First the May Facts & Figures for the Austin real estate market, active listings are up 1756 from last year. Homes sold is down 544 from last year. Both these numbers indicate a trend for a buyers market. But then the average sales price is up as well as the median sales price, so what does that mean? I think this is a little misleading because lower priced houses are not selling which is pushing the median and average prices up.

So what is going on with the Austin real estate market? Certainly the market has been affected by the subprime issues and the national housing malaise that has affected the entire country. We are seeing sellers that are more negotiable and prices have come down. But that said, we are not seeing 30% price drops like what California is currently experiencing. This is likely because the Austin real estate market did not see the wild appreciation California experienced for the last several years before the subprime issues. Let's look over the past couple years.

One interesting thing to look at is the sold to list price. It was pretty steadily around 97% for 2006 and 2007 until September 2007. It then wavered a couple months, and now April and May have come back up to just under 97%. Now that said, you have to remember to not get caught up in what the asking price is because getting a place for 5% less than list price does not mean it is necessarily a good deal. This is a common misconception. Good deals are not a ratio of list to sale price. Good deals are those that sell for less than the current market price. A lot of people feel good when they get X amount off the sales price, but what if it was X amount overpriced to begin with? Actually, some of the highest appreciating properties and best deals we have personally bought were purchased at list price.

Next let's look at the months of inventory on the market. This is basically how many months it would take to sell off all the houses currently on the market. Generally anything over 6 is considered a buyers market. Anything below 6 is a buyers market. Last year at this time the Months of Inventory was 3.27 which basically indicates we were in a very hot sellers market. In May 2008 we are at 4.91. Although this is above what we say in 2007, 4.91 is not that bad. And it's certainly a different story than what other parts of the country are experiencing. (I think parts of Florida are hovering at around 20 Months of Inventory).

Overall I would still say we are in a buyers market. For sellers I would advise to make their house as spotless and presentable as possible. Buyers are not going to look past stains in the carpet and even general clutter is really hurting a houses chance of selling in the current market. For buyers, if you look over the market you can still find decent deals out there. But if you are looking for a decent deal , you need to be flexible in what you are looking for and be open to variety of different houses & areas. That way you have many opportunities and a higher probability of finding a deal.

Now let's look at the breakout of the submarkets. The suburbs months of inventory increased from last month, from 4.83 to 5.22. East Austin has also increased its MOI just slightly from 5.61 in April to 5.71 for May. And central has improved quite a bit with a drop from 4.01 to 3.46 of MOI.

And finally, below is the further breakdown of the different central Austin MLS areas. Here is a map of Austin showing the different Austin MLS areas.

As always, if you have any questions about a particular house or the market in general, or if you are looking for a home feel free to contact us. Also if you want to search what is currently on the market we have a search here for Austin homes.

The stats for April are out for the Austin Real Estate market. I have gotten a few questions about why for instance April stats are not released until May. Basically although a sale happens in April, it is not reported until later. So if you were to pull the stats out in the beginning of April they would be pretty far off.

There is some interesting stuff going on this month so let's get started. First off, the basics. The market is definitely still slower than it was in 2007. Don't let anyone tell you different. The number of active listings on the market is up 20% compared to last year (8354 to 10034). The number of solds is down 14% (2295 to 1981). The median price is up ($185,000 to $187,900) and average price is down ($249,912 to $242,160). I think the median price is only up because cheaper houses under 150k are not selling due to the subprime issues. Basically in today's market, I am seeing lower prices and better deals than I did last year.

While the market is slower than last year, at this time we are actually seeing some positive signs over the last few months. One indicator people look at is the Months of Inventory on the market. It is based on the current number of sales and looks at how long it would take to sell all the houses currently on the market. A lower months of inventory means the market is a strong market/seller's market. Below is a graph showing the months of inventory over the last few years. As we see the months of inventory has been falling for the last few months. And the difference between now and last year is the lowest it has been in several months. Keep in mind the market is currently a buyers market and is worse than last year. But it seems to be weathering the storm better than a lot of markets that are currently imploding.

Now let let's look at average prices. Because of seasonal flucations in prices we usually compare the average price to what they were last year. So in contrast to the "Months of Inventory" graphs, what we discover when we look at prices is that seasonally adjusted average prices are down 3 percent this month the biggest year to year decrease in several years.

