Bill Morris on Austin Real Estate
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Related news …
Just after I posted Trends to Watch, commenting on changes in the Central Texas real estate market, I found a very good article from Inman in my inbox that covers the national outlook:
Inventory is rising, home prices could flatten in 2019
But don’t expect homes to get cheaper anytime soon with demand remaining high
Strong demand in the Austin area is preventing real inventory build-up, but prices flattening here in the coming year or two may well be a fact. Our Months’ Supply metric was 3.0 months in September 2018, the same as September 2017 and only slightly higher than 2.8 months in September 2016. Moreover, all other monthly inventories were consistently lower in 2018 versus the same month in 2017.
There was also a related article in this morning’s Austin American-Statesman:
Austin-area Homebuilding pace slows in third quarter
Home prices in the city of Austin’s are pushing buyers farther and farther into the suburbs, and availability of build-able residential lots and permitting processes in some areas have slowed building starts.
The issues highlighted in both of these articles will remain important in the months to come, and I’ll keep an eye on them.
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I offered some thoughts yesterday about where we are in the current market cycle. For a broader view of the Austin-Central Texas residential real estate market, this post will cover my ongoing Market Dashboard, now updated through 3rd Quarter 2018.
First, Trends to Watch commented on listing inventory. Here’s the big picture since near the end of the last market cycle:
Most market analysts consider 6 to 6 1/2 months’ supply to represent “normal” or “balanced” market conditions. Notice how long our local market inventory has been at or below half of that level. Listing inventory in September was 3.0 months, unchanged from August and the same as September 2017. Seasonal performance looks very much like each year since 2014.
My earlier post also discussed market absorption — i.e., the “odds of selling” for an active listing each month. For historical perspective, this chart clearly shows how different this market cycle has been from all others in almost 30 years:
The steep decline from 46% to 31% between May and September is noticeable. As I said earlier, though, one data point is not a trend. This metric will bear watching in the coming months.
Finally, I wrote previously about the slowing pace of year-over-year price appreciation, but the view of actual average and median prices is important:
Notice that very strong demand has pulled prices upward and above the long-term trendline in recent years, most noticeably since 2015. Prices have moved closer to the trendline since June, which hasn’t been unusual in recent years, but it is more noticeable and coincides with the decline with the decline in “odds of selling.” Again, there isn’t enough data here to state with certainty whether this is the beginning of a market transition or just typical seasonality.
Market economists remain confident in our strong market conditions through 2019 and into 2020, and I agree. Inevitably, however, we will see prices moderate, interest rates increase, “days on market” grow, and inventory will begin to catch up with demand. I don’t see signs right now of a sharp change but instead anticipate a fairly smooth transition. Of course, external factors that we don’t know about today could change that, but that’s another post for another time, if needed.
