A couple of months ago I wrote about a “slowdown” in Austin-area real estate — that I didn’t believe then and don’t believe now (see Market Shift?). It is inevitable that our market will move toward “normal” over time, and there may be signs that that’s beginning to happen. That is decidedly NOT a slowdown, however, but could well lead to healthier market conditions for the long run.
Our supply-and-demand imbalance in Central Texas residential real estate continues:
Notice that listing inventory has remained at or below 3 months’ supply for almost 6 years now, less than half of what most market economists consider “normal” or “balanced.” In addition, the odds of an active listing selling during those years has averaged 41%:
For comparison, the average “odds of selling” from 1990 through 2012 was 22%, just over half of our recent pace. In fact, the ONLY time this metric was at or above 40% was in 12 of 16 months between May 1999 and August 2000.
The obvious result of those market conditions has been upward pressure on sale prices:
Ultimately, all market cycles turn, and this one will too, but as I wrote in July (Market Shift?) and August (Market Dashboard – 1H 2018 in review), job and population growth remain strong in the Austin area, supporting continuing strength in residential real estate. We might be seeing some resistance, though:
There is no question that average “days to sell” has been increasing year-over-year since 2014. At the peak of the last market cycle, this metric reached its low point of 49 days in May of 2007. The lowest days to sell in 2018 was 42 in July, followed by 47 days in August.
I am NOT forecasting a downturn but it is worth being aware and watching this multi-year trend. The slope of the trend is shallow and there don’t seem to be any clouds on the horizon for our regional economy, but rising prices will meet resistance eventually. That won’t stop demand but rather should moderate it, allowing supply to catch up a bit. That’s not a bad thing, and making this correction in a controlled way is far preferable to the kind of market changes we saw in 2000-2001 and in 2007-2008.
External events could certainly change things, but locally and regionally housing affordability and transportation issues remain key, along with certainty in long-term water availability — and those are issues we should be able to manage if we can gather the political will to make changes that we know are necessary. Much of our future really is up to us.