So are sellers overreacting to negative talk about the national real estate market? Maybe. Should sellers go with higher prices. I would say no for 2 reasons. First the Austin real estate market is not strong, it just seems to be weathering the current real estate storm. Secondly if everyone on your block is selling their houses for 200k and you list for 220k, well you can make your own conclusions about the likelihood of selling your home. What does this mean for buyers? Basically prices are down and interest rates are still relatively low. So if you take some time and look over the market you can probably find some decent deals out there. This is what promoted Lisa and I to make an offer on an investment property this week.

Ok lets look at the submarkets of the Austin real estate market. The Lakeway/Lago Vista market is moving incredibly slowly, by far the worst part of the market. East Austin has improved quite a bit from its dreadful performance a few months ago but is still underperforming the general market. West Central Austin is still outperforming all the other submarkets in the Austin area. The central part of the city outperforming the rest of the market is actually reflective of what we have been seeing in other cities around the country.

Here is a further breakdown of the different central Austin MLS areas. Here is a map showing the boundaries of the different Austin MLS areas.

Also if you want to search what is currently on the market we have a search here for Austin homes. As always, if you have any questions about a particular house or the market in general, or if you are looking for a home feel free to contact us

So what do all these numbers mean for the Austin real estate market. Basically as we move into summer we generally start seeing more sales, and that is what we are seeing. Considering all the issues in the national market there was some worry that the real estate market would not heat up in the summer but it looks like we are seeing more sales as the summer approaches.

The number of sales this month (1832) is up from last month (1499). It's down quite a bit (21%) from last year. Another statistic we look at is the months of inventory on the market. Basically, based on current sales, this is how long it would take to sell everything on the market assuming nothing new was added. The average months on market is 6. This month the months of inventory in the Austin real estate market was at 5.26 down from last month's number of 6.09.

Overall the market slowed down in September 2007 with all the subprime issues. The months of inventory in September went from 3.93 to 5.51. Since then the market has been moving at a slower rate. But we have not seen the market getting worse or better. Kind of like being in a car going 70 mph and we shifted gears and since then we have been going steady at 40 mph. I cannot predict the future. But from the statistics we have been seeing, it looks like this summer will be ok although not as good as last summer.

Currently we are in a buyer's market. We are seeing much better deals than we saw this time last year. I have gotten a few questions from people trying to time the market. Basically wanting to buy in the worst month. Kind of similar to buying in the lowest month in a stock market. Market timing doesn’t work as well in real estate as it does in the stock market for a few reasons. First, statistics on the market are delayed. People putting in offers today will not show up in sales statistics for at least a month (it usually takes a month from initial offer to final sale). So we won't know what the bottom month is until way after the fact. In addition, the market doesn’t seem to be getting steadily worse. Instead it seems to be moving at a slower but steady pace for several months now.

Also getting a good deal in real estate is more dependent on the property than the exact time of sale. So instead of waiting for a particular low month and jumping into a property one would have better success having a long time window and waiting for a good deal in the area they are interested in.

Moving on, let's look at the different sub-markets of the Austin real estate market.

The East Austin real estate market ran into problems when the California investors left in September. There was a ton of inventory on the market and very few sales. While the East Austin market is improving somewhat from the last few months, overall it still is relatively weak.

The central Austin real market is doing pretty well. There were relatively few subprime mortgages in central Austin. In addition because properties in central Austin don't cashflow, California investors bought fewer property in central Austin than in other areas of Austin. Also the supply of homes in central Austin is relatively fixed.

As we have seen for several months, the central Austin market is outperforming the suburbs. I don’t expect this trend to change anytime soon. The markets in Lakeway and Lago Vista continues to be doing extremely poorly with a months of inventory just over 12.

So let's break out numbers a little more. Below is a chart showing the sales of homes in the central Austin real estate market broken out by Austin MLS areas. Here is a map showing the boundaries of the Austin MLS areas.

