I have been hearing the phrase "it seems like there are not many homes on the market". And the truth is there is not. In fact, the last time we has less than 6 thousand homes on the market was in 2001. Compared to January 2012 the amount of inventory is down 28.5%.

The inventory seems to have fallen more in central Austin. Here are the drops in inventory for the central Austin mls areas.

10N - Down 56.7%
10S - Down 58.1%
1B - Down 38.3%
2 - Down 76.5%
4 - Down 50.0%
6 - Down 63.2%
7 - Down 43.8%

It's hard to know where the market goes from here. While sales are up the one thing that is lowering sales volume is a lack of inventory. Part of the problem is the current waits at the city for permits. Currently the wait for a permit to build or remodel is running around 4-5 months. So there is some pent of inventory we should be seeing released onto the market in the next few months.

In order to do this I compare the rate of change from say July to August compared to the typical rate of change over the last 10 years. First lets look at Sales.

Generally we don't see much of a change in Sales from July to August. Over the last 10 years on average we have seen a decline of 1%. This year we saw an increase of 4% moving from July to August. But last month we saw the opposite. The number of sales dropped a little more than what is typical.

So in essence the Austin market got pretty hot earlier in the year. Over the last few months the market is not getting hotter or cooler. Its basically maintaining the same level level.

Another data point we like to look is pending sales. These are homes that have accepted contracts but are waiting to close. This is somewhat seen as a future indicator.

Basically for the last two months we are seeing patterns that are almost identical to the change we usually see going from June to July and going from July to August.

Pending Sales
Month	Historical Average	Average Change	2012 Change
Jan	1,623.90	1.30	1.33
Feb	1,734.50	1.07	1.18
Mar	2,186.10	1.26	1.21
Apr	2,302.50	1.05	1.06
May	2,252.30	0.99	1.05
Jun	2,239.70	1.00	0.94
Jul	2,154.30	0.97	0.95
Aug	2,036.90	0.95	0.96
Sep	1,701.50	0.85	x
Oct	1,646.60	0.96	x
Nov	1,475.40	0.93	x
Dec	1,290.50	0.88	x

So in summary the market started hot at the beginning of the summer. Over the last few months the market has not gotten hotter or colder.

Moving forward we expect the market to cool as we move into winter (this is very very typical). We then usually see a spike in January so it will be interesting how the January Bouce compares to the last several years.

As always if you have any specific questions about the market feel free to contact me. You can use our search for Homes in the Austin MLS. If you are looking for a knowledgeable realtor in Austin you can contact me here.

Sales in May 2012 were up 25% over May 2011. The amount of current inventory on the market is down 23% compared to last year. Generally a market with less than 6 months of inventory is considered a strong market. In May 2011 we had 5.20 months of inventory. In May 2012 we were down to 3.23 months of inventory. This is the lowest months of inventory we have had since August 2006.

So obviously the market is hotter than last year and it has been this way since February. I have talked to some realtors that felt as the summer dragged on the market got hotter and some felt it was cooling down (although it was still doing better than last year). It was an interesting question since the stock market was falling throughout May. The Dow started May at 13279 and was down to 12118.57 by June 1st for a one month drop of 9%.

So how do we determine what is happening in May compared to April. May had more sales than April but historically May always has more sales than April. So to figure it out I looked at the last 10 years of data for the Austin real estate market and looked at the average month to month changes in sales.

So although April was very strong for the Austin market we see that sales increased 22% from April to May. The average change from April to May is only 11%.

So next let's look at pending sales. This is more of a leading indicator of where the market is going. So again we looked at the historical average for the last 10 years to see the average month to month changes.

Over the last 10 years on average there are slightly less pending sales recorded in May than in April (down 1%). In 2012 pendings are up 5% in May over the number of pendings in April.

So long story short the market has been hot for the last several months but it seems like, even after accounting for seasonal fluctuations, May was hotter than April. And based on the pending sales data June will probably be hotter than May.

