Here are the statistics for last month’s single-family home sales in Austin, TX: 

[Note:  I am tweaking my new color system to read the above spreadsheet:  red=double-digit changes to the negative; yellow=single digit changes either negative or positive; and green= double-digit changes to the positive.  My decision on red vs. green relates to whether the category creates an active real estate market or not since an active market is best for both buyers and sellers]

The tide is turning, as they say.

1. Through April of this year, our listings had gone up slightly when compared to 2009 (up about 3%), but the past 2 months have seen double-digit increases.  And, we exceeded 11,000 listings each month with back-to-back record highs for Austin.
2. After going up an average of 27% YTD through April, our pendings, too, have dropped by double-digits in May/June reducing the YTD average to about 10%.  Our 1,610 pendings—if all of them close next month—won’t be enough to exceed last July’s 2,068 sales.
3. Sales have dropped for the first time this year after going up an average of over 17% through May and now are up only 3% for the year (see chart below).  As you can see, we started off this year trending well, but have fallen off in May/June.  In fairness, consider that during the first part of 2009 we were still feeling the aftershocks of the financial meltdown in fall/2008.  And, the government announced in spring/2009 that first-time buyers could use the $8,000 credit toward their down payment which likely spurred more sales in June/09.
4. Inventory:  this represents the biggest change last month—not only was it our first month this year where it increased when compared to 2009, it increased by double-digits.   At face value, 5.9 months still represents a market in equilibrium, so the next few months will give us a better reading if we are, in fact, heading into a buyer’s market (many would argue we are there now).
5. The Median price went up 4% to $208,750, our highest ever.
6. Our average price went up by 11%, to $278,753, also our highest ever.
7. Days on market continues to be a bright spot, dropping every month this year when compared to 2009, and we now average just over a 9% drop in the number of days to sell a home vs. 2009.

So, why would we have such positive numbers with prices when all of the other categories have dropped by so much?  The upper-end of our market.  Sales of homes last month in the $300k+ range represented just over 30% of all sales vs. 23% in Jun/2009 [compare this to Jun/2007—before the recession—when they represented 25.3%].   Homes over $500k jumped by 43% over last June.  Further, homes priced $800-899,999 increased by 36%….the highest of any price category tracked in these reports created by the Real Estate Center at Texas A&M.  Lastly, homes over $1,000,000 saw a 25% increase (#5 of the categories).  Together, the total dollar volume of single-family properties last month rose 6% to over $550M mainly due to increased demand for homes in these higher price ranges.  The first-time buyer credit has allowed existing homeowners to move up to larger homes, pushing up the prices.

As mentioned in previous newsletters, buyers have a great opportunity in the coming months.  I believe it will be the 2^nd best time to buy a home since I moved to Austin in 1971.  The other time was the late 1980’s and early 1990’s when we went through savings and loan debacle which caused lots of distressed sales.  However, interest rates were much higher than they are now, which makes this time a great time to buy before rates begin to rise (and they will).

For the Austin metro area, the home price slide has been much better than the rest of the country.  The dot-com bust in the early part of the last decade affected our area due to our large high-tech industry base, but not dramatically (see chart below).  Median prices remained very flat overall during the first 5 years of the decade, then, beginning in 2005, we saw good—but not overheated—price increases hitting a double-digit price increase only once—the 4^th quarter of that year.  Our year-over-year price increases have stayed in the 6-8% range during the past 5 years.

This is one of the primary reasons we haven’t had the dramatic price drops seen in some parts of the country like California, Nevada, Arizona and Florida—we simply didn’t have the huge run-ups in prices so we don’t have to give them back (Gary Keller says “we just gave back the sales we borrowed”)..   Our average prices in Austin only declined .7% in 2008 and 1.5% in 2009 and we are only down .5% thru May of this year.  Having said this, I do believe that Austin will see some more price softening the remainder of this year due, primarily, to concerns over the job market and the languishing national economy.  But, I don’t see these as dramatic decreases, either….we might end 2010 with a 2-4% drop in average home prices.

Here are the statistics for last month’s single-family home sales in Austin, TX:

We definitely got a mixed-bag of results last month…consider:

