The Austin-area real estate market has turned the corner. We’re clearly into a new growth phase. As evidence, here’s a quick summary of the past few years’ home sales:
We have experience 22 consecutive months of year-over-year sale growth, and very significant growth in most of those months:
Moreover, it’s worth noting that even filtering out seasonal effects, both unit sales and prices have been extremely strong:
In that chart you can see that the 12-month sales totals haven’t achieved the levels we saw at the top of the last market cycle, but the sales price rolling average has reached all-time highs in every month since August 2012!
As yet another sign of real market strength, consider that the market absorption rate in December 2012 nearly reached the level we last experienced at the Summer sales peak in 2006:
But as I wrote several weeks ago, the limited supply of homes this year also represents our challenge (see Housing Supply). Strong employment and population growth continue throughout the Austin metropolitan area, and it is welcomed. Home builders are working to keep up with demand, but all recognize that they will be constrained by the availability of lots for construction. New subdivision planning virtually stopped for much of the past few years, and we could be two years or more from seeing an adequate supply to support the population growth that is expected to continue for many years to come. That is very good news for many sellers of existing homes. Overall, the Austin metro area is now working with about 2 1/2 months’ supply of active residential listings:
Consider these take-aways from that chart:
(1) Compared to the 6-month mark that most market analysts consider “balanced” conditions, we are decidedly in “seller’s market” territory here.
(2) In absolute terms, the supply of homes today us much lower than experienced at any time during the past market cycle. Indeed, you have to go back to February 2001 to find inventory below the current level. (Keep in mind that population has grown by about 40% since then, and most estimates of current growth indicate that we’re now gaining 1,200 to 1,500 residents in the metro area each week.)
In that environment, at least some sellers are faced with the dilemma of finding their next home here is they sell the one they live in now. The imbalance of supply and demand also exerts upward pressure on prices, straining the intentionally conservative appraisal process to keep up. Many buyers are frustrated by multiple offer situations and the reality that they may make offers for several homes before successfully getting one under contract. The strength of this year’s accelerating market conditions may well impose limits as well, but that is as it should be — the way markets work.
I remain extremely optimistic that our area can absorb this growth, manage the employment and housing issues, and also retain the environmental and cultural factors that make Austin Austin. I love living in Austin and have seen many changes since the early 1970s, and I am very confident in our future.
For complete, printable views of my Austin Market Dashboard, see these links: