Austin Real Estate - 3rd Quarter Report

The Austin real estate market tightened slightly during the 3rd quarter of 2009. Inventory for Austin as a whole is balanced – with a level of 5.7 months of supply. This is down from 6.3 months of supply at the end of the 2nd Quarter. However, throughout the Austin area, there are local variations in the market.

Sellers Markets: 1 – 3 months of supply

There are 9 local areas with less than 4 months of inventory. These are all located in the close-in suburban part of Austin. Median home prices range from $100,000 to $400,000. Homes in these neighborhoods are mostly limited to re-sales. Builders have generally moved further out to find lots for new construction. There is strong demand for these close-in areas. Mortgages are readily available. And, the first time homebuyer tax credit has drawn buyers into the market. Strong demand has kept inventory at low levels.

Balanced Markets: 4 – 6 months of supply

There are 17 local areas with balanced markets. The balanced markets are distributed throughout central core areas; close-in suburban areas; and some outer-suburban areas. Median prices in these neighborhoods range from $100,000 to $400,000, with a couple of areas up to $600,000. There is some new construction in these areas – which increases inventory. Readily available conforming mortgages; first time homebuyer tax credit; and low interest rates have improved the demand side, and kept these areas balanced.

Buyers Markets: 7 + months of supply

There are 20 local areas with over 7 months of inventory. Median home prices in these areas vary from $100,000 to over $1 million. Generally, these neighborhoods have more new home construction available – which increases supply. Upper end homes continue to have higher inventory than the lower and mid level part of the market.

Upper End Market:

Areas with many homes over $800,000 include Central and Northwest Austin, Westlake, Barton Creek, and Lake Travis. These neighborhoods have been popular locations for speculative building or remodeling.

Although most builders have slowed or stopped speculative building in the high end, this level of inventory has been slow to contract. This is because mortgage money is not as readily available for buyers of high end homes. Jumbo mortgages (over $417,000) require 20% down payment; excellent credit and income; and a higher interest rate. Many buyers in this market have been unable to sell their previous home in another state, and this has slowed the demand for high end homes here.

Foreclosures:

On average, foreclosures are 3.1% of listings on the market – not a significant part of our market. (1st Quarter was 3.7%; 2nd Quarter was 3.6%) However, some sections of Austin have more foreclosures than this. These include the Manor, Elgin, Bastrop and some Southeast areas. Here you may see foreclosures at 8% to 12% of listings. These areas were popular with first time homebuyers, and were also targeted by investors during the boom market. The good news is that these neighborhoods do not have very high inventory levels. This indicates that their foreclosures are being absorbed quickly and inventory is not building up.

Conclusion:

In Austin we are not faced with serious depreciation, as a result of prices that were pushed to unsustainable levels. We are not faced with a serious foreclosure problem, generating its own downward spiral. And, we are not faced with widespread job loss.

Joel Kotkin, whose research appears on Forbes, ranks Austin as the best big city for jobs. He writes, “Few places have received more accolades in recent years than Austin, the city that ranked first on our list of the best big cities for jobs.

Builder Magazine placed Austin second on their list of the “healthiest housing market for 2009.” Their study says: “While other markets lost employment, Austin added 17,400 jobs last year – a 2.3% growth rate. It helps that Austin is home to both a major university and the state capital. Existing homes cost a little bit more in Austin than other Texas markets, roughly $188,600, but that’s still below the national average. Also, Austin is one of the few metro areas in the country where median prices actually rose in 2008 — 2.7%. Amazingly, Austin now generates more home building activity than Chicago, which has six times more people.”

For buyers in all price ranges it is a great time to come into the market. Interest rates below 5% are the best in a lifetime, and they certainly will not remain this low. This is not the time to be waiting around for a better deal. It is the time to start shopping for a great place to live in Austin!