To be honest I was unsure what the data was going to show before I ran the numbers. There has been a lot of pent up demand in the market for the last few years and I thought what we saw early in 2012 was many people that had stayed on the sidelines moving into the market once they felt more confidence in the economy. But apparently at least for now we are working in a hot market that is getting hotter. It will be interesting what the second half of 2012 brings.

As always if you have any specific questions about the market feel free to contact me. If you want to search for properties in the Austin MLS you can use our search here. If you are looking for a knowledgeable realtor in Austin you can contact me here.

What I am a little more excited about is inventory. Inventory is down. Currently we have 7926 homes on the market. Looking at the last few years

Oct 2009 8948
Oct 2010 9703
Oct 2011 7926

The current months of inventory is 5.45. Generally anything below 6 is a sign of a healthy market. Now part of sales we are seeing are due to foreclosures. But all in all from what I am seeing in the field and looking at the numbers the Austin market is doing ok. So looking down the road there are a few things to be worried about. The first is interest rates. Mortgage rates are hovering near all time lows again. We broke below 4% recently which is unprecedented. If rates start to rise that could sap some strength out of the market. Additionally, there is the shadow inventory problem. Shadow inventory is basically homes held by lenders that have not hit the market. Lenders are holding back inventory all over the country to avoid flooding the market. Instead they are slowly letting it leak onto the market. Shadow inventory is probably a bigger problem in markets like California and Florida that are seeing more foreclosures. Austin does have some shadow inventory it's just not as great as other markets. The third thing is a drop in the stock market. If the market has another rapid fall that is going to sap some strength out of the market.

So currently the market is improving but it's not the same red hot market that we saw in 2006 and 2007 and to be honest I don't see that type of market returning for a long long long time.

Ok so submarkets what are we seeing. First off abor has something called a hotness ratio that they assign to areas. More or less totally ignore that. Why? Basically it's based on the time properties sit on the market before selling. The problem is that foreclosures tend to sell quickly. So submarkets with lots of foreclosures have low days on market and are considered "hot". Also builders tend to build expense houses and they tend to sit on the market for a bit. That pushes the number of days on the market up. But an area with lots of foreclosures is not actually hotter than an area where houses are being renovated or built.

So what areas are stronger right now. Central Austin is outperforming the suburbs. I don't see that trend reversing especially with high gas and energy prices.

I am seeing a tepid recovery in demand for vacant lots. Here are the number of vacant lots that sold in August and September for the last 3 years.

Aug-Oct 2009 - 295
Aug - Oct 2010 - 316
Aug - Oct 2011 - 344

Before anyone gets too excited the numbers of lots that sold this month was 114. There are 4631 lots on the market. So the months of inventory on the market for lots is 40.6. So the market for lots has recovered from flatlining to being in a stable coma.

The market for multifamily is improved but there is simply nothing on the market. Here are the number of sales for the last few years

Aug-Oct 2009 - 94
Aug-Oct 2010 - 131
Aug-Oct 2011 - 135

What's interesting is if we look at standing inventory

Oct 2009 - 417
Oct 2010 - 411
Oct 2011 - 244

Part of this is due to multifamily owners refinancing at lower interest rates (and increasing cashflow) instead of selling.

The only section of the market which seems down compared to last year is Commercial. The commercial market remains pretty weak. The problem I have with the commercial market relates to interest rates. Basically one of the benefits of buying in the current market is locking in at incredibly low mortgage rates. The problem with commercial properties is in general you can only lock in your interest rate from 5-7 years. So basically in 5-7 years your mortgage is going to go up some unspecified amount lowering or possibly eliminating cashflow. Additionally, if the commercial market does crash it could be difficult to sell or refinance in 5-7 years. So long story short we have looked at commercial properties this year but in the end buying multiple 1-4 family rentals seems more attractive in the current market.