So what areas jump out to me? For investment I really like area 10N. 10N has a few things going for it. First, it's in central Austin which means the supply is relatively fixed. Second, prices are down because subprime borrowers cannot currently buy homes, which hurt areas with homes priced below 150k. But overall the area is pretty central, once banks loosen standards a little, the area seems primed for appreciation. If you buy something there ,I would recommend getting a decent realtor. A lot of the homes in the area have hidden problems with foundations and underground pipelines. (I happen to know this one realtor you can contact him here he has a blog :)). But seriously if you don't use me, find someone that knows what they are talking about.

So here are some more stats I found interesting. Below is a chart showing sales broken out by price of home.

What we notice when looking at the different home price brackets is that homes priced below 150k are selling at a much slower rate than last year. In addition homes over 400k are selling less frequently than less year. So what is going on? Because banks are not giving loans to subprime borrowers (bad credit scores) homes priced below 150k are having a difficult time selling. Homes priced between 150k and 400k are doing okay. Homes priced over 400k are selling slowly because rates on jumbo loans have gone up. This is just my opinion but I think increasing rates on jumbo loans was a way for banks to quickly exit markets like California that are doing poorly.

If you want to look at statistics for the last few year they are located here Austin real estate market statistics. Also if you want to search what is currently on the market we have a search for Austin homes. As always, if you have any questions about a particular house or the market in general, or if you are looking for a home feel free to contact us

Date	30 YR	15 YR	5 YR ARM	1 YR Arm
March 13	6.13	5.6	5.58	5.14
March 20	5.87	5.27	5.56	5.15
March 27	5.85	5.34	5.67	5.24

Mortgage rates for 30 Year loans came down again this week. Last week they fell from 6.13 to 5.87. This week they moved down slightly from 5.87 to 5.85. These drops were probably due to the Fed cutting interest rates 2 weeks ago. What is interesting is that rates on 5 and 1 year ARMs went up. This is probably due to the fact that lenders see 30 year loans as safer and are viewing 5 and 1 year ARMs with more caution. In the past 2 weeks 5 year Arms's have gone up from 5.58 to 5.67 and 1 year Arms have gone from 5.14 to 5.24.

So in the context of the last few years what are mortgage rates doing. Here is a graph of the 30 year mortgage graphed since 2005. With the exception of a sharp dip in mortgage rates last month, the 30 year rate is the lowest it has been since 2005.

If you want to look at more mortgage rate trends we have a tool over here that graphs mortgage interest rates.

http://www.johnmccain.com/Informing/News/Speeches/bea72b48-35ba-48cb-8cea-b3b68b9be7ee.htm

Here is the relevant part of his speech.

We should also convene a meeting of the nation's top mortgage lenders. Working together, they should pledge to provide maximum support and help to their cash-strapped, but credit worthy customers. They should pledge to do everything possible to keep families in their homes and businesses growing. Recall that immediately after September 11, 2001 General Motors stepped in to provide 0 percent financing as part of keeping the economy growing. We need a similar response by the mortgage lenders. They've been asking the government to help them out. I'm now calling upon them to help their customers, and their nation out. It's time to help American families.

The difference between General Motors and Mortgage Lenders is that General Motors is selling cars. So if they offer 0 percent interest they still make money on the car. Lenders on the other hand do not generally build the homes they are giving out loans for. So while 0 percent mortgages sounds pretty appealing to most potential borrowers (heck it sounds pretty appealing to me), I assume the lenders are not in love with the concept since they would quickly go out of business. Or I guess more accurately, taking away their primary source of income would cause lenders to go out of business faster than they currently are.

We can only assume that after this speech that his advisors pulled McCain aside and told him that 0 percent mortgages are not actually possible.

We had to alter the statistics because this month February had 29 days and last year it only had 28.
Compared to last year at this time, the number of homes on the market is up 24% compared to last year. The number of home sales is down by 13% which is similar to last month but better than the preceding 4 months. The Average Price compared to last year is basically flat (it is up 0.1%). What does all this mean? Basically the market is weaker than last year. But it doesn't seem to be getter worse like California and Florida. Instead it's holding steady at its new slower pace.

