Local Prominent Luxury Realtor Reveals The Reasons For The

WATCH THE INTERVIEW: https://www.cnbc.com/video/2021/05/07/morgan-stanleys-tirupattur-on-why-the-housing-boom-isnt-a-bubble.html

READ THE INTERVIEW - JEANNETTE SPINELLI: In this ‘market of the moment’ I have personally been the seller and I have personally been the buyer and I can tell you, it’s better to be the seller in Austin, Texas.  This past year has been a brutal buying market.  Aspiring homebuyers were competing with 20 offers or more on a single property.  Homes often sell 15-30% over the asking price and offers contingent on third party financing being pushed out by the exuberant amount of all cash offers. 

We are now starting to see that white-hot climate dim a bit. However, the market is still weighted in favor of the sellers due to the low inventory and steady desire to live in Austin, Texas.  

Austin’s median home price of $575,000 increased by 42% meanwhile the average days on market shed more than a month off its year-ago position, plummeting to just 13 days on average, confirming that demand for housing remains robust.     

Opportunities continue to surface as the area's five-county metropolitan statistical area, or MSA, where the median home price increased 35% to $482,364—an all-time record, provides homebuyers with options. Some counties such as Caldwell County offer homes at the $300K median price, affordable by many standards.  The Austin Metro area includes cities like Round Rock, recently reported from Fastest Growing Cities in America as the 8th fastest growing city in Texas in 2020.  

Leander, another bedroom community in Austin, was listed by the census bureau as the fastest growing large city (population of 50K or more) in the nation. Leander posted a 12% growth rate as compared to the national average growth rate of .5%.

SLOW DOWN OF SALES

In August  the City of Austin showed just over a  2-percentage point decline in the number of sales since this time last year -- marking 6 months of pricing stabilization. The 5-County Area posted 4months of pricing stabilization.

The lack of inventory is one of three drivers slowing down sales. The supply issue in Austin was most critical when the months of inventory depleted to just 0.4 months. Minimal inventory affected not only the resale market but the space of new construction as well; which primarily has been absorbed. Further, the number of building permits issued in Austin is down to just 2,283 permits last year. Resulting most spec home builders with a ratio of 30:1, buyers to available homes.  

The second factor ensuing a slowdown of sales could be attributed to the double-digit home-price appreciation. For many buyers affordability has completely vanished. This is a leading deterrent to Austin’s business growth that prompted one local employer, in hopes of incentivizing prospective talent, to consider purchasing land in a suburban pocket with the intent of building his own affordable housing subdivision. 

Lastly, is simple buyer's fatigue.  Some have decided to take a pause hoping that inventory rises and demand falls.  Falling demand is not a likely scenario that Austin, Texas will experience.   With rates at such lows, waiting may be a mistake.  

The Luxury Market 

As we weave through this segment of the market it’s important to note that in most areas the standard definition of a luxury home is 3 times the area’s average price point while uber-luxury is 4 times the average.    

The share of luxury homes sold in Austin more than doubled since July of last year at 42.1% with a year over year surge in the median price.  

Last month’s Austin luxury market statistics read the median price at $1.4M.

The number of closed sales is up 53% at the $1M price point and up 55% at the $2M price point. It isn’t until we reach the $3M price point that we find a neutralization of sales. 

In my experience selling through challenging times like 9/11 and the crash in 2008, the home values in the upper-end market did not take a hit, rather the inventory altered. Supply increased so by virtue we did not experience the escalation of price, nor the over-ask offers, or the offers structured with terms heavily favored to the seller. This market may indeed be different in this market of the moment. We will see. 

The only notable softening we are presently seeing is in the ultra, high net worth price points--the top 3% which in Austin, Texas is $3M break point.  While we are experiencing a lengthening of days on market in this ultra-luxury space, the average remains significantly less than 18 months ago. In 2019 listings could take a year to sell. Agents would often prefer to be the 2nd or 3rd listing agent because it took that long to move our $2.5M plus properties.  But now…it is a fast clip for those sales.  

OUR FORECAST:

When I began selling real estate 23 years ago, when I said I lived in Austin people would think I was saying “Boston”. Many had not even heard of Austin, didn’t know what or where Austin was, and-- they thought we all rode horses…really.  However, for the last 20 years we have been courting various economic engines – from the film industry to Silicon Valley to energy. The state’s expanding economy and favorable business policies attracting diverse industries support a positive outlook but most importantly, for our futures, it supports a sustainable outlook for Austin.

• The Austin economy is expected to expand at a faster pace than the national rate.  

• In August alone,  our chamber announced 17 companies expanding or relocating accounting for thousands of new jobs in our city.  

• We have a projected annual growth rate of 2.39%.  

• Austin regained 96% of spring 2020’s pandemic-related job losses and that upward swing of hiring is continuing. 

• Most of our relocating buyers see Austin prices as a bargain.  And, they are coming from cut throat markets and are willing to go to battle.  

As we analyze probable outcomes for the future, we must consider that for the data to be meaningful, real estate analyses must be considered at a micro level.    Neighborhood to neighborhood and price band to price band, each tells a different story and results in differing forecasts. This has always been the case.  What is new is that while the geographic scale is at a micro level, the snapshot is too-- equally as refined as the markets are fast paced.  Data we could previously discern quarter to quarter now must be done monthly. Buyer and seller strategies are often pivoting correspondingly as with the market trends.  

For both sellers and buyers, these few months of stabilization mean we can trust the market analysis we are seeing.  No longer are we in a reactive mode, extrapolating for what will happen in a week or two.  We can now examine the very recent history, know we can rely on those findings not changing, and price or make offers with confidence.  While indicators do not predict pricing will fall, it does seem like the wings of soaring prices have been clipped and the purchase terms surrounding the offer price are becoming more balanced. 

Market stabilization only means more opportunity for all.  Buyers are feeling they have options and are not willing to be a victim to a market they cannot control.  Sellers who feel they missed the peak…don’t worry, you will continue to reap rewards of your investment with pricing demonstrating a healthy appreciation year over year and with demand still high, you will find the right buyer, at the right price, and at the right time.  

For the past 15 years, the inclusion of Austin, TX in the top 10 lists of best places to live or to work is the norm. And recently the high-profile corporate relocations of Tesla and expansions of Oracle gets us on the front page but all that notwithstanding our real benefit-- it’s a phenomenal place to do business. We are tax friendly and it being Austin, it is a mega talent attractor making hiring easy. The city is a phenomenal place to live for families, singles, and retirees.  The healthy lifestyle, great values, stellar public-school systems, and the natural beauty will continue to be attractors but the best of Austin--the people.  We can all make a living in a lot of different places but we can’t be passive about making a life.   And making a life is accomplished in a beautiful way here in Austin, Texas.