As always if you have any specific questions about the market feel free to contact me. If you want to search for properties in the Austin MLS you can use our search here. If you are looking for a knowledgeable realtor in Austin you can contact me here.

There is a lot of interesting stuff going on in the market but first let's look at some stats.

So for February 2011 we had 1112 sales in Austin. This is almost exactly what we saw for the last 2 years. In February 2010 we had 1115 sales and in 2009 we saw 1106 sales. So for all pratical purposes the market for sales is flat. A somewhat positive note for the market is that the number of active listings is down with 8605 listings for sale in February 2011 vs 9335 listings for sale in February 2010. According to the statistics, average and median prices are up slightly compared to a year ago. I am simply not seeing this in the market. I believe what is happening is that last year we had the tax credit which encouraged first time home buyers to purchase which pushed average prices down a little.

So what is going to happen moving forward. There has been some positive press about the Austin market, but there are still a lot of downward pressures in the national market. So I thought it would be fun to argue both sides.

The Pro Argument

-The Austin Real Estate market is stronger than it seems
Sales are flat compared to last year. But last year we had the tax credits which artificially pushed the number of sales up. So most likely the market today is stronger than this time last year.

-The Real Estate market always recovers last
In addition, it looks like the US is slowly pulling out of a deep recession. Yes the national real estate market is in shambles but in general real estate is the last thing to recover from a recession (the stock market usually recovers first).

-Things look bright for Austin moving forward
There are multiple positive signs for Austin. Not only has Austin been cited as one of the real estate markets to recover the fastest, but we just landed a slot on the national F1 racing circuit which by some estimates should bring in more money to the Austin economy than all the UT football games and SXSW combined.

-The number of active listings is down 7.8% from last year. This is exactly what we would expect to see in a recovering market.

The Negative Argument

-Foreclosures
So I am going to admit that without the tax credit, sales would have been lower last year. But a lot of the sales we are currently seeing are foreclosures. Also mortgage rates have been hovering around all time lows for the last few years. If the economy starts to recover mortgage rates should move up.

-Japan = Higher Mortgage Rates
And more importantly the events in Japan should push mortgage rates up. What does Japan have to do with mortgage rates? Japan has been buying US Treasuries. Now that Japan has to deal with rebuilding their country it's doubtful they will have much of an appetite for buying US debt. Japan and China tend to be the two largest buyers of US Debt. And, because they need cash for rebuilding, as the treasury notes they hold come due, they will probably cash out instead of reinvesting. In essence we now have have less buyers for US debt and more debt to service. In the end interest rates will have to rise. And consequently US mortgage rates will have to rise.

-Pending Sales
The number of pendings is way down compared to last year. In February 2011 the number of pendings was 1543 and in February 2010 was 1738. Given - the tax credit was going on last year. But the number of pendings don't indicate that the market is about to heat up.

Ok. So where does that leave us? I don't know. For the plus side I think the things that matter the most is that the Austin market seems to have more positive things going for it than the rest of the country. On the negative side the things that worry me the most are Japan and mortgage rates.

So what am I doing? In 2011 we have bought 3 properties so far. My basic thinking is that if rates increase there will be a downward pressure on prices. But if prices fall and rates increase the mortgage payment on a house would likely increase. So I would avoid buying a house in cash (because one would not benefit from low rates) and I would not buy a house if the plan was to sell it in 1-3 years. But long term buy and holds do make sense, at least for me, at this time.

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 the market, here is our search of the Austin MLS.

After the tax credit ended the results for June were low (6% drop compared to June 2009). It looks like sales from the tax credit boosted the numbers for June. This was probably due to the lending environment. While contracts usually take 30 days to close due to current lending restrictions contracts are being delayed and taking much longer to close. Therefore there were probably a lot of contracts signed in April that didn't actually close until June. But now the July statistics are showing us the first month truly free of the effects of the tax credit and it's not pretty.