Next let's break out some different areas of the Austin real estate market. (Here is map of Austin with the different MLS areas)

The months of inventory describes how many months it would take to sell all the inventory on the market. Generally the lower the number the stronger the market ,and high numbers designate weak market. 6 months is generally regarded as the dividing line between a buyers and sellers market. As has been the case for the last few months, the East Austin Real Estate market still has a large amount of inventory. Basically when the market slowed down, the California investors fled the market and dumped a lot of inventory on the market.

I also broke out Lakeway/Lago Vista this month. As can be seen, this area is doing very poorly. There are currently 14.5 months of inventory. Areas like Lakeway/Lago Vista where builders built too much inventory are having a hard time.

Next up is Central Austin and the Suburbs. Central Austin is doing better than the suburbs. Why? The amount of houses in central Austin is fixed while the amount of houses in the suburbs keeps growing. Due to the laws of supply and demand, when the supply is fixed prices tend to appreciate during strong markets and hold their value better during weak real estate markets. Also in Austin, there is a lot of attraction to living central because there are a lot of amentities in downtown Austin.

Below is a further breakdown of the different central Austin MLS areas.

Next, I wanted to show what the multifamily market (duplexes, triplexes, and fourplexes etc) is doing in Austin.

Basically the multifamily market in Austin is on life support. It is having the same problem as East Austin real estate. When the California real estate market started tanking, investors from California started dumping their properties here on the market. But I am more confident about the multifamily market. Unlike East Austin, multifamily properties did not experience the huge appreciation in 2006 and 2007.

In contrast, over the last two years I had a hard time finding investment properties that had positive cashflow (rents are greater than the mortgage and other property expenses each month). But now with the California investors leaving, prices have come down. In addition, since rents went up in Austin along with mortgage interest rates coming down more investment properties with positive cashflow are showing up.

If anyone has any questions about any particular areas or a particular house feel free to contact us. Also if you want to search for properties currently on the market here is our Austin Home Search.

So the mortgage industry has started blackballing certain zip codes which they feel are a risky investment. There have been some questions if this violates the redlining rules which where implemented in the 1960's to prevent banks from refusing to give out loans in minorityneighborhoods.

This time around, banks are not blackballing certain areas but the mortgage insurers. Mortgage insurers, which are required in cases where the borrower is putting down less than a 20 percent, have started flagging certain zip codes where they refuse to provide insurance. In some cases mortgage insurers have gone as far as blackballing the entire states of California, Florida, Arizona, Michigan, Ohio and Nevada.

While this will not limit all loans in these areas, it will limit people from getting loans that are putting down 3 percent down payments or people looking to buy second homes or investment properties. This certainly deals a serious blow to the areas affected and will offset any gains from the recent falling mortgage interest rates over the last 2 weeks. So far 9600 zip codes have been flagged. Most of the zip codes are in California, Phoenix and Florida.

The January stats are out for the Austin real estate market. As has been the case for the last several months, the Austin market is slower than it was last year. Compared to this time last year, inventory is up 24%. Home sales are down 10%.

Overall the market seems to be doing about the same. The market doesn’t seem to be getting better or worse over the last few months. The decrease in sales (10%) compared to last year was the lowest year to year decrease since this summer, which is a positive sign. But overall I think we are still clearly in a buyers market. Below is a breakout of the statistics for the last few years.

Next let's look at the submarkets for Austin. The trends we have been seeing remain the same. The East Austin real estate market continues to have a lot of inventory on the market since the California investors left the market. The suburbs are also doing worse than the general market. West Central Austin is outperforming the general market.

For more stats here is a breakdown of the central Austin MLS areas. (Here is map of Austin showing the location of the different MLS areas

I have been getting a lot of questions about the Austin condo market. Below is a chart of sales for the last 2 years. Basically the amount of inventory on the market has increased but sales have not. In January 2006 we had 131 sales and 955 Active Listings. In January 2008 we had 121 sales so about the same as 2 years ago, but we had 1676 condos on the market. So it looks like central Austin is outperforming the suburbs and houses are outperforming condos.

I wrote a question and answer section for Decembers Austin real estate blog. Most of these points remain the same. The most important is I still think it's a bad time to flip because the market is slow and it's hard to flip profitably if it takes 6 months to sell a property. I also think it's a good time to buy and hold because buyers can buy homes and investment properties for less and interest rates are low. In 10 years people are generally happy when they buy in a down market.

