The Austin real estate statistics are out for the month of June and as predicted, it marked the 25th straight month of year over year sales volume increases. June also marks the end halfway point for a year that I believe most will agree has been one of the wildest six month stretches in Austin real estate history.
The question is: Has the market peaked? Will this remarkable run continue or is Austin poised to see market activity level off for the remainder of the year?
According to recent housing market numbers, sales for June only showed an 8.7% increase over June 2012. For the month, sales of single family homes, condos & townhomes topped the three thousand mark (3085); the highest total for June in the past six years. That’s coming on the heels of the month of May that came a measly 10 closings shy of matching the all time high (3337) for the Austin area, set in June 2006 – by most accounts the “peak” of Austin real estate over the past decade. Based on available data, there have only been three years now with multiple months of three thousand or more closings (2006, 2007, 2013) – will we set a record in 2013 with a third?
Each sub-market and price range is unique but in general it has been a banner year thus far for Austin real estate.
The First 6 Months in Austin (Austin MLS Market Area)
- New home listings are up 5.6%
- Pending sales are up 21.4%
- Closed sales are up 18.2%
- Time on market is down 28.8% to 48 days prior to sale
- Median and Average sale price are up about 9%
- Inventory of available homes for sale is down between 27-40% depending on the metric chosen
Factors Contributing to the 2013 Real Estate Surge
For the most part, the surge has been driven by the simple economical factors of supply and demand. Recent estimates suggest that as many as 150 people are moving to the Austin, metro area each day to take advantage of Austin’s job growth. We’ve seen recent yearly immigration of over 60,000 new residents to the area and just do not have enough units (lease or purchase) to house all of the newcomers.
Local housing expert Mark Sprague (analyst with Independence Title) suggests a rule of thumb of one new housing start for every two jobs being created in the area. Due to a recent slow-down caused by the economic recovery of the past 3-5 years, Sprague projects only about 9,000 housing starts in the Central Texas area. All the while, the region is expected to add as many as 32,000 jobs. That kind of growth would necessitate 16,000 starts just to break even. With the influx of new residents and a three to five year pent up demand for buyers looking for a different house, Sprague says, “ultimately you don’t have enough supply to meet demand over the next three to five years.”
Increased Demand + Low Inventory + Constrained Supply = Higher Prices
Across the Austin/Central Texas area, home prices are up just about 9-10 percent on average through the first 6 months of 2013. The June data shows an increase between 6-8% for the month compared to last June. Remarkably, certain sub-markets and price points have seen as much as 20-25% appreciation over the past 12 months.
As rents continue to rise across the area, would-be renters have sought to take advantage of ridiculously low interest rates and become home owners. More buyers competing for the same number of homes for sale, equals higher prices. For various reasons, there have been fewer distressed sales on the open market to bring values down. And, quite honestly, there is a lot of cash out there buying right now. What difference does that make? Well, if you are an average buyer competing in a sellers market, having to finance your purchase and knowing there is a high probability that one of the 5 other offers you’ll be competing against is going to be cash, what do you do? You do your best to outbid them in a responsible way. You make concessions such as promising to pay out of pocket to close the gap between sale price and appraisal value. It’s happening, trust me. The influx of cash buyers in the market is forcing “financed” buyers to pay more and it’s driving prices upward.
What Does the Immediate Future Hold?
A number that I always keep an eye on in regards to forecasting the health of the market over the next couple of months is contracts that are in pending status. At the end of June, 3144 MLS properties were in pending status (P/PB), presumably scheduled to close in the next 30-60 days. That number represented a 21.3% increase over June 2012. With the volume of properties under contract, it would appear that July and August could easily follow suit.
From there, it’s anyone’s guess. The market historically slows down at the turn of the school calendar which is fast approaching. Couple that with the fact that interest rates have spiked a full point in the past 6-8 weeks (hitting a 24 month high) and we might see some leveling off. That said, supply and demand are going to remain out of equilibrium for a while so there is no indication that the Austin housing market is going to see a substantial plateau or decline any time soon.
The best time to buy was yesterday and it would appear that the next best time to buy is going to be tomorrow so if you’ve considered a move, let’s get in touch to discuss options.
* Statistical data was pulled from Austin Area MLS and pieces of information in this article were taken from a June 2013 presentation & slides provided by Mark Sprague, Director of Information Capital at Independence Title.