1. I went back to Jan/2000 and couldn’t find one month where we exceeded 11,000 active listings.  The closest we’ve come is last month (10,749) and Jun/Jul of 2008 where we nearly reached 11,000.  In addition, we had over 4,000 new listings go online in Mar & Apr this year (4,170 and 4,415 respectively)…I had to go back to May/07 to find the last time we had 4,000+ listings in one month, but the economy was much stronger back then.
2. Pendings down 34%.  Since Pendings forecast future sales, June doesn’t look good with only 1,405 Pendings to close.  Assuming all of these homes close next month, we will be down about 35% from 2009 for June’s sales figures.
3. While Sales were up 24%, most of the increase can be attributed to the home-buying tax credits that expired at the end of April (buyers have until 6/30 to close).  I spoke to an escrow officer who said she had a mild schedule for closings next week which tells me most who took advantage of the tax credits closed in April or May.   
4. Inventory was 5.4 months which is leaning toward a “sellers market”.  However, if the listings hold steady next month and the 1,405 Pendings close, it will represent an 8-month inventory of homes…well into a “buyers market”.   I forecast this buyers market will continue for the rest of the year.
5. Median and Average prices were down 2% & 3% respectively.  I colored this yellow since it is not too dramatic a drop, but I believe we will experience an overall drop in prices by the time 2010 ends.  Considering we only had a 1.5% drop in average prices last year and a .7% drop in 2008, Austin is still doing considerably better than nearly all (if not all) other cities our size.  Thru May/2010 our prices are down only .6% and .5% for Median and Average prices respectively.  However, it wouldn’t surprise me if we end this year down somewhere around 2 - 5% for both.
6. Average days on market continues to shine with another 20% decrease off 2009’s numbers.  When compared to 2008, though, we had nearly the same number. I expect this number to increase as we go through the rest of 2010.

In summary, if you absolutely have to sell this year, you will need to price “ahead of the market”, which means to set your price at a level that is valid in the near future (ie-declining prices) given the softening of prices right now.  “Testing the market” to see if your home might sell is a big mistake in today’s environment.  If you can wait until next year to sell and want/need to get top dollar for your home, I would recommend doing so as I feel we will be that much further out of the recession and companies should be hiring more by next spring.  This, alone, will foster sales since the #1 issue on the minds of most home buyers is job security.

I’ve included a lot of articles in my newsletters over the years about how Austin made the top-10 of this list and the top-10 of that list, but I’ve never seen one like this:  Austin to be ‘best of next decade’.  That’s right…Austin was selected out of ALL U.S. cities to have the best prospect for growth and growth potential in the next 10 years.  The Kiplinger study went on to say: “And it’s no coincidence that economic vitality and livability go hand in hand. Creativity in music, arts and culture, plus neighborhoods and recreational facilities that rank high for “coolness,” attract like-minded professionals who go on to cultivate a region’s business scene. All of which make our 2010 Best Cities not just great places to live but also great places to start a business or find a job.”Speaking of top-ten lists, here are a couple more that Austin made:

Here are some area developments:

1.  Samsung plans $3.6 billion Austin plant upgrade, 500 new jobs.  The project will provide temporary construction jobs for nearly 3,000 workers and will add about 500 permanent employees (it has 1,000 working now) to Samsung’s Austin operation by late next year.  This $3.6 billion expansion is the most expensive project in Austin’s history.

2. New art house theater to open downtown.  If you thought the Alamo Drafthouse was pretty cool, check out this place….highbrow flicks and an upscale scene.

3. Developer changes plans for downtown block.  This block—on the parking lot the wraps around Miller Blueprint downtown—will now have a 28-story condominium tower, 16-story office tower, restaurant, shops and a bank.

4. Developers plan condo towers to replace Austin Energy site downtown.  This 425 condominium project in two towers will be 500’ tall and be on the site of the former Green Water Treatment Plant. 

Regarding our local jobs market:

1. CoreLogic spinoff to add 100 jobs in Austin.  This $2 billion revenue per year company will increase staff by 50% from its current 200 employees here.
2. Web hosting company expanding into Austin.  HostGator, based in Houston, will be adding 200 jobs in Austin by the end of this year.

Also, here is a very big story for our area: Formula One headed for Austin beginning in 2012.  What’s the big deal, you ask?  The economic impact on Austin is almost as big as the Super Bowl….every year.  “This will be a game-changer for Austin. …we expect every hotel from San Antonio to Temple will be full,” Austin Mayor Lee Leffingwell said.  The Austin Grand Prix race, for the first time in U.S. history, would have a track specifically built for Grand Prix racing and is anticipated to cost $250 million to build.

March—very similar to February—was another strong month:

