Market Pace and Pricing

In Update on “days on market” I discussed the relationship between increases in the time it takes to sell a residential property in the Austin area and the change in the ratio of Sales Price to Original List Price. Even though the change in time on market looks subtle, its impact is confirmed by the fact that I receive emails regularly about price reductions in many parts of our area … messages that were very rare or nonexistent a year ago.

As another look at those changes in our marketplace I will look again today at Days to Sell and relate it to year-over-year price appreciation. You will recognize the moving averages graphed below from the older post mentioned above:

Notice that as the last market cycle peaked in 2006 and 2007, the Days to Sell metric reached its lowest point in the cycle. After the mortgage industry crisis and the recession that followed that metric rose dramatically, to a median of almost 60 days in 2011. As the Austin-area real estate market strengthened in 2012 and 2013, Days to Sell dropped precipitously, far lower than its lowest level in the last market cycle. In the second half of 2014 the average Days to Sell began increasing again, with the median lagging just a bit. Both remain lower than their 2007 levels, but the increase has been steady.

As it takes longer to sell, some sellers get impatient and those that are motivated and can afford to adjust begin to reduce their asking prices. This chart zooms in more closely on the current market cycle:

With the Austin market’s recovery from the previous downturn year-over-year increases in sale prices rose, reaching about 9% in 2013 as we consumed inventory. The appreciation rate retreated a bit in 2014, before peaking again in 2015 with a median change of 9.5%. That median has been declining steadily since then — to 1.6% so far in 2019.

Note that the number of listings is essentially unchanged over the past three years, even as the number of sales has increased. One would expect that imbalance to drive prices upward but as more and more home buyers move to the suburbs for more affordable housing. Combined with some market resistance in upper price ranges, escalation in the five-county aggregate of sales prices has slowed.

I have commented before that growth in unit sales in our area is constrained by lack of inventory — not enough homes for sale to serve the demand for them. Based on just our area’s economy and market conditions I don’t see a reason for that to change. Broader changes in the U.S. economy, however, could affect us. Most economists seem to believe we’re at least a year, maybe two, away from a significant shift in the U.S. economy, Presidential election year politics and international economics make the coming year unpredictable, but my forecast is that the market for residential real estate in the Austin metropolitan area will continue much as it is now for the foreseeable future.