1st Quarter 2019 – Market imbalance continued

2019 promises to be another fast-paced year for residential real estate in the Austin area. Listing inventory finished the quarter at 2.4 months’ supply, versus the 6.5 months’ most market analysts consider “normal” or “balanced”. There some mixed signals, however.

For example, the number of homes (houses, condos, and townhouses) sold in 1Q ’19 was up just 1.3% from the same period in 2018. For comparison, unit sales grew 6.5% from 1Q ‘ 17 to 1Q ’18. Likewise, the average sale price rose just 0.9% from 1Q ’18 to 1Q ‘ 19, compared to a 4.1% increase from 1Q ’17 to 1Q ’18. These charts show more details, including the 12-month moving averages:

You can see that unit sales growth has been sporadic since 2014, but dipped noticeably in the second half of 2016 and again from October 2018 through March 2019. Year-over-year price growth has been declining fairly steadily since 2015.

As I have noted many times, the Central Texas economy continues to create jobs and to attract population growth and accompanying development. A critical challenge is building enough housing to support the growth. Demand is high but sales are gridlocked by the lack of available homes, especially under $300,000. I noted in More on Austin-area Home Prices that 60% of 2018 sales were between $200,000 and $400,000, but there are only five mostly small suburban cities where more than half of sales were below $300,000, and in Home Prices in Austin you can see that in 2018 the percentage of homes priced $200,000 to $250,000 declined from 2017 — the first decrease ever in that price range.

Finally (for this post), the five-year trend of increasing “days to sell” appears to continue:

By no means is an average of 60 to 70 days to sell “slow” in historical terms, and I actually expect the 12-month moving average of this metric to level off somewhat this year. Notice that the last time this measure bottomed was as the mortgage crisis began in 2007, and the peak in the middle of that chart was just as we turned the corner into the current market cycle.

There is no sign now of the kind of disruption we saw in 2007-2008. We are simply being held back at this point by a shortage of housing available for sale. More news on this to come ….