Last week I wrote about the accumulation of residential listing inventory in late March (Preparing for recovery, 04/14/2020). Now that I have this month’s data from the TAMU Real Estate Center this post is an update through March in the form of my Market Dashboard. At the end I will also provide a brief look-ahead at April sales and beyond.
In last week’s post I noted that our market spent about four weeks in January and February absorbing aging and largely lower-priced listings for houses, condos, and townhouses. The result was yet another extremely low month-end “months’ supply” report:
Our Months’ Supply metric has been below 2 only one time previously (at least since 1990) — in January 2016, when it reached 1.9 months’ supply. Now we have four months even lower — December 2019 at 1.7, January 2020 at 1.6, February at 1.5, and March 2020 at 1.6 months’ supply.
However, there’s a very important point needed to interpret that metric. Look closely at the orange line in the chart above, and notice what happened to the number of active listings. In June and July 2019, we had almost 7,900 properties for sale. By December that number was about 5,300, and we have had less than 5,000 active listings since January 1, 2020. Unit sales in the first quarter of 2020 were up 6% compared to the first quarter of 2019, while the number of homes available for sale was down 28%!
That helps to explain why March 2020 was the first month in the history I have reviewed that the market absorbed more than 60% of all active listings:
Several of my recent posts have focused on whether/how the Covid-19 issue affected home sales in the Austin area, but it’s clear that strong demand for people to live and work here has changed our market for much longer than that. We are now in our eighth year with absorption rates consistently above the 26% long-term rate. Notice also that instead of the well-established pattern of Spring and Summer market peaks, we saw annual maximums in absorbtion in December of 2017 and 2019, and March 2020 is by far the highest rate we’ve seen in our market — 62%! These are unprecedented times in many ways.
And continuing the trend in this very long housing boom, home prices in the Austin metropolitan area continue to trend upward:
I’ll comment separately about the pace of price appreciation, but it’s worth noting here that the median sale prices in both February and March 2020 were up 12% from the same months in 2019!
Finally, you saw in my last post that there was a significant surge in new purchase activity in the last half of March. Many of those new contracts will close in late April. According to MLS data mid-day on April 22, closed sales this month are less than half of the month-end total in March. The number of newly pending listings between March 15 and April 5 (those most likely to close this month) is not enough to close that gap, so it appears that we are headed for low unit sales in April, and probably another month or two after that.
Some buyers are still waiting out the Covid-19 issue and/or are unwilling or unable to obtain mortgage financing right now, and the number of homes available remains at its lowest point since January 2001. How the regional economy reopens and confidence that Covid-19 is more controlled will affect buyer activity and real inventory growth. We are likely to remain supply-constrained into the summer months, but demand to live and work in the Austin area will drive a return to strong market performance again. I’ll watch this closely and keep you informed.
Why do you think we saw this increase in sales? Other than people were tired of shopping, and a few other debatable theories, Austin and DFW are acting different than the rest.
Hope you are doing well. Always enjoy your perspective.
As I mentioned in one earlier look at that data in an e-newsletter, I don’t argue that correlation means causation, but I watched absolute frenzies at my listings right after the national emergency declaration, and the daily sale numbers sure look like ready and willing buyers worried that their window was about to close. It is interesting that demand dipped in the week after the local declaration, but by then I think most of us were fairly well resigned to staying at home. That’s wearing off now and it looks like reopening is about to begin. Interesting times …!