at this time was when the market first started to slow down. So we are basically comparing a slow market this year to a market that was in the middle of slowing down last year. Another interesting statistic is to look at sales for September for the last 3 years.

September 2006 2341
September 2007 1816
September 2006 1670

So from September 2006 when the market was pretty strong we are seeing a significant drop in sales (29%). Now that seems to fly in the face of the numerous news reports we have seen showing that Austin is one of the strongest real estate markets. First off that is more a sign of the weakness of the rest of country than the relative strength of the Austin real estate market. Also it's because Austin and Texas in general is considered to be in a better position than most markets because we didn't see large price increases over the last 8 years.

Ok let's keep moving through the stats. The average price is down 4 percent compared to last year. The Statesman made a big deal of this saying it's the first time Austin saw a drop in median prices in the last few years. The only issue here is that prices have down for quite some time. As we have discussed here before the reason it appeared that average prices were going up was because lowered priced homes were not selling as frequently because banks go rid of sub prime and no doc loans. The fact that lowered prices homes were not selling artificially increased average prices. So basically prices have been down for awhile.

Still I find it interesting that sales and prices are both down compared to last year. Basically the market slowed down very rapidly this time last year. Then it seemed the market held steady at the new slower pace. But looking at these numbers it seems like the market has slowed down a little over the last year.

Ok lets look at inventory we have 10,217 on the market. This is an increase of 2 percent compared to last year. Again this is much better than the 20 percent year to year increases in inventory we have been seeing but it's because this time last year was when the market started to slow down.

So what factors are currently weighing on the Austin real estate market? First the stock market is obviously hurting the market. Although it's not directly affecting Austin it's basically freaking people out. As a side note it's really hurting the economy in New York City due to the massive layoffs that are occurring in the financial industry. Anyway the stock market is certainly slowing down activity. In fact on days when the market plummets we get canceled appointments and talking to realtors around the country they are experiencing the same thing. Additionally the sour loan market is weighing on the market. Basically if someone can't get a loan they generally can't buy a house.

The government of course is doing whatever they can to stimulate the mortgage markets. And after the takeover of Freddie Mac and Fannie Mae they have the ability to have more direct control over the mortgage market. We can expect that the government will do it what it can to make it easier to get a loan which should help the market. In addition, they recently passed a 5,000 tax credit for first time home buyers. This should provide a boost to the market. The Fed is also expected to cut rates this week bringing the fed rate to lowest point it has been in 4 years. And of course the 700 bailout for banks which is intended to influence banks to start lending. The question is whether the government's attempt to help the market will work.

So what is my advice for buyers looking for homes in the current market? I realize appreciation is not the only concern when buying a house but we are still seeing central Austin outperforming the suburbs. Also please ignore list price. I talk to so many people that think they are only getting a good deal if they buy 20% under list. Sometimes if you buy 20% under list you are getting a bad deal and sometimes if you buy above list you are getting a good deal. Buying for X percent under list doesn't mean anything (besides maybe talking about it at the water cooler the next day at work). In fact we put in an offer for a property yesterday (for us personally) at above list price. It's always better to get a good deal than simply get a property for under list.

Prices are down but loans are also harder to get. So while credit scores were less important 2 years ago they are important today. This means two basic things. It's a good idea to check credit scores early on in the home buying process and get rid of any issues that might be dragging it down. By boosting your credit score you have a better chance of getting a loan with a lower interest rate. The same can be said of down payments.
The more you can put down the better. Right now banks greatly prefer loans with higher down payments. And the days of 0 percent down payments are pretty much dead. So it's a good idea to save as much as possible. Also if you plan on getting a car and a house I would get the house first.

Lastly if you are getting a loan I would check mortgage rates somewhat frequently. Basically we are seeing a lot of flux with mortgage rates over the last few weeks. So if you lock in at say 6.25 it's probably worth it to check rates again in a week and see if you can relock at the lower rate. Just keep in mind once you get close to closing date you can't relock.

Moving on lets look at different segments of the market.

The year to date stats (the first graph) show us what we have seen before. The multifamily, lot, commercial and condo market is doing much worse than the residential market. I found the snapshot for September (the second chart a little more interesting. Basically compared to September 2007 sales for the single family market are down 8 percent but commercial sales are down 33%. Initially when the market slowed down last year the commercial market held up. In fact some commercial agents proclaimed that the commercial market would not be affected by the sub prime crisis but since then we have seen commercial market slow down quite a bit. We are also seeing a very weak multifamily market.

Below are the stats for the central Austin real estate market. We also have stats for the other mls areas
10N - 8E, 8W - HH, HS-HW, OT-WW

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 for Austin Area Homes.

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.

First all the top executives and the board are going to be dismissed. I have mixed feelings on this. On the one had I am sick of CEO's walking away with millions after running their companies into the ground. But on the other hand I don't know if dismissing all the top executives and the board at the same time is a wise move. Once the Fed moves in, if they have questions it will be a little harder to get answers with basically the entire executive level of the corporation out of the picture. I would have preferred to see a few people stay around at base pay.

The stock has plummeting in the last month over fears that there would be a government takeover and it might possibly wipe out shareholders. The inside sources are saying that the shares will be diluted but not entirely wiped out. So basically the fears of investors were more or less well founded. The implications of this are probably why the plans were leaked today after the close of the stock market. [Full Disclosure : My investment firm has been selling Fannie and Freddie Mae short over the last month. I thought it was risky to short a company after it had already lost 90% of its value but I guess they were right.]

