Before I get into the monthly market statistics let’s talk about what many potential home sellers are asking; should they sell now or wait until next spring. As always, I wish I had a crystal ball and trying to time any market whether it’s the real estate market or the stock market is tricky. I also want to say you can always reach out to me to talk about your specific situation with no pressure. One of the nice things about our company is we have plenty of business so we don’t need to scare you into selling now if that’s not what’s best for you.
Here is something you should consider. To a large extent real estate comes down to supply and demand. When buyers have fewer homes to choose from prices tend to go up. When buyers have more homes to choose from prices tend to go down, or at least not appreciate as fast.
I expect what happened this spring to be an abomination. It was a once in a lifetime period where several factors came together to cause real estate prices to explode. If you are considering selling now or waiting until the spring something you should consider is how low the inventory of homes is today compared to what we normally see in the spring.
Take a look at this chart of the current inventory of homes. The number of homes on the market is going up but, we are still at only about 3 weeks. That means if no additional homes were listed for sale and homes continued to go under contract at the same rate it would take 3 weeks until all the homes were sold.
Now let’s look at the inventory levels from spring of 2019. 2019 started with almost 4 months of inventory and settled around 2 months by the end of the summer. That’s a significant difference between that and 3 weeks.
Something we may see next year is a larger influx of sellers once they have more certainty. As the inventory of homes increases it makes it easier for someone who has been holding off selling because they were worried they couldn’t find a home to jump into the market. Once those hesitant sellers have more certainty, we may see a larger than normal bump in the inventory of homes. In addition, the builders are starting to build again. For example, there is a 1,000-home neighborhood off Ronald Reagan and 29 that will have completed homes next spring. You might think that won’t impact your home sale, but here’s what I expect. I have several sellers who will be buying in that neighborhood and we will be putting their current homes on the market next spring. We might see a market where a small bump in resale inventory along with new home inventory to create a larger than normal supply of homes for sale.
Of course, we may see more buyers next spring also. It is possible prices will be higher in the spring but I don’t know if I would make my plans based on expecting prices to be 33% higher again next year. If you’re planning to hold off moving to a better place hoping for another jackpot next year that may not happen and you might make your calculations using a more normal appreciation figure.
I mentioned we are no pressure, but there are some people who should sell your home right now. The low inventory market has been especially forgiving to sellers with a home that has some type of defect. This year we have sold many homes that backed to commercial areas, train tracks, had water damage and many other factors that in a normal market would have been punishing to sellers. This year with so few homes to choose from buyers are paying high prices for those homes without the typical discount we would have expected. If you have a home with a defect buyer would use against you when they have 3-4 other homes to choose from you should consider selling now before the inventory goes up even more.
Now let’s take a look at the important statistics covering July, 2021. In July the total sales were down 15.4% although that’s a little misleading because about 10% of that is a reduction in new home sales. We know that isn’t due to a lack of demand and only due to builder’s not being able to build as many homes this year.
New listings were up 9.5% and that is a significant jump in listings. Pending home sales were down 36.5%. We will talk later about the market crashing but as the number of homes coming on the market increases and the number of homes going under contract decreases, we can expect to see the market appreciation moderate.
The months of inventory was down to .8 months but that is up from June when the months of inventory was a super low .5 months and down from July, 2019 when the inventory was over 2 months.
The average sales price increased to $589,237, 33.3% over last July. That was only a slight increase over the average sales price in June at $586,908 showing the market appreciation is slowing.
The median sold price was $475,000 which is $127,000 over July, 2020. However, this is only a $2,000 increase over June’s median price.
The median sold price per square foot increased to $240, a 42% increase over July, 2020 but only a $1 increase compared to June’s figure.
The median sold price to original list price was 105%, 5% over list price. Sellers should know in most cases the days of getting 20 offers for your home are probably behind us. Buyers who have been going through buyer fatigue shouldn’t give up because the market is still competitive, but not as competitive as it was earlier in the year. If you’re working with a great real estate agent you should be able to get a home under contract.
The median days on market continued to be low at only 5 days showing although some of the overall market statistics show a slowing in appreciation, buyers still have to move fast.
*Statistics courtesy of the Austin Board of Realtors and Independent Title.
You can call me at 512-791-7473 if you have questions about the real estate market or you want our help buying or selling in the area. I’ll continue to update you on what’s happening in the Austin real estate market. I appreciate your support. Make it a great day.
If you are planning to sell you would benefit from attending one of our upcoming Free Online Home Selling Seminars. See dates and sign up at KopaWorkshop.com.
Is The Market Crashing?
When someone tells me the market is going to crash, I like to ask what that means to them. If my home is worth $800,000 today and the market crashes what will my home be worth and at what date? Nobody has ever been able to give me an answer to those questions.
Let me save you the suspense of having to read to the end…No, the market is not crashing. However, we are seeing the market “calming” in some areas and price ranges. Whether you are buying or selling it’s important to know what that means for you.
Why is this happening? We do know why prices have risen so dramatically this year. It’s because there have been so few homes for sale, that’s no secret. When a home is called “Active” it means it is not under contract, you can actually buy that house. Two years ago, at this time of the year there were over 7,000 homes you could buy in the Austin MLS. By January of 2021 there were barely over 1,000 homes for sale. As I write this in early August there are 3,752 Active homes for sale. That is still a low number of homes for sale but significantly more than we had in January so there’s no doubt that will affect the perception buyers have in the market. That extra price buyers were willing to pay (that I described as the whipped cream on an ice cream sundae) was the result of buyers fearing they could never find another home to buy. Time will tell how buyers will react when they have a few extra choices.
As the number of Active listings in increasing the average number of days it takes for a home to sell is also increasing. By no means is this a disaster. At a presentation for the local builders group an economist compared our market as going from a “Super, Super, Super, Super, Super Seller’s Market” to a “Super, Super, Super, Super Seller’s Market.”
Some buyers are thinking the tide has turned and the market is dropping. We put 2 homes on the market this weekend and we have multiple offers on both so in my opinion the market is still excellent for sellers, but there are some changes you should be aware of. Many buyers are going to confuse the market going from 40-50% appreciation to perhaps a more normal appreciation market and not understand that still means prices are going up. There may be less competition for each home but price appreciation momentum slowing doesn’t mean the market is crashing.
Why are we seeing an increase in Active listings? In part we normally see an increase in listings during the summer, but I believe what’s happening is more than our typical seasonality. Over the past few weeks, the rate of growth has begun to slow and fewer buyers are seeking mortgages to purchase homes.
Rental rates have gone up dramatically, indicating many buyers have put their home search on pause or decided to rent first before buying when they relocated. Anecdotally we have noticed a decrease in the number of agents doing Facetime tours on our listings and a decrease in the number of buyers expecting they will need to pay 20% over asking price on every listing. Don’t interpret that to mean people aren’t still relocating here. At this time, we have 4 listings under contract to buyers who are relocating and our open houses last weekend were full of people moving here from all over the country, not just California.
In part we are also seeing some homes not selling because the sellers overestimated the market and were overconfident about buyers paying top dollar for anything. This is a quote from a local Realtor in one of the real estate Facebook groups describing what she is seeing in the market… ”Agents not prepping listings, just putting crap on the market at top dollar. My buyers aren’t going for that!”
"Agents not prepping listings, just putting crap on the market at top dollar. My buyers aren’t going for that!