The average and median prices are both up (16 and 15 percent respectively). But I don't think that is a sign of market strength. Instead I think we are simply seeing fewer lower priced homes selling. For the most part anyone that was going to buy a home for 150k bought it while the tax credit was active. In markets like this one with a lot of atypical forces I feel like average and median prices are almost pointless to look at as a valid indicator of the market. From what we have seen looking at properties, prices are certainly lower than they were a year ago.

Moving on the number of active listings is pretty high, again another sign of a weak market. The number of listing is 18% above this time last year. The number of active listings 1174 is the highest number of listings we have seen ever in the Austin market.

So is this a temporary drop? There are two main factors to look at. First we are having a negative effect on sales from the tax credit. Basically people planning to buy mostly bought while the tax credit was active. So some say moving forward sales should increase as we get farther away from this dead period after the tax credit ended. But on the other hand mortgage rates are at an all time historic low and they can't stay this low forever. Once they increase that will have a negative effect on sales.

So let’s look at different segments of the market beyond residential. While the residential market dropped 25 percent compared to this time last year we saw an even bigger drop in the condo market which fell 38 percent. The Austin multifamily market also saw a large drop falling 40% from this time last year. The commercial market fell 17% but the commercial market has been dead for awhile and all the expectations is that things are simply going to get worse.

So in all this doom and gloom what am I doing? It might seem counter intuitive but I am about to close on two properties. I am not sure if prices are going to fall further so why am I looking at properties? There are two reasons. First off prices are lower than what I have seen in a while. And perhaps more importantly mortgage rates are incredibly low. In fact, 5 weeks ago mortgage rates hit an all time low and every week since then rates have fallen further. The mortgage payment on a 200k loan just dropped below $1000 (it’s at $996.80 now, chart below). Before 2009 it was rarely below $1200. So cash flow on properties is starting to look pretty attractive.

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 the market, here is our search of the Austin MLS.

The rest of the data is pointing in different directions. Compared to last year sales are down 4 percent and compared to two years ago sales are down 11 percent. Considering the effect of tax credit ending I would say that overall the market is doing better than it was this time last year.

One factor that at first glance seems positive is that the average sales price is up 11 percent compared to last year and the median price is up 4 percent. I think these numbers are a little misleading. Properties for the most part seem to be selling for slightly less than they were last year. The statistics is probably influenced by the fact that less expensive houses were affected more by the tax credit. A 6,500 tax credit is a relatively bigger benefit when buying a 120k house vs. buying a 500k house. And homes over 800k were not eligible for the tax credit.

Inventory in the Austin real estate market is up 16% compared to this time last year. What we have seen happening is a lot of people put their houses on the market hoping that their houses would sell while the tax credit was in effect.

So what is the big picture? Compared to last year we are experiencing an extremely weak recovery. And at the same time it’s not a certainty the market will continue to recovery. Although we are still seeing life in the Austin real estate market after the end of the tax credit we are by no means out of the woods yet. If the economy starts to falter the real estate market is going to falter. Additionally, although the tax credit had a larger effect on the market than mortgage rates once rates move up off their current historically low values we are going to see a drop in sales numbers.

So let’s look at some different segments of the market.

The Austin commercial real estate is up 18% compared to this time last year. One thing to keep in mind is that most commercial sales are not reported so the sales numbers are usually somewhat unrealistic. Overall the commercial has a bumpy read ahead. A lot of balloons are coming due and banks still seem hesitant about giving out commercial loans. So a lot of balloon loans coming due and an unfriendly lending environment means we are going to see a decent number of foreclosures ahead in the commercial market.

The condo market has seen a 53 increase in sales compared to last year. Part of that has to do with the fact that 2009 was an extremely weak year for the condo market. But it’s still nice to see some life in the condo market. I still don't see condos as an attractive investment. They rarely cash flow and in general don't see to appreciate as fast as homes.

The multifamily market is up 14%. Lenders are still taking a dim view of investors. We are seeing a lot of people interested in buying investment properties but they are simply having a hard time getting loans. The multifamily market seems attractive. With extremely low rates and low prices we are seeing more properties with positive cash flow than we have seen in the last few years.

