The trend has been clear for several months, but this month one chart from my dashboard really tells you most of what you need to know about the Austin/Central Texas residential market (click chart to enlarge):
In April, 46% of all active listings sold! The last time we saw a market anything like this was in 2000:
The steep decline that followed that peak was caused by a confluence of very bad and very unusual events — the Dot-Com Bust, then 9-11, then the Enron and Worldcom debacles — so there is no reason to expect a repeat of that experience. Nonetheless, supply and demand in our market are badly out of balance. Let’s look at the long-term again:
With market absorption extremely high, listing inventory gets very low — about 2 months’ supply in 2000, and 2.6 months’ supply now. If you have purchased a home recently (or tried to, or know someone who is in the market now), then you know how common multiple offer situations and bidding wars are in many areas. As a result, prices are being pushed upward:
The appraisal process tends to restrain rapid price increases somewhat, but any student of marketing knows that “market value” is nothing more or less than what a willing buyer and a willing seller agree to. Appraisers have some discretion to take market conditions into account, so more appraisals are working these days than you might expect, and ultimately “comps” will be available to support even higher prices until supply catches up with demand.
One last chart highlights the strength of demand in the Austin/Central Texas market:
What you see there is 23 consecutive months of year-to-year growth in the number of homes sold — and not trivial sales changes. 15% to 20% annual sales growth has not been at all unusual over the past two years, and growth in the mid-30% range has been common in the last several months. (Those same growth percentages in 2011 were compared to significant year-earlier declines, so I’m less impressed with those months.)
Where do we go from here? In my view, very low inventory for the rest of this year and most or all of 2014. As builders acquire more buildable lots they will help to relieve some of the pressure, but it could be 2015 before we get anywhere close to “catching up.” In 2011 and 2012, the Austin metro area population grew about an estimated 70 people per day, making this the 5th fastest-growing city in the U.S. — and now the 11th largest city in the country! I’m hearing current estimates of 150 people per day moving here — twice the pace we saw just last year. That’s a lot of homes — and many of them haven’t been built yet.
For complete, printable, views of this month’s Austin Market Dashboard, click below: