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Market News and Trends, Uncategorized

Housing Bubble? Austin compared to Case-Shiller cities

A few days ago I posted some brief thoughts about the latest release of the S&P/Case-Shiller Home Price Index:

Quick comparison — Austin vs. Case-Shiller Index

Texas generally, and Austin/Central Texas specifically, have bucked national trends throughout the housing crisis, and in that post I pointed out that even after significant adjustments in recent months, the 12-month average residential sale price in Austin reached all-time highs in November and December 2010.

Today I decided to assemble a more complete comparison of home prices in the Austin area and in the Case-Shiller indices (10-city and 20-city composites).  The result?  Here’s what a housing bubble looks like:

Case-Shiller/Austin Comparison 2000 - 2010

I have not tried to completely replicate S&P’s methodology of weighting market areas and tracking repeat sales, so this is not truly apples-to-apples.  Instead I charted the 3-month rolling average of sale prices (MLS data) in the Austin metropolitan area and added a polynomial trend line to smooth that data for comparison.  I began the comparison in January 2000 because that is when data for all 20 Case-Shiller cities becomes consistently available for each month.  (Click here for a better description of how the Case-Shiller indices are calculated.)

What you see is that the 10-City Case-Shiller index peaked in June 2006 at 226% of its January 2000 level.  The 20-City index peaked in July 2006 at 206% of the January 2000 reference point.  Sale prices more than doubled in 6 1/2 years!

In contrast, the Austin metro was pretty unexciting:  The rolling average price at that time was up just 30% from January 2000, and still rising.  Our peak happened just three months ago, in September 2010, and at just 154% of the January 2000 level.  We averaged about 5.4% annual appreciation for all eleven years, compared to the indexed cities’ 6 1/2 years at almost 18% annual growth followed by 4 1/2 years falling more than 14% per year.

NOTE:  The Austin area did NOT dodge all the market ups and downs over the past several years.  We rode the dot-com bubble up and saw unemployment spike and home sales fall when it burst.  We knew the impact of 9/11 and the Enron/Worldcom period, and the mortgage meltdown was a national issue.  A very concise measure of overall market health that I track routinely is the percentage of active listings sold each month:

Austin Odds Of Selling 2000-2010

The average “odds of selling” over this eleven-year period was about 22%, but there is no mistaking the pace of activity at the height of the dot-com boom, or the subsequent crash.  We saw the 2006-2007 boom, and in the first chart above you can see that that market strength pushed home values above the trend-line.  Through it all, though, the Austin/Central Texas economy remained resilient, and home values generally held their own or appreciated.

Will that continue?  I think so.  We continue to see strong net in-migration and employment growth, and home inventories remain relatively stable at 6.5 to 7 months’ supply.  With continuing domestic and international political and economic uncertainty, however, I will leave “official” predictions to smarter folks than me.  That said, as I have pointed out in my Austin Market Dashboard and elsewhere, I believe there is ample reason for optimism this year.

The Case-Shiller data also suggests that the housing crisis is not as all-encompassing as most of us perceive.  The cities used in the indices include many that suffered the most during the recession, and very few that weathered the storm well (Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Francisco, San Diego, Washington D.C, Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland, Seattle, Tampa).  Nonetheless, even after the dramatic decline in home values, the Case-Shiller cities have gained more ground over the past eleven years than the Austin area, and if you bought a home before 2004 the odds are good that its value is still at or above what you paid for it.

That is absolutely not true of all neighborhoods in all cities, but … Home ownership remains a great place to store personal wealth.

Renting or buying, you’re going to pay for a home.  Shouldn’t it be yours?

About Bill Morris, Realtor

Many years of business experience (high tech, client service, business organization and start-up, including almost 20 years in real estate) tell me that service is the key to success and I look forward to serving you. I represent both buyers and sellers throughout the Austin metropolitan area, which means first-hand market knowledge is brought to bear on serving your needs. Learn more about my background and experience, my commitment to my clients, my profession, and to the real estate industry at

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