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Scorching Austin real estate market poised for another record-breaking year

Scorching Austin real estate market poised for another record-breaking year  Austin is on track for yet another record-breaking year in real estate. That’s according to the June and Midyear 2016 Central Texas Housing Market Report released by the Austin Board of Realtors (ABoR), which details the city’s scorching housing market and our steadily increasing home sales.  “Despite the ongoing housing shortage and affordability challenges impacting our region, population growth and housing demand continue to drive home sales upward,” said Aaron Farmer, ABoR president, in a release. “The Austin-Round Rock housing market is on track to outpace 2015 market levels, which was a record-breaking year for home sales.”

Austin’s office market continuing to thrive

Austin’s office market continuing to thrive   Developers are moving forward with new buildings amid a continued thriving Austin-area office market.  Dirt will soon begin moving on Barton Springs Road just south of downtown, where a nine-story building will rise that will have 90,500 square feet of office space, plus a restaurant.  “The Austin office market this summer continues to sizzle… and demand for high-end space remains stronger than ever,” said Ryan Kasten, managing director with Cushman & Wakefield Austin. “Downtown Class A office space made history by surpassing the $50 mark for the first time.

Is the real estate market about to shift?

Is the real estate market about to shift from a seller’s market to a buyer’s market?   That was one topic Gary Keller (co-founder of Keller Williams) discussed at last week’s annual Keller Williams Mega Camp held in Austin.  Gary made headlines nearly 10 years ago when he wrote the bestselling book “Shift – How top real estate agents handle tough times” which is a blueprint for how real estate agents should deal with shifting markets.  All markets are cyclical whether we are talking about real estate, stocks, bonds, oil & gas, etc.  Gary said they are starting to see signs of a shift nationally based on some indicators.  Below is a slide from Gary’s presentation showing the cycle for real estate and the negative indicators at the bottom left (DOM = Days on Market).    As you can see, they are all trending negatively.

Shifting market indicators

So, what does all of this mean for our Austin market?   Apparently not much, as you can see from this article:  Experts: Housing in Austin can survive U.S. slowdown with a sub-headline of “Local observers see little reason to worry in case national market shifts”.   The author spoke with 4 local real estate experts–all of which I’ve quoted in my past newsletters–who unanimously agree that Austin’s economy and desirability are shields against any big downturn in our local real estate market.   As I’ve stated here before, Austin is in the midst of our transition to an international city and the momentum created from that will help us from suffering through a significant downturn.   

 

I keep home sales statistics for 5 NW Austin neighborhoods (Great Hills   Spicewood/Balcones   Anderson Mill   Forest North Estates  Milwood) which represent a broad spectrum between first-time buyer neighborhoods priced at $250k+ to higher priced neighborhoods running into the $700k range.  I use a similar color coded system like the one I use for Austin metro home sales–green is a positive trend and yellow is a negative trend.  Virtually all of them have experienced many more yellow categories this year, so even Austin has experienced some slowdown from our red hot real estate market this year.  Isn’t this contrary to what I stated above about Austin’s market being “bullet proof”?  No, I simply think Austin will experience a plateauing of our upward trends for awhile–a cooling off, if you will–and then we will continue moving forward and upward.   Personally, I believe both the national and local real estate markets are being affected by our presidential election.  I don’t want to get into a political debate here, but nearly everyone I speak to agrees this is one of the strangest (if not the strangest) elections we’ve have ever witnessed.  That is contributing to some angst among home buyers and sellers which I believe will be at least somewhat removed after November 8th. My advice to Austin metro homeowners who need/want to sell in the next 6 months is to have your home in great condition, get it staged, and price it at or below the average price sold in your neighborhood for comparable properties.  

July Austin home sales down, but prices still going up

Here are the July/2016 MLS single-family statistics for Austin, TX:

Austin home sales stats July-2016

We had more red categories with our July Austin home sales than any other this year, and they were significant:

  • Our Pendings (ie-have contract but not closed) were down by a small amount (.3%), but this is the 2nd month in a row of declines in this category.  Pending sales are important since they are the barometer of the future trend of the real estate market;
  • Austin home sales dropped a by a meaningful 8% in July, nearly reaching the 6% drop we had in January.  Sales and pricing are the most important categories of the seven I track each month since they are the end result of all of the other activity;
  • Inventory (ie-the number of months it would take to sell all homes currently on the market at the current sales pace) increased slightly (+3%) to 2.35 months.  While an increase in this category is important, keep in mind that 6 months of inventory is considered equilibrium (some say 5-7 months) where neither buyers nor sellers have an advantage.   So, sellers still clearly have the upper hand here.  

