Demand for residential real estate in the Austin area remains high, but you wouldn’t know that from reported sales volumes. Look at the number of homes (houses, condos, and townhouses) sold each month since the bottom of the last market cycle (after the collapse of the mortgage business):
Notice that the number of homes sold in May 2020 was down more than 25% from one year earlier, the worst performance on this metric since the last half of 2010, almost 18 months before the beginning of the current cycle. Those steep sales declines in April and May this year represent contracts written in March and April, during the early stages of the coronavirus-driven stay-at-home orders. I wrote at the time that I saw frenzied buyer activity in the first few days of that period, but activity was seriously impacted after that.
But disregarding the coronavirus for the moment, there is an important difference between 2010 and 2020 that’s easy to see in this chart:
Look at the number of listings (orange line) on the market in the middle of 2010 — more than 13,000! Now look at 2020, with less than half of that inventory. The green dotted line in that chart shows an even more important fact: In 2010 that listing inventory represented more than 7 months’ supply at the pace of sales at the time. In 2020, the inventory of about 6,000 listings represents just 2 months’ supply!
The result of those differences is obvious when you look at the percentage of active listings sold in each month over that time:
During 2010 an average of 14% of listings sold each month. So far in 2020, that average is 46%, more than triple the 2010 pace! And notice that that percentage was up in May 2020.
Predictably, this market environment drives prices higher, and you can see that when our months’ supply dropped below 2 months late last year, a long downward trend in year-over-year price growth was reversed:
The critical factor for the coming months is whether our market can build inventory, through new home construction and dramatic increases in resale listings. As I write this on June 25, there are 5,283 active listings for houses, condominiums, and townhouses across the 5-county metropolitan area. That is 13% lower than May and 17% below April inventory. Of course, the coronavirus has disrupted both resale listings and new home construction.
I believe this trend can change during the second half of 2020, but there are influences that we don’t really control — notably continuing disruption from Covid-19 and its impact on buyers’ and sellers’ willingness to interact in the market. Volatility in the stock market may also affect their confidence in their financial conditions. The current cultural and political battles around the country and presidential election year politics are also disruptive.
So … in answer the the opening question for this post: Demand to live in the Austin area remains very strong, and major employers continue to eye Central Texas as a hub of activity. At the same time we have less homes to sell than we’ve had for a very long time. Uncertainties aside, I remain optimistic about the strength of our regional economy and our residential market.