Yesterday I posted comments about my Austin Market Dashboard, updated through the end of 2012. Among the charts and data discussed there, I noted that the average residential sale price in the Austin metropolitan area increased 14.7% during 2012. Does that mean that the market value of a specific home increased by that amount? Not necessarily, although the supply-and-demand environment certainly pushed prices upward, particularly in the last half of the year when buyers became increasingly frustrated by low inventory/multiple offer situations.
Let’s focus on just the past 10 years to talk about what has happened to Austin-area home prices:
(MLS Data — Austin/Central Texas Realty Information Service)
First, notice that the starting point for last year’s steep increase in average prices was a deep valley early in the year. The 12-month rolling average superimposed on that graph shows that the actual trend was less dramatic — still climbing quickly, but on a pace much more like our long-term average.
We absolutely saw general price appreciation in 2012, and we will see more in 2013 — probably even a steeper curve than last year. But there are also other contributors — new construction making up a larger proportion of total sales, new residents moving to town and buying more expensive homes, etc. What we have seen is the continuation of a long-term buyer migration upward:
(Data from the Real Estate Center at Texas A&M University)
I highlighted price ranges in each year that accounted for 10% or more of total home sales. At a glance, you can see the move toward higher price ranges, but look at a few details:
- The $200,000 to $249,999 price range has contributed significantly to total sales in all of these 10 years. The proportion has grown about 30% — from 10.8% to 14%.
- During the same period, sales in the $300,000 to $399,999 range increased from 6.5% to 12.1% of all homes sales — an 86% increase!
- Although they have not yet reached the 10% level, the proportions of sales in the $400,000 to $499,999 and $500,000 and more ranges grew 162% and 143%, respectively.
The take-away: All of the proportional sales growth in this market over the past 10 years has happened above $250,000, and the fastest growth was above $400,000 — even though the median price remained below $200,000 until last year.
That said, home shoppers are being pushed upward. If a hypothetical buyer wanted to see 50% of all sold homes, he or she could have done that below $180,000 as recently as 2006, but no more:
Home prices in Austin are up. They will go higher this year.
But as you read reports about what’s going on the market, keep in mind that there is a difference between appreciation in the value of a specific property or of homes in a neighborhood, versus increases in market-wide median and average prices. The larger the market area covered, the less large averages apply to any specific property or homeowner. National price trends are interesting, and useful to analysts and economists, but virtually meaningless to the average consumer. Even metro-area averages, while more helpful to most folks, don’t tell you anything about the value of a specific property in that area.
Through all the ups and downs, all the grinding of teeth and wringing of hands in recent years, real estate remains a hyper-local business. If you’re interested in the current market value of specific properties that interest you, you need and deserve the advice and counsel of a local real estate professional. If you’re not already working with an Austin-area REALTOR®, give me a call and I’ll tell you what you need to know based on long experience in our market.