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 the market, here is our search of the Austin MLS.

What worries me is the number 11,230. That is the number of homes currently on the market. This is up 13% from a year ago. It’s the highest number of homes on the market in the last 3 years.

The reason that is concerning is one would expect that due to the high volume of sales we saw the last few months that inventory levels would have gone down.

Instead inventory levels have increased as sellers have started to put their homes on the market.

There are two ways to look at this.
If we see the expected drop off in sales with the tax credit expiring and the usual increase in inventory in the summer we could see a glut of homes on the market. On the other hand possibly people that would have usually listed in the summer listed earlier in an attempt to target the tax credit buyers. We will know one way or another in the next few months.

Median and Average prices were both down (2 and 3 percent). We are seeing steeper drops with fix up properties for 2 reasons. Banks are more likely to turn down loans for fixer upper houses. Additionally, investors that buy and flip homes have become an endangered species. That said, it’s probably not a bad time to buy a fixer upper since the price differential between rough houses and fixed up houses is higher than it’s been in a long time.

So let’s look at the different segments of the Austin real estate market.

Single Family is up 24% and condos are up 28%. The multifamily had a down month and was down 10% from last year. The commercial market remains pretty dead. We have started to see some more activity in the market for vacant lots.

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 the market, here is our search of the Austin MLS.

There were 10,300 houses on the market for an increase of 6 percent compared to this time last year. And compared to last month we had a bigger increase than usual. This is probably simply due to people rushing to list while the tax credit was still in effect.

The condo market is showing some more activity. This month we saw an increase of 129%. While part of that is because of the tax credit we have been seeing more activity in the for the last few months. We also saw a 21% increase in the multifamily market. This is a little more interesting. Why? The tax credit is not affecting sales in the multifamily market. So this is a somewhat positive sign for the multifamily market. The commercial market stats were a little mixed. We saw an 11 percent increase in sales but the average price decreased 54%. Basically what is happening is smaller properties are selling in many cases for cash. But larger properties that need financing are not selling simply because getting loans for commercial properties is incredibly tight right now.

I am still not all that hot for the commercial market. With a commercial loan you can typically only lock in your rate for 5-7 years. With rates near all time lows one of the main benefits of buying now is locking into rates that are very low by historical standards for 30 years.

The market for Austin luxury homes seems to be strong this year. Here is a chart show sales for the first 3 months of the year.

What’s interesting if we look at the 5th column we see there is a 45% increase in homes over 1 million compared to the same time period last year. We also saw a 37% increase in homes from 800k-1 million.

Here are the stats broken down by Austin MLS area.

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 the market, here is our search of the Austin MLS.

So where does that leave the Austin market. In October, November, and December, we were seeing signs of steady improvement. Then starting in January the market has pulled back. The question of course is the market steadily improving and January and February were bumps in the road, or is the recovery off track. At this point it seems we are somewhat in a holding pattern. February seems slightly better than January but overall the market is certainly not improving but it doesn’t seem to be actively getting worse. It’s almost like it’s uncertain of which way to turn.

Enough about the general market. Let's dive into some more details and Austin real estate submarkets. The commercial market continues to be very weak. I had lunch with someone a few weeks ago who had a job recruiting commercial lenders. They said it was almost like they had a year long vacation because the commercial market was a ghost town. It’s extremely difficult to get commercial loans which has put the skids on commercial activity not just in Austin but most of the country. The commercial deals we are seeing are smaller in size as well.

The market for multifamily properties has been very very weak for the last 2 years. Not much has changed. Loans continue to be difficult for investors. Additionally, most of the recent government programs are targeted for individuals looking to buy and live in single family homes not people looking to buy and rent out multifamily properties. One thing that is interesting with the multifamily market is that although sales are down, listings are down as well.

