Market Dashboard
Sales Price Distribution 1998-2009
- Explanation/Interpretation Below -
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The discussion below focuses on the Dashboard charts linked to this page. For additional context regarding the most recent market data, see Austin Home Sales and Listing Inventory at BillMorrisRealtor.com.
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In an effort to put the market ups and downs of the past couple of years in perspective, I maintain this Market Dashboard, updated on a monthly basis. Generally, final data for each calendar month is available by the 20th to 25th of the following month. This dashboard is always directly accessible at www.AustinMarketDashboard.com.
This is an approach to explaining market conditions that I have found very helpful with many clients. I keep two versions of this "dashboard" updated on a monthly basis -- a long-term view (going back to January 1990) and a five-year view. Both are available via the links above.
Let's start with the Long-Term Market Dashboard because it provides the most complete historical context. I originally assembled this chart because I had so many clients and prospects trying to "time the market" and asking, "When will we see the bottom?" The truth is that the only way to recognize a market bottom is when you can look back at it 6 or 12 months in the past. However, history can provide some hints. (Note: Click images below to enlarge.)
Begin with the "Odds Of Selling" graph to the right (and in the middle of the linked PDF). That chart shows the percentage of active listings that sold in each of 247 months shown. The average over the entire period was 22%. During that time the Austin market saw four market cycles before the current "down cycle." The most concise indicator in each case was when the "odds of selling" dipped to about 10% of active listings. We reached that level in January 2009 and despite other signs of market strength, again in January 2010. You can see that average prices fell dramatically in response to that weakened demand.
Note that until this year January-February has consistently shown the lowest "odds of selling" in every market bottom over the past twenty years. That changed in 2010 as homebuyer tax credits distorted seasonal demand, leaving a "hole" in July, when the odds of selling dipped again, to 12% of active listings. We are now entering a time of year when demand would typically decline somewhat anyway, so analyzing sales patterns over the next several months will be difficult.
Earlier this year, the Fed ended a program of making very significant investments in mortgage backed securities. All observers projected an increase in mortgage interest rates in response to that change in "artificial" demand. Instead, rates have generally declined, which most analysts attribute to investors concerned about Euro-denominated investments instead putting their money into U.S. instruments, and general concern about the status of the U.S. and world economies. As most economic indicators show continued weakness, the Fed plans to intervene again, announcing on August 27 that a new program of buying long-term bonds and mortgage-backed securities may begin soon.
In the "Market Activity" chart, you can see how listing inventory was pulled down during the peak periods and how it grew during times of market weakness:
Referring to the "Average Sale Prices" chart, during each of the previous peak markets, prices moved above the long-term trendline. During each of the market valleys, prices dipped below the trendline, and that is clearly visible now as well. Nonetheless, there is no mistaking the long-term direction of Austin-area real estate values:
Now, refer to the charts below or to the linked PDF of the Five-Year Market Dashboard. Interpretation of the graphs is the same as above, but recent activity and market seasonality are easier to see. Looking at post-World War II history, U.S. real estate has increased in value over almost any 5 year period. Obviously, that has not been true in some markets over the last few years (notably, California, Arizona, Nevada, and Florida), but even with the significant disruptions in 2008 and 2009, you can see that a home purchased in the Austin area in 2005 would, on average, still have a higher value today than it did then. (Referring back to the long-term dashboard, check 5-year changes in average prices over the past 20-plus years.)
Last year, average prices came down as they do every year from their seasonal May-June peak, but a really interesting feature in 2009 was that even as sales slowed seasonally, and the "odds of selling" dipped at the end of the year, median and average sale prices spiked dramatically in December. A small bump at the end of the year is not unheard of, but a jump of this magnitude only happened once before in the past twenty years -- in 2001. Obviously, at the end of that year we were coming off of an extremely significant "distortion" caused by the attacks of September 11. 2009 market activity was undoubtedly distorted by home buying tax incentives in late 2009, but I have not been able to make the connection between that and the huge December price increase. Is is a coincidence that July 2010 -- the first month after expiration of the second tax credit program -- exhibited the same phenomenon? July's average sale price was up almost 3.5% compared to June, and increased more than 16% from July 2009!
The price jump last December was completed retracted in January 2010. Then, as demand rebounded somewhat in February, so did sale prices. In January through April 2010, as the extended tax credit program "matured," average sale prices remained weak. Average and median prices moved up in May, and then skyrocketed in June. Then July prices jumped again. Time will tell how market prices fare in August and September.
With all of these market distortions, there were 8.6% more homes sold in the first seven months of 2010 than in the same period last year. I continue to believe that more homes -- new and resale -- will be sold in 2010 than in 2009, and that we will see modest gains in property values during this year.
Finally, there has been another interesting development in the Austin metro real estate market in 2010: a migration toward upper-end homes. One year ago homes priced $500,000 and above represented about 7% of sales. Now those homes account for 12% of sales here! (See Impressive sales performance for premium properties! and ongoing commentary about Austin/Central Texas market conditions at BillMorrisRealtor.com.)
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To provide further historical perspective, the Sales Price Distribution 1998-2009 may be helpful. The top of that table shows what percentage of home sales during those years occurred in each "price band" shown. I have highlighted the bands which represented 10% or more of each year's sales. The migration toward higher sale prices in our area is clearly visible. Then I added the bottom half of that table:
The real estate industry and the business press routinely speak about the "median price," which is a useful statistical measure, but not one that many consumers readily relate to. The bottom half of the price distribution chart answers the question, "If a homebuyer wanted to look at half of all the available homes in the market, how high would their price range have to be?" This table accumulates the percentages from the top half of the chart. You can see that in just the past 10 years (2000 to 2009), the price range required to include at least 1/2 of all listings went from the high-$150,000s to the high-$190,000s, and it didn't change much at all during the "downturn" of the past couple of years.
My consistent advice to my clients has always been: (1) buy within your means, (2) plan to stay at least 3 to 5 years, and (3) manage your life so that you can pick your time to sell. Since precise market timing is virtually impossible, and prices over the long run are going up anyway, don't worry about exactly where we are in the market cycle. If you want to buy a house and you find the right one, then the time is right! My advice about "picking your time to sell" does not contradict that. It simply indicates that I can provide you a market analysis at any point in time that will tell you what your house is worth. If that value is attractive to you, then sell! If it's not, then wait.
Note that in 1990-1991, 2003-2004, and now 2009-2010, "W-shaped" market bottoms were followed by strong 2 to 3 year growth cycles. Markets can be complicated things, and with all the wild cards in our economy at this time it's impossible to predict with certainty what the next twelve months will look like. Nonetheless, Central Texas has remained a fairly "sane" real estate market, and over almost any 5-year period property owners have gained equity. My services include detailed analysis of specific market areas and specific properties -- for sellers and for buyers. If you're thinking about a move, let me know and I'll give you the best information available so you can make informed decisions.
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Do you have any questions about this information?
Would you like specific information about your home or your neighborhood?
Just call 512-785-3345 or email bmorris@remax.net,
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and I'll be happy to help.
