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Hope this finds each of you well! It's been a market of varying opinions so I'm jumping right in with mine. Contrary to what a lot of people are saying, I believe our local real estate market has seen the worst. Our market topped out at 8.6 mths supply last year (6 mths is considered a balanced market, with anything above being an oversupplied market) and has been at or below 7.6 mths since then. Recent comparisons showing large year-to-year decreases in pendings/solds and higher inventory are skewed due to the tax credit expiring. In actuality, the number of sold homes year-to-date is 2% higher than last year AND our overall supply is lower than at the same time last year. Certainly there are national x factors that could still affect our market negatively, but barring those I feel pretty good that the Austin market is not materially worsening.
Austin Business Journal - Sales report for August
For most of this year we've been "bumping along this bottom" of 7-8 mths supply with spikes in activity followed by big lulls - a unique year in that sense. This trend has certainly been prevalent in the 2nd and 3rd quarter. For example, on the heels of the tax credit, our market looked like it was stabilizing with a slight oversupply in May at 6.5 mths. While I expected a quiet June, very little happened even through July and our market experienced the lowest sold volume for summer since 2003 as supply crept up to 7.8 mths. Clearly the summer buyers bought "ahead of schedule" due to the tax credit, creating a vacuum of buyers in the summer market. Since late July however, the market has noticed a slight uptick in activity (particularly the higher end) and we're currently at 7.4 mths supply. I expect our supply to inch back up through fall, but unlikely to reach last year's highwater mark of 8.6 mths supply level mainly due to a conservative yet stabilizing employment climate in Austin.
Austin Letter - Housing Report
For 2010, we're on pace to add 9000 net jobs - which is nothing spectacular, but a definite improvement from the 3000 or so jobs last year and in large part why I feel we've seen the worst in our real estate market. Employers locally are adding jobs at a conservative pace but our local employment base is at almost 2007 levels with unemployment slightly improving to 7.2% (it's 9.5% nationally). Yes, the quality of jobs added is not as high as before but we're slowly improving on overall numbers, and leading sectors like tech are holding steady for the last 6 mths. As an additional effect of this improving job market, sales tax receipts per the comptroller are up 8% compared to last year, which in turn spurns more spending. Looking ahead, I feel the job growth will improve to the 12000 jobs range in 2011 and press overall housing supply in Austin down into the 6 mth range, at which point we're in the beginning stage of our next market up-cycle.
Central TX Economy in Perspective
Monster.com, Milkens, Kiplingers - Best Cities For Jobs
Austin Letter - Employment Report
Additional and notable trends. First, the market above $700k has finally bottomed. While it's still certainly oversupplied, I've seen big supply decreases in the last 60-90 days. For example, the Westlake area last year had a 30+ mth supply over $1M, today that stands at 17 mths. Similarly, the $500k-$700k range in several central areas has seen double-digit decreases in supply (though it's still oversupplied) in the last 4 mths. Improvement in central sectors is a leading indicator of our overall market trending in the right direction, and historically the turnaround in Austin starts in the urban core markets. Further out sectors like Round Rock and Dripping Springs have also seen material improvement on the supply numbers. Ditto for the downtown condo market which has continued to see higher-than-expected demand as pre-solds have inched up to 50%+. Finally, new construction by big builders market-wide remains at/below 6 mths supply...the "deals" are close to being gone.
Austin Rankings - Housing, Employment and Lifestyle |