The market for vacant lots is starting to improve. For the last 4 months we have seen 20+ more sales when compared to this time a year ago. Now the market for lots was probably the worst of the different Austin submarkets this time last year, but still it’s without a doubt showing signs of improvement.

So for a preview of next month I imagine we are going to see an increased number of sales for March. Now you might see some ink from realtors that the market is recovering and offer March sales number as proof. Basically what is happening is the tax credit is ending and so buyers are rushing to buy before it ends. We are going to have to wait until April numbers are released to see whether the market is going up or down.

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 the market, here is our Austin MLS search.

So what happened? November and December showed steady improvement compared to the rest of the year. Is this a temporarily glitch or will the next few months be slow as well. I am going to argue this from both angles. In favor of a temporary glitch the preliminary indicators on February look somewhat better. Additionally investors account for a higher percentage of sales in January (regular buyers, distracted by the holidays are looking in January but not going to closing yet). Because of the lending environment investors are far and few between.

On the other side we had a massive slowdown that I don’t think can be explained away simply by the lack of investors. Additionally, the tax credit is still in place and mortgage rates are still near all time lows. When the tax credit is removed and interest rates rise they will have a depressing effect on home sales.

Here are the stats for Austin real estate market for the last few years.

I hate when news outlets quote average and median prices. Basically they are widely inaccurate. If median prices move up or down it could mean prices are moving up or down, but it more often is an indicator that the high or low end of the market has heated up or slowed down. Basically if the high end market heats up average prices skyrocket even though the average house has not increased in value. That said average and median prices are down and my feeling is that the average property in Austin has lost value.

Let’s look at some different sub markets for Austin.

After a year in the doldrums the condo market is showing signs of improvement. But most of the sales are in the lower end market. The median priced condo that sold in January 2008 was 170k the median priced condo that sold in January 2010 was 130k. In January we saw 45 condos sell for under 100k and we saw 0 condos sell that were over 500k. It makes one wonder how a development like the Austonian, that is targeting the upper end condo market, is going to do.

The multifamily market is still slow. It’s better than this time last year but again January 2009 was the worst month in a decade. The multifamily market continues to be plagued by lenders that are not interested in working with investors. For those that can get loans we continue to see better deals than we saw a few years ago.

The market for lots continues to do worse than the market for single family properties in Austin. Basically developers are trying to unload current inventory and so are not interested in buying up lots. For the same reason the number of houses that are being demolished has dropped.

The Austin commercial real estate market is doing very poorly. Lenders (who think the commercial market is going to get worse) are not interested in giving out commercial loans. Since it’s hard to get commercial loans we are seeing very few sales (there were only 9 commercial sales in the mls this month). While there is speculation about what is going on with the residential market the general expectation is that the commercial market is in trouble and it’s just going to get worse. I still like the multifamily market over the commercial market because of the loans available. If someone buys a duplex they can lock into historically low rates for 30 years. On the other hand for commercial loans it’s rare to lock in for more than 5 years. And after 5 years when the rates start to adjust rates will probably be much higher.

As far as the different areas of Austin, here are sales numbers for the different mls areas of Austin.

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 MLS search.

After adjusting for seasonal variations, December had strong numbers compared to most of 2009. But it was much weaker than what we saw in the previous two months. October (1783 sales) and November (1542 sales) were incredibly strong. Below are monthly statistics for the last few years.

So all the numbers still look pretty strong. So the market is about to set on fire right? I am not so sure. I think the last few months the market has been incredibly strong because of the housing tax credit and historically low interest rates. Even if interest rates stay down for awhile longer, the tax credit is going to expire. And once the tax credit expires, I doubt the market will be moving as slow as it was this time last year (when people were talking about a possible economic depression). Rather, it's probably going to be slower than what we are seeing today. For buyers the trade off is that later there might be less buyers to compete with in the market later but interest rates might be higher. For sellers there is no real trade off. Waiting a few months for higher interest rates and less buyers is probably far from ideal.