Now to the bigger question what does all this mean? First of all it means that as of today we are in the midst of a huge financial crisis. Taking over companies the size of Freddie Mac and Fannie Mae is a big deal. It’s going to cost tens of billions of dollars o taxpayers and is the largest government takeover in US history. Freddie Mac and Fannie Mae provide insurance for half of loans issued in the US. Currently they own or provide insurance for 5 trillion in loans. Now the federal government provides insurance for 5 trillion in loans. This means if someone decides to not pay their mortgage instead of a bank coming after them the federal government could be knocking on their door.

What does it mean for the future? Oddly enough I have been waiting for this to happen and I think it could have a positive effect on the real estate market. Why? During the financing crisis Freddie Mac and Fannie Mae have added tons of loan restrictions which have hurt the real estate market. While some of these rules have simply gotten rid of the free wheeling money lending of the boom, others seem bizarrely restrictive. For instance there is a rule that individuals can only get 4 property loans regardless of income or credit score. So if someone has a few million dollars in the bank they could for instance only get 4 150k rental houses unless they wanted to pay cash. As you can guess these restrictions have hurt the real estate market. It’s assumed that with the US Government (which has been attempting to help the real estate market pull out of this mess) taking over Freddie Mac and Fannie Mae that they will remove some of the recent loan restrictions.

Are we likely to see more government bailouts? I don't think so. The Fed has made it clear that they are not going to let Freddie Mac and Fannie Mae fail but have basically said the same is not true of the smaller banks. So I think for small banks that run into problems they are going to fall instead of be taken over.

The stats for July are out for the Austin real estate market. First let's look at the big picture. Compared to last year sales are down 21% (2621 to 2071) and active listings are up 15% (9451 to 10913). The 15% year to year increase in listings is the lowest we have seen over the last few months (from Dec 2007 to June 2008 the year to year increase in listings ranged from 19% to 24%). So does this mean this month's statistics point to the market turning around? No. Basically last year at this time was when the market first started slowing down and we started seeing more listings. Average prices are pretty much the same as last year and Median prices increased 2.7 percent from last year (189,900 to 195,000). So in summary the overall market is still down from 2007 but it seems to be holding steady at its new slower pace. Below are the month's stats for the last 3 years. And although the Austin real estate market is slower compared to the beginning of 2007, Austin is still considered one of the strongest markets in the country.

So let's break out the market by property type. First let's look at commercial properties.

Last year when the market started slowing down some optimistic commercial brokers predicted that the commercial market would remain strong throughout 2008 even while the residential market slowed down. In contrast it looks like the commercial market has been one of the worst performing markets. As the below chart shows, year-to-date sales are down 32% compared to last year. In contrast, sales in the residential market is only down 18% compared to last year.

The other property type that is down is Multifamily. Year-to-date multifamily sales are down 44% compared to last year. So what is pushing down the multifamily market? Basically lenders have gotten a lot tighter for multifamily loans. Many are requiring 30% down payments; additionally, most lenders are limiting individuals to have only 4 property loans. This has basically really slowed down the multifamily market. Therefore we are seeing lower prices and more properties that cashflow.

Ok let's look at the different areas of Austin.

Central West Austin is still the strongest market. East Austin is still slower because too many investors rushed in during 2007. But the good news for the east Austin real estate market is it seems to be improving. Back in January it was 6.68 months of inventory and now it is down to 5.67. The suburbs are doing worse than the market in general.

So what areas of the market do I like right now? As has been the case for awhile I still like area 10N and SWW (the area just south of Ben White, here's a map of the MLS areas). Basically the area is still pretty affordable and close to town. What's not to like.

So that's what I recommend. What would be the last thing I would recommend? Basically condos that are farther from town. I generally say houses appreciate faster than condos and central Austin outperforms the suburbs. So getting a condo in a condo complex outside of central Austin is kind of like getting the worst of both worlds.

So if you are thinking of getting a place what's my advice? First of all, if you are looking for a good deal, ignore list price. And this goes both ways. If a property is overpriced you are not getting a good deal just because you get it for 10% or 20% off. At the same time it might make sense to get a property for close to list price if its already priced well.

Second a lot of people have been asking when the market is going to bottom out. Not only do I not know but generally no one knows until way after the fact. We are definitely going through a low point now. So even if you are not planning on buying this week or next, now is probably the time to start looking and familiarizing yourself with the market.

As always if you have any questions about the market or a particular property, feel free to contact us. Also if you want to look at what is currently on the market, feel free to use our map-based search of the Austin MLS.

So anyone that follows my blog knows I like graphics. This one is pretty interesting. To start off with the top image shows where the highest percent of subprime loans were give out and what percentage of those loans are now in foreclosure. First the map is color coded with darker colors indicating the areas where subprime loans accounted for a high percentage of all mortgages given out. Second height shows the percent of subprime mortgages that are now in foreclosure.

So for instance Dallas, Texas is dark because a high percent of the loans give out where subprime loans. But the height is low because few of these loans (6.1%) went into foreclosure. On the other hand in Sacramento, California a high percent (17.2) of the subprime loans ended up in foreclosure.

The two smaller maps below help explain some of the difference. The first map shows the construction boom from 2004-2007. Basically areas that experienced a lot of overbuilding also saw a lot of out of state investors. And as we have been seeing in the subprime mess areas with lots of investors have seen a lot of foreclosures. The other piece of the picture is job loss. Areas with high rates of job loss see a high level of foreclosure. This is why although areas like Minneapolis-St Paul didn't see a lot of subprime mortgages we still see a high rate of foreclosures (17.1) with the subprime mortgage that were given out.