1. Listings were up by 6%.  March is typically a month where a lot of sellers put their homes on the market in anticipation of the upcoming spring/summer sales surge.  I colored this yellow vs. red since it is the first month this year we’ve increased listings over the same month in 2009, and due to the fact that sales increased 27% so listings are being absorbed [also see inventory comments in #4 below].  If we continue to increase our listings each month going forward, however, we may find ourselves with a glut of homes for sale which would portend a buyer’s market.
2. Pending up by 31%.  This was very similar to last year’s 37% increase, which began a run of increases for 8 of the next 10 months in 2009.  This year’s increase is likely fueled by the expiration of the 2 income tax credits this Friday.
3. Sales up 27%.  Compare this to last year’s 22% drop.  Each month in our first quarter saw sales increases over 2009 and we now have a 7-month streak of monthly sales increases over the same month a year earlier (see graph in this article: March home sales surge; prices remain stable).  Some of this is due to the fact that the financial meltdown in fall/2008 and last year’s recession dragged down our sales, so increases are inevitable as the economy improves.
4. Inventory down 16%.  This is the biggest drop since last Oct/Nov when buyers were scrambling to get a home under contract so they could qualify for the original deadline for the tax credits.  We are likely seeing a similar situation this year.  Time will tell what happens after the expiration of the tax credits.  Many are saying our sales will drop precipitously because the tax credits are propping up our sales, but I disagree.  While the health of our national economy is not where anyone wants it, by most measures it is doing better than 12 months ago.  As it continues to improve, consumer confidence will go up and we will have more buyers entering the market that have held off—even with the enticement of large tax credits.
5. Median price is unchanged.  Through the first quarter of this year, median price is up .40% compared to a drop of 1.62% the first quarter of 2009 and an increase of 4.87% in 2008.  I am cautiously optimistic we will hold prices this year and maybe have a small increase.
6. Average price up 3%.  Stronger numbers here:  3.22% increase during the first quarter of 2010 vs. a drop of 1.89% in 2009 and a drop of .41% in 2008.
7. Days on market down 17%.  This is one of the most improved categories. Our DOM has dropped each month this year and we averaged a 10.62% decrease the first quarter over the same period in 2009.  When you consider the first quarter of 2009 averaged an increase of 13.83% and 2008 had jump of 10.6%, you see just how good our first quarter was.

Bad news travels fast.  If it bleeds, it reads.  Bad news sells.  If it bleeds, it leads.   These clichés are so true.  Our society is fixated on bad news.  It permeates the local and national news.  It is the big font type on the newspaper and magazine headlines.  There is only one problem:  there is a lot of good news out there that gets buried deep into the paper and at the end of the newscasts.  It is out there, only it isn’t reported with the same gusto as bad news.   

Well, I like to find and report to you via this newsletter some of this good news, if only to offset all the negative stuff out there.   After all, the best decisions we make are ones that have as much of the truth and relevant information that is available. 

For instance, I’ve had several people ask me recently about buying right now because they are concerned prices may drop further.  I don’t see this happening simply because from all indications, both the national and our local economy have bottomed-out and are making a turn for the better.  An improving economy fuels more demand which raises home prices (and interest rates).  Consider these articles, most of which I found buried in the back of the newspaper:

1. Home Depot adds store jobs for the first time since 2006.
2. Ad agencies again in hiring mode.
3. Austin new home starts jump.
4. Time spotlights Austin as a place of innovation. [here is a link to a great map to show Where the Jobs Will Be Found]
5. Drop in late payers:  Is market rebuilding?
6. 500 jobs on tap for Austin?
7. State sales tax still sinking, but pace slows
8. Medical tech plant to bring 45 jobs.
9. More CEOs see job increases than losses
10. March brings sales revival for U.S. retailers

 Here are a couple of more “good news” items for the Austin area: 

1. Population Growth:  Texas was #6 from 2003-2007 and #3 from 2007-2009 (just missed #2 spot) as you can see from the chart below:

1. Austin’s water quality was ranked #7 in the nation according to the Environmental Working Group as seen below:

February MLS single-family statistics for Austin, TX :

Well, after last month’s “all green” categories, we got close again with only 2 yellow ones and they were both less than a ½ per cent change.Consider:

1. Listings were down slightly (only 38 homes) compared to 2009.  Fewer homes on the market helps stabilize prices due to the same reason for any market—supply and demand.
2. Pendings—a good barometer of the future of the market since they are homes with a contract that hasn’t closed yet—were up 24%, compared to up 7% last month.  I expect these to continue upward through April since more and more buyers are taking advantage of the tax breaks.  A similar pattern occurred last fall with the original expiration of the first-time buyer credit on 11/30/09.
3. Sales were up 4%, and marked our 6^th straight rise in area home sales as seen by the graph at right.  While this sounds like a positive number, keep in mind that the first part of last year sales were down due to the shock of the financial meltdown in fall/2008.  In fact, it took us until last September to reach positive (ie-green on my chart) territory for sales in 2009 when compared to the same month in 2008.  So, there is great debate whether the sales spikes we saw last Oct/Nov are artificially-induced due to the tax credit issue mentioned above.
4. Inventory is down the first 2 months of this year when compared to 2009.  Less inventory usually leads to higher/stable prices.
5. Median price barely dropped, but is up slightly for the year.  What is surprising is that our median prices only dropped .9% all of last year.  When you consider how hard the upper-end of the market has been hit—due to the financial meltdown and tighter mortgage loan availability—drops in sales of these homes should have had a bigger impact on our median prices.
6. Our average price moved up over $3,000 (1.3%) last month and is up 3.5% YTD.  Compare that with a drop of nearly 1% for the first 2 months of 2009.
7. Our biggest surprise is the number of days a home stays on the market before it closes.  Last month’s 77 days was 12.5% lower than 2009.  We’ve averaged a drop of nearly 8% for the 1^st two months of this year vs. an increase of nearly 10% for the same months of 2009 when compared to 2008.  We averaged 75 days in Feb/2008 vs. 88 in 2009 and 77 last month.