Moving on let's look at different market segments. Here is the numbers for the year broken down by market segment.

The Austin condo market looks likes it's finally seeing some improvement. Sales are up 31% compared to last year. The number of condos on the market has fallen from 1569 to 1287. Austin was spared from some of what we saw in Florida because the condo boom hit right before the market meltdown in late 2007. While there were a lot of Austin condo projects planned many of them fell apart. That said the condo market is still worse than the single family market. I have heard a few people say that the condo market is actually stronger than the residential market, which I disagree. The months of inventory shows the number of months it would take to sell everything currently on the market (assuming nothing new was added). The lower the number the better the market is doing. Looking at months of inventory for December 2009, we see condos with more inventory / less strong:

Condos - 8.52
Homes - 5.884

The second part of the pro-condo argument is that the months of inventory is higher but that’s always true, and if we take that into account we will see the condo market has recovered from the downturn faster than the residential market. So I looked at numbers from January 2007 before the market started to slow down and compared them to today's numbers.

Condos Jan 2007 - 5.31
Condos Dec 2009 - 8.52
Homes Jan 2007 - 4.786
Homes Dec 2009 - 5.884

So the condo market has suffered more over the last few years than the residential market. But that said, the condo market is doing better than it was 6 months ago.

The Austin commercial market is up this month but still struggling. I have been mixed on the commercial market. On the one hand it’s appealing because prices are down. The problem I see with the commercial market deals with loans. One of the main benefits of buying now is locking into a long term loan at today's abnormally low interest rates. So if I buy multifamily I can get a low rate locked in for 30 years. With commercial in general it’s rare to get a rate locked for more than 5 years. So when we are looking at commercial properties, the question is always "the numbers look great today but what is my mortgage going to be in 5 years when the rate starts adjusting."

The multifamily market is also up for the month. The multifamily market is still struggling. A lot of the problems with the multifamily market have to do with difficulty in financing. Currently banks like residential properties but they are less interested in multifamily properties. Currently it’s difficult to get a loan for a multifamily property with less than 30% down. A few years ago investors were picking up multifamily properties with 5 to 10% down.

As far as the different areas of Austin, here are sales numbers for the different mls areas of Austin.

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.

In addition to having more sales compared to last year there are fewer properties on the market. We currently have 8,551 active listings which is down 7 percent from last year.

So why are we seeing more sales? There are two obvious factors. First the government tax credits are certainly increasing sales numbers. Second historically low mortgage rates are pushing sales numbers up. In addition, I would not call the national mood positive today, but it is without a doubt better than what it was this time last year when people were regularly talking about a total economic collapse. Below are the numbers for the last 3 years.

The average price is up 2 percent from last year and the median price is down 2 percent from last year. Average and median prices are notoriously unreliable since more or less sales in certain market segments (luxury properties or first time homes) can have more of an effect on prices than actual changes in the prices.

As far as prices, here are a few things we are seeing. Residential homes prices are holding steady or falling slightly. Houses that need repairs are selling for substantially less than what they sold for a few years ago because lenders are hesitant to give loans on these properties. Vacant lots and properties with teardown houses are selling for substantially less. Basically this is because we are seeing less building as builders try to get rid of excess inventory.

So moving beyond residential let’s look at some of the different market segments.

As we can see, residential saw 58% more sales than this time last year. We are also seeing more condo sales. I am still not too positive about condos as we still have a decent amount of excess inventory to move through. The condo situation in Austin is better than in Florida though. The downturn arrived in Austin in the midst of the condo boom so a lot of planned projects were cancelled. So while we have too much inventory it could have been worse if (like Florida) the condo building craze started a year or two earlier. All that said even with rising condo sales I still am not too positive about the health of the condo market.

The Austin commercial market as we have been talking about is on life support. It’s down 24 percent from last year and last year was bad. It’s down 46 percent from 2 years ago. Basically lenders are avoiding commercial loans like the black plague for the time being.