As always if anyone has a question about a particular property please feel free to contact us. Also in addition to all the stats if you are interested in looking at homes currently on the market you can use our search of the Austin MLS.

The December stats are out for the Austin Real Estate market. Last month we saw very few pendings, which we thought might foreshadow less sales this month. That turned out to be the case. The number of sales dropped 16 percent compared to December 2006. The number of actives increased by 21 percent. The months of inventory is at 5 months. Typically anything below 6 months means we are in a sellers’ market. Despite Austin being under that benchmark, the Austin market is definitely a buyers’ market. Below is a further breakdown of Austin real estate statistics for the last 3 years.

The average and median prices are both up, but I think this is a little misleading. When the subprime mess happened, it mostly affected homes under $200k. So basically, since less of those homes are selling, the average and median prices are being pushed up.

So when are we going to go back to being an up (aka sellers’) market? According to the National Association of Realtors (NAR), it will probably be soon. Maybe tomorrow, if not later today. But they are always saying that, so it would be best to ignore them. Recently I have been asked some of the same questions from people, so before we look at the statistics for different submarkets of Austin, I wanted to write down a few of the basic questions I have been receiving lately and my answers.

Q: Exactly how much is the Austin market going to appreciate over the next X months/years?
A: I have no idea. I can’t really see into the future. I am a realtor, not a godlike super-natural deity. I wish I was a super-natural deity because it would look better on my business card. I would also probably be cooler at block parties.

Q: When is the exact date when the Austin real estate market is going to go from an up market to a down market?
A: This is pretty much the same as the above answer. It could have been last week, it could be next week, it could be 5 months from now. I don’t know. I imagine when the national real estate market improves (which has been in a funk for awhile) the Austin market will improve. Basically the fundamentals of Austin are good we are just being dragged down by the national market.

Q: Is Austin going to experience a 30% to 50% dip?
A: Again I can’t see the future but this seems pretty unlikely. California saw huge appreciation rates (bubble) for several years. Austin on the other hand has had pretty mild appreciation for the last several years. see graphic

Q: Is this a good time to flip?
A: No. When you need to sell in 3 months, if you get lucky & the market improves, that is great. But if the market is moving slower, it could take a long time to sell. And if you get a low offer, you will be faced with the choice of accepting a lower offer or making more mortgage payments on your vacant house. Not really an appealing prospect.

Q: Is this a good time to buy and hold?
A: People always don’t want to buy in a bad market. But ideally you want to buy in down markets and sell in up markets. And right now we are in a down market. If you combine the fact that prices are lower, sellers are more willing to negotiate, and interest rates are low, the market is starting to look pretty interesting. For instance if we look at houses that are South of Ben White about 10 minutes to downtown, we see a few properties for sale around $125k. If you use our real estate calculator (plug in 2.5% for the tax rate and a 10% down payment), you end up with a mortgage payment of $950.

Q: Can I offer 100k for a 200k house?
A: Yes. You can offer whatever you want. But the chance you will get the house is around 0%. The sold to list price in November was the lowest in the last 3 years since sellers are becoming more flexible. But the list to sold in November was 95.8% not 50%. We are seeing some deals coming in higher and lower than 95.8% but not 50% unless there is something wrong (ie a list price that is totally unreasonable).

Q: I want to buy a house in Leander/ Round Rock/ middle of nowhere. I see a lot of building out there. Does that mean I can expect values to increase?
A: No. If you think about the laws of supply and demand, the supply increasing is not good for market value. Buying real estate far out is bad. The fact that they are building more just makes it worse. Even if demand were to increase, the fact that builders would just build more houses to satisfy that demand basically sucks the wind out of your home increasing in value. The benefit of buying central is that the supply is fixed.

Q: I heard the market is down but rents seem to be up. Am I missing something?
A: Nope. Rents are up. Basically in down markets more people rent. And right now a lot of people are forced to rent because they can't get home loans due to the mortgage issues. Rents will probably not go down unless people start to leave Austin, which is not happening.