For our positive categories:

  • Listings continue to drop this year (by 5%) continuing the trend we’ve seen each month this year.  YTD, we are down 7.3% in this category;
  • Home prices continue to defy gravity with our median prices (ie-half of all homes sold for more and half sold for less) increasing to $285,000 (+6%) and average prices increasing to $355,806 (+5%).  YTD, these categories have increased by 7.1% and 5.6% respectively.   To see how much our market has increased the past 5 years, consider that our median price in July/2011 was $196,750, or $88,250 higher (+44.8%) and our average price then was $265,835, or $89,971 higher (+33.9%);
  • Our days on market decreased by 1 day to 40.   Compare that to our 77 days in July/2011 which was nearly double our current number.

Stewardship guides plan of new Salt Lick home development

Stewardship guides plan of new Salt Lick home development  Decade-old plans to develop several hundred acres near the Salt Lick BBQ in Driftwood are becoming reality at last for Scott Roberts, who owns the popular restaurant and whose family ties to the area date to 1881.  Roberts has started marketing the first 31 home sites in the development, which sits about 30 miles southwest of Austin off FM 1826, in northern Hays County. In the next three to five years, the project, named Driftwood, could have 85 to 100 homes bearing price tags of $1 million and up.

Stewardship guides plan of new Salt Lick home development

Stewardship guides plan of new Salt Lick home development  Decade-old plans to develop several hundred acres near the Salt Lick BBQ in Driftwood are becoming reality at last for Scott Roberts, who owns the popular restaurant and whose family ties to the area date to 1881.  Roberts has started marketing the first 31 home sites in the development, which sits about 30 miles southwest of Austin off FM 1826, in northern Hays County. In the next three to five years, the project, named Driftwood, could have 85 to 100 homes bearing price tags of $1 million and up.

Austin unemployment tied for lowest in state

Austin unemployment tied for lowest in state   Although Austin’s unemployment rate ticked up slightly in June from May, the state capital, facing the tightest job market it’s seen in years, is now tied with Amarillo for the lowest metro unemployment rate in the state.  The Austin area recorded an unadjusted unemployment rate of 3.3 percent in June, up from 2.9 percent in May, but still lower than the 3.6 percent unemployment rate seen in June 2015.

Delayed Texas 45 SW project has reached showdown stage

Delayed Texas 45 SW project has reached showdown stage  The next six weeks will be crucial in the long-running fight over whether to build Texas 45 Southwest.  The Central Texas Regional Mobility Authority, deputized by the Texas Department of Transportation to build the 3.6-mile-long, four-lane tollway in Southwest Austin, will get construction bids Wednesday. The project is estimated to take three years and up to $80 million to build.

This might be good time for a home refinance

This might be good time for a home refinance  It’s a good time to check the rate on your home mortgage, because you might save money by refinancing.  The average interest rate on a 30-year fixed-rate mortgage was about 3.5 percent last week, which is down from 4.2 percent a year ago and 3.9 percent at the start of 2016. (The rates on 15-year fixed-rate mortgages and various forms of adjustable-rate loans are also down).  Using the rule of thumb that refinancing frequently makes sense when rates have fallen by a full percentage point, people who took out loans at the prevailing rate at various points in late 2013 and the first part of 2014 might see favorable economics for refinancing, as will those whose loan was first made anytime before mid-2010.

More first-time buyers skip starter home stage for bigger, better

More first-time buyers skip starter home stage for bigger, better   The concept of a “starter home” is quickly becoming a real estate relic, like track lighting and brass hardware. Time was, young families with average incomes who were shopping for a first house would choose a small one in an affordable neighborhood — maybe with just a hint of a yard and a carport, rather than a half-acre lot and a two-car garage.  Today, first-time homeowners are buying more square footage and putting down roots, in what may mark a fundamental change in family housing. But experts say there are still ways for families who can’t afford fancier properties to cope.

Robert Kauffman, Realtor -- Keller Williams Realty Austin, TX