We are starting to see more activity in the Austin luxury market. The luxury market had been pretty dead for the year. For the first 6 months of the year, sales of properties over 1 million was down 28 percent compared to 2008. But in November 2009 we saw twice as many sales as we saw in November 2008.

As far as the different areas of Austin, here are sales numbers for the different mls areas of Austin.

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.

There were 1823 single family sales in October; this is 38% higher than what we saw this time last year. It’s also higher than what we saw last month (1733). It’s extremely rare to see an increase in sales as the market moves into winter. Another way to look at it is that October 2008 was slower than February, March, April, May, June, July, August and September. This October had more sales than every month in 2009 except just June and July.

Ok, so October had a high number of sales. Why? There are a number of factors. Although unemployment is still high their is an emerging feeling that the economy is recovering (the stock market is up 57% since March). We are also experiencing historically low mortgage rates. But the most important factor is probably the 8k and 6.5 home buying tax credit. Additionally, before the tax credit was extended there was a rush of buyers looking to buy before the tax credit expired.

Without the tax credit I would expect stronger sales than what we have been seeing over the last year but we would certainly not be seeing a 38% from this time last year.

Beyond sales the number of listings is down 10% from a year ago. This is roughly in line with what we have been seeing. The average price is down 2% and the median price is down 5%. In contrast for the last few months we have seen prices flat or higher than what we saw at the same time last year. So it seems weird that as the market moved faster, prices went down. If we look into the numbers a little more we see that the average size house that sold in October 2008 was 2713 and in October 2009 it was 2669. And for October 2008 and October 2009 the price per square feet was 114 square foot. So it looks like instead of prices going down compared to last year instead smaller houses are selling. This might be due to the fact that an 8k tax credit is more motivating for people looking at a smaller less expensive houses than people looking at large more expensive houses.

Although we saw more sales in the lower end of the market its also interesting that the upper end of the market finally started moving again. The market for homes over 1 million has been dead. Before October there were only 136 sales in 2009. October saw the highest number of 1 million+ home sales all year with 30.

Moving beyond the single family Austin real estate market lets look at some other market segments

The condo market is also up compared to last year. In fact there were 39% more condo sales than this time last year. Does this mean the Austin condo market is doing better than the single family market? Not really. The condo market was just much worse last year. Below are the sales and inventory numbers for both markets.

Sales Inventory Months of Inventory on Market
1823 8947 4.91
170 1353 7.96

So if we stopped putting in new listings it would take 7.96 months to sell off all the condos on the market and it would only take 4.91 months to sell off all the single family homes on the market. So while the condo market is not doing as well as the single family market its still doing much much better than this time last year.

The Austin commercial market is still anemic. Sales are down 25% compared to this time last year and 50% compared to 2 years ago. So why is the Austin commercial suffering while residential and condos markets are thriving? First the tax credit which is helping the residential market is not a factor for the commercial market. Second the commercial market has some serious long term problems which boil down to the fact that lenders are looking for any way to exit the commercial market because they are expecting a meltdown. It’s expected to be worse than the residential problems although it probably won't receive as much press as the residential market problems did because it affects less people.

The multifamily market had the same number of sales as last year at 36 it is down 54% from two years ago when it had 78 sales. This is better than the last two months when we saw one year declines of 38 and 32 percent. What’s been interesting with multifamily properties is that although sales are flat are down so is inventory. One would have expected that after the low number of sales the last 2 months inventory would have built up. Instead inventory is down 6 percent compared to last year. So although properties are not selling we are not seeing a lot of owners put their properties on the market.

The Lot market is down 30% compared to last year. Lots right now are like the hot potatoes in that game hot potato. Basically no one wants vacant lots. It’s going to take a little while for builders to clear out inventory and start building again, and in the meantime no one is buying lots. So the market for vacant lots is pretty much dead.

For the different areas of Austin here are sales based on the different mls areas of Austin.

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.