Q: I saw a house and they said the market value is 200k but they are going to sell it to me for 160k. How excited should I be? Super excited or super-super excited. I can’t decide.
A: I have been seeing the words ‘below market value’ thrown around by sellers a little bit recently. You should basically ignore this unless you are setting down with someone other than the seller looking at a CMA based on recent solds. Recently I saw a house where the seller was selling for $140k and the market value was stated as $175k. Great. The problem is that the house was listed on the MLS at $150k for 3 months and no one bought it. Basically if no one was willing to buy it for $150k after 3 months, that means it’s not worth $150k and certainly not worth $175k. We are seeing some good deals out there but obviously don't take the sellers statements at face value.

Q: What is the meaning to life?
A: Umm… Something about eating an apple a day. Kids are the future? I don’t know. Boggle? Okay, maybe no one really asks me that.

Ok enough questions. Let’s look at the break downs for some of the different submarkets of the Austin real estate market. Before we get into it, I want to define months of inventory (MOI) on the market. Basically it means the number of months it would take to sell off all the homes on the market based on the current actives and the amount of sales. The lower the number, the strong the market.

Overall, the market months of inventory increased from 4.79 in November to 5 in December. The suburbs are still doing worse (5.24) than the overall market. I expect this to continue.

As we have been saying for the last few months east Austin still has a lot of properties on the market. This was caused by California investors pulling out of the Austin market, and they were more heavily concentrated in east Austin. And while the market in east Austin is still oversaturated, it’s actually starting to show signs of improvement. The months of inventory increased but it increased less than the overall market. Not a huge improvement but still a positive sign.

Central Austin had the lowest number for months of inventory on the market in November (4.03 months). And in December it was the only submarket to actually see a decrease in months of inventory, going down to 3.9 months. Overall, central is being affected by the slow down (last year the MOI was 2.2), but it seems to be holding up better than the suburbs or east Austin. And part of the reason is that the supply is fixed. They can’t build any more houses in central Austin unlike east Austin (which has a lot of tracts of vacant land) and the suburbs.

Ok its 3am in the morning. I am going to bed. Hopefully I won’t dream of real estate. I have been doing that recently, which I think is a sign that I am way too obsessed with my job.

As always, if you have any specific questions about the market or a particular house, feel free to ask. Also if you are interested in looking at homes currently on the market you can use our Austin homes search.

http://www.escapesomewhere.com/blogim/mls-map.JPG

Why does real estate in the central city generally do better? Basically the supply is fixed so when demand goes up prices increase. In contrast in the suburbs when demand goes up builders simply build more houses. Below is the interactive map so you can click around and look at the exact appreciation statistics for different areas of the Austin real estate market. If you click on the "Percent change in home median price" an interactive color coded map comes up based on real estate price appreciation.

One thing you might notice is there is a red dot in the middle which represents downtown. Downtown Austin only had one house sell so the statistics for downtown are pretty meaningless. I know some of you have your own blogs. If you want to post the interactive map here is a link with just the map.

http://www.escapesomewhere.com/Austin-Real-Estate-Map-1207.html

Above is the summary for November 2007 statistics for the Austin real estate market. Here is a further breakdown of those numbers for the last three years.

There are a lot of interesting numbers in these stats. To start off with, the market is clearly down compared to last year. There were 13.05% less sales in November 2007 compared to November 2006, and the number of listings was up by 9.72%.

Although the market is still down, we see a positive trend over the past three months. In September we had a decrease in sales of 22.85% from last year; in October we had a decrease of 16.95%; and in November we had a decrease of 13.05%. Looking at active listings, in September we had increase of 22% from 2006, in October we had a increase of 19% from 2006, and in November we had a increase of 10% from 2006. The last column is Months of Inventory (MOI) on the market. Basically a low months of inventory is good because it shows houses are moving off the market quickly. We jumped up in MOI in September, but it has steadily decreased from September to November. In September we were at 5.52, in October we were at 5.42, and in November we were at 4.79.

The one column that points in a negative direction is the number of pending listings. The number of pendings is a indicator of how many sales we will have next month. And the number of pendings in November (1278) is pretty low which indicates the number of sales in December should be pretty low. So although there were some positive signs in the November stats, I would say we are without a doubt still in a buyers market. And although the November stats looked better than what we have been seeing I am not too positive about what we will see next month.

