Another school year has begun, and we are well into Autumn, typically signaling calmer market conditions. If that’s true this year, in my opinion it is only because the “gold rush” we experienced in Austin real estate during the Summer burned itself out. Many folks who had intended to buy homes in 2013 saw the manic pace of sales and either opted out entirely or jumped into the process with both feet, determined to buy before the market moved out of reach. That led to many multiple offer situations, very quick sales, and prices that were sometimes bid up faster than normal appraisal practices could support them.
Much of that frantic market activity is abating recently. As a result, even as the number of homes for sale declined in August and September, sales declined as well:
Nonetheless, at the end of the 3rd Quarter of 2013, listing inventory (i.e., months’ supply) is at its lowest point since early 2000, just before the last growth surge that preceded the 2000-2001 downturn.
Market absorption peaked during Summer 2013 with 3 of 4 months in which more than half of all active listings sold:
Please don’t jump to conclusions, but we have only experienced that pace of sales once before:
Yes, we last saw 50%-plus absorption at the market peak in the Spring of 2000, just before the bubble burst. The conclusion I discourage is that we’re poised for that kind of downturn again. Of course, there are uncertainties in the financial and political arenas today, but we are not riding a bubble of transitory wealth like we saw near the end of the dot-com boom. Even the dot-com bust need not have been as painful as it was, but when the downturn was exacerbated and accelerated by the Enron-WorldCom-etc. debacles, and by 9/11, we saw true free-fall. I do not believe the ingredients are in place in the current market for anything similar.
Instead, we are seeing the foundation of a healthy real estate industry coming back this year. The threat of increasing home prices and interest rates, not to mention huge in-migration to Central Texas, will create continuing demand. The Fed appears positioned to hold rates down through its bond-buying program, but it remains a point of uncertainty. Moreover, as home builders catch up they will help to rebalance supply and demand, even as they capitalize on the opportunity for price increases.
We have now seen 28 consecutive months of year-over-year sales growth (units), and significant growth at that:
… And 20 months of annual price appreciation:
To put that into perspective, though, note that even at the demand peak this Summer average prices began to decline, and in September returned to the long-term trend line:
My conclusion: Low inventory will keep things challenging for home buyers, but not as frustrating and frantic as our market was in the Spring and Summer of 2013. Going into next year’s traditional selling season, builders will help more with supply, but demand will remain very strong as well.
As always, every hyper-local market is different, but get advice from an experienced real estate professional you trust. I expect 3 to 5 years of continued growth and value appreciation, so if you’re considering a move get some guidance regarding your specific plans and priorities. Give me a call when I can be of service.
Complete printable views of my Austin Market Dashboard are available here:
Austin Market Dashboard January 1990 to Present
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