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Well, it’s hard to believe that Austin is finally getting a light rail system starting 3/22/2010:  Rail gets green light.  This has been discussed since I moved to Austin in 1971.  After many delays and an original start date of “Fall/08”, it will be good to see the system up and running.  There are many opinions about whether this will be a useful system or not.  I was in the skeptical camp, too, until I traveled to see my son a couple of years ago in Chicago.  I was able to deplane, walk a short distance from the airport terminal to their light rail stop, travel from Midway Airport in far SW Chicago to north of downtown, and get off a few blocks from my son’s apartment for only a few bucks…pretty cool.  As Austin’s population becomes more compact with more people living in the urban areas, we Texans (I was born and raised in TX) may likely come to realize there is some value in a good rail system.  For this reason, I believe that homes near the 9 stops will—over time—gain higher appreciation rates than Austin as a whole due to their proximity to the light rail system, especially if it is extended to the airport and other destinations as discussed in one of my previous newsletters (Austin ponders new downtown bridge for rail).

We continue to see improvement in the Austin metro real estate market.  I researched several years of MLS data that I track and I didn’t see any month where all categories were green (last September was close with all green, except for one category that had no change).  What a testament to the quality and strength of our local real estate market.

Our forecast population growth and additional jobs economists expect in 2010 bode well for the long-term value of Austin real estate.  This makes it challenging sometimes for realtors helping a buyer find a property in our community.  Many times buyers will want to low-ball the offer they make on a property based on what they hear and read about the national real estate market.   They calculate that sellers are desperate to sell and will entertain their offer.  With a less than 1% drop in median prices last year and a 1.5% drop in average prices, most sellers see the market differently and are reluctant to just “give their house away”.

In addition, the percentage of foreclosures and short sales (pre-foreclosures) in Austin isn’t as high as in other states.  As someone aptly put it, “We weren’t invited to the party of 20%+ annual appreciation, so we don’t have the hangover”.   All real estate is local.  The national real estate market has nothing to do with our Austin market.  Only mortgage rates are national and affect everyone the same.

Here are the statistics for single-family home sales in Austin, TX for December, 2009:

We finished 2009 with a very good December, as seen below:

1. Listings dropped by 441 units (down 5%) when compared to Dec/2008;
2. We sold 68 more homes (up 5%);
3. Our inventory (# of months to sell all current listings at current sales rate) dropped to 5.9 (down 10%);
4. Median prices were up by $11,500, or 6%;
5. Average prices increased by $14,347 (also up 6%).

So, how did the 2009 Austin real estate market fare, given the recession and uncertainty last year?

1. Our listings continued to drop which puts upward pressure on home prices (the old supply and demand theory).
2. While our Pendings were up by an average of 22% for the year, they didn’t all translate into sales.  This was due, in part, to some tightened lending underwriting and the enactment of the HVCC rule in May which caused some appraisal problems.
3. Sales were down by 5%, or an average of 92 per month.  While this doesn’t look like good news, I believe this is a testament of the strength of the Austin real estate market during a very difficult recession year.
4. Inventory was up by 2%.  However, using the definition of a 5-7 month inventory equaling a market in equilibrium shows Austin is not out of line with our total listings on hand.
5. Median price down by $1,622 per home…a drop of only 0.9%.  Again, while this looks like a negative, I find it incredible that we can survive a year of great uncertainty in our national economy and only have our median price drop by less than 1%.  Austin continues to outperform nearly all of the cities in the Case-Shiller Home Price Index.
6. Average prices dropped by $3,766 (only -1.5%).  See comments above in number 5.
7. Days on market increased by 8, or 10.6%.  Sellers who had their home in good condition and priced right simply had to wait a little longer to get their home sold.

Austin’s home prices never had the unreasonable jumps seen in some areas of the nation during the past decade.  There were parts of California, Las Vegas, Arizona and Florida that had annual price appreciation of 20+%.  Our single-digit increases over the past 10 years—by contrast—are why our prices haven’t fallen precipitously either.  On a state level, California and Florida home prices went through the roof in 2003-2005, only to fall dramatically the past few years.  Texas, by contrast, has had a fairly steady appreciation throughout the past 10 years, so we aren’t having the price correction seen by a large part of the nation.