Before we move away from analyzing these stats, there is one more thing I would like to point out which is the Sold to List Price. This is basically the amount a house sells compared to the list price. The Sold to List Price is going down, which basically shows that sellers are realizing they need to accept lower prices in many cases in order to sell their homes.

Now let's break out statistics for the different submarkets of the Austin Real Estate Market.

The first thing that jumps out is the months of inventory on the market for all areas is under 6. Basically a market that is over 6 months, is a buyers market. When the months of inventory is under 6, we are in a sellers market. Although the months of inventory is under 6 I think we are still in a buyers market.

The suburbs are doing a little worse than the overall market. This is pretty typical. In central Austin, the supply of homes is relatively fixed because all the land has already been built on. Whether the market is strong or weak, the suburbs tend to appreciate slower than central Austin. Second, as we have been seeing the last few months, east Austin has a lot of inventory. Basically the California investors, which are getting hammered at home, are selling off the investment properties they bought in Austin over the last few years. Consequently, areas like east Austin where a high percentage of owners were Californians now have a lot of inventory on the market. In contrast, areas like central and west Austin where there are fewer investors and more owner-occupants are seeing less inventory on the market.

So what is going to happen in 2008 is the million dollar question. A lot of what will happen in 2008 depends on the local and national economy. While I can't predict what will happen, I can say what might be a good move based on what you think will happen in 2008. If you think the national economy is about to tank, you might consider renting or (because rent prices are increasing) look at buying a smaller less expensive house than what you would otherwise be looking at. If you think the Austin market is going to come back and are looking to invest, you should consider looking for some centrally located properties that have positive cashflow. Due to rising rents and sellers that are more flexible we are seeing a lot more properties that generate positive cashflow.

Just in case you want to see some more statistics here are the Austin real estate statistics for the last four years. And of course if you want to look at what is currently available on the market, you can use our Austin MLS Search. And as always, if anyone has any questions about a specific property or you are looking for a real estate agent to help buy or sell a property feel free to give us a call.

Countrywide official 1 : Are you reading the Austin Real Estate Blog?

Countrywide official 2 : Of course. That is all I do. Even when he doesn't post for 2 weeks I just stare blankly at the screen.

Countrywide official 1 : We are going to go bankrupt! Let's call BOA and make a deal.

*calling*

BOA official : Are you reading the Austin Real Estate Blog? You guys are about to go bankrupt!

Countrywide official 1 : I know. Can you buy us or something?

BOA official : Oh. Sure why not.

BOA official : Let's do it just to spite that guy behind the Austin Real Estate blog. He is going to be so pissed tomorrow morning.

In all seriousness though- it's obvious that the BOA buyout makes the possibility of Countrywide going bankrupt much much lower. But I am going to keep the post up because the reasons in it (Countrywide's ineptitude at dealing with short sales) are still valid.

And of course because it's a historically important document/blog post for being the sole cause of the BOA buyout.

To say Countrywide's stock has gone down over the last 3 days would be an understatement. Countrywide stock was at 8.52 two days ago. Today Countrywide closed at 5.12 for a drop of 40%.

So what caused the colossal drop? Countrywide released its numbers for the third quarter of 2007 which were worse than expected. And the expectations were not good in the first place.

First off, delinquencies were up. 6.96% of its loans were delinquent last month, and 1.04% of its loans were pending foreclosure. Both are bad signs for Countrywide.

I would guess one of the reasons foreclosures are up is that Countrywide is not very adept at dealing with short sales, which is the last ditch effort to sell the property at a loss with bank approval before foreclosure. I have dealt with Countrywide on a few short sales. There inadequacy is not just bad, it’s bewildering. On one of the short sales, Countrywide stands to lose only a few thousand dollars, which should look appealing compared to the alternative of massive legal fees involved in foreclosure.

Since Countrywide is trying to stem loses and we have offers in hand, one would expect Countrywide to move quickly. Instead we are waiting for weeks to just be assigned to a case officer. If Countrywide’s survival depends on being able to sell properties, they are doomed. Before even being assigned a case officer, we were given a mountain of paperwork. One of the requested items was a copy of the note… are they that messed up that they don’t have a copy of the note themselves? If you call with questions, you are connected a different call center person each time in another country who knows nothing about your case. This may sound harsh but Countrywide at this point is not just going to bankrupt they deserve to go bankrupt.

I understand Countrywide wants to cross all their T's, but they are going to lose out in the long run. In a down market, you can only ask so much from buyers. Investors are low-balling Countrywide foreclosures because they realize it’s a royal pain to deal with them. And this royal pain will end up costing Countrywide.

Moving on, the number I found most interesting was 1.2 billion, which was loss Countrywide experienced in the third quarter. To put that number in perspective based on today’s stock price Countrywide is only worth 2.97 billion. Ouch. Management is currently making predictions for a profitable last quarter of 2007 and a profit for the year of 2008. I am going to make a different prediction. I predict that instead of being profitable in 2008, Countrywide is going to go into bankrupt in 2008.

What makes me feel that Countrywide is going to go out?

*Countrywide can't continue to have the word loss after the word billion.

*There is no reason to expect that Countrywide is going to have a better 4th quarter or a better 2008. Although the Austin real estate market is doing a little better, the national real estate market is in a funk. And regardless of Countrywide’s sunny predictions, the number of foreclosures should continue to increase as Countrywide finds that the sub prime loans they gave out earlier more and more frequently end up in foreclosure.

*Countrywide’s inability to handle short sales is going to make the high number of delinquencies and foreclosures that much more painful.

So how much has the number of new home builds slowed. Austin had 3516 new builds in the 4th quarter of 2006. In the 4th quarter of 2007, we saw 2824 building starts for a year over year decrease of 19.68%. We also saw a large decrease compared to the third quarter of 2007 where we saw 4357 new builds. Below is a graphic which shows the amount of new home starts for the last 2 years.

There is another statistic which is pretty interesting. Usually I look at the months of supply on the market. But since we are talking about new home builds, another stat to look at is the months of supply of vacant homes. This is related to new builds because lenders for new construction use this number as a gage for understanding if the market has a demand for new. Overall the months of supply of vacant homes is 2.4.

If we look at the graphic above we can see a breakout of the months of inventory of vacant homes for different subsections of the Austin real estate market. The numbers for vacant homes are not that surprising based on what we have been seeing. East Austin has been seeing a rapid rise in inventory. We talked about the high inventory levels in East Austin in our blog on the October Stats for the Austin real estate market. There were a lot of investors in East Austin that built properties over the summer. We are seeing less inventory in intown/central Austin. This is probably due in part to the fact that there is simply less vacant land in central Austin.

So how does this fit in with the larger picture of the Austin real estate market. First of all, we are in a buyers market and none of this really changes that. Even though we are in a buyers market, we actually have one of the best markets in the country right now. How? Basically the rest of the country is a lot worse.

The second question is why is Austin not tanking like the rest of the country? There are a few reasons.

First Austin never saw the rapid price increases we saw in California and Florida markets. And consequently the income/house price ratios look a lot better in Austin.

Second the subprime issues hurt the Austin real estate market but not as bad as it did in California. When the subprime fiasco happened, California had extremely lenient/borderline illegal lending practices. So when the changes happened California went from extremely lenient to strict lending practices. On the other hand Austin went from normal to strict so while it hurt us, it didn't have as bad of an effect.

And lastly Austin is just kind of cool. I can't put a number or a graph on that. But people that live here know what I am talking about. Every time I visit people in other cities by the end of the trip I am just thinking "Yeah I like Austin". There are cool businesses and events and more importantly the people here are generally pretty nice and friendly.

I want to be clear- all the above said, we are still in a buyers market. I am simply explaining why our real estate market is better than most. I actually kind of like working in a buyers market. While we are still seeing multiple offers I am not seeing them as frequently as I did over the summer. Buyers can feel a little more relaxed now when looking for a home. Due to rising rents we are also starting to see more properties cashflow in decent areas which we didn't see this summer.

If anyone has any particular questions about the Austin market or a particular neighborhood or house, feel free to send us an email.

If you want to look at more stats we have stats for the last few years here Austin real estate stats if you want to check what is currently on the market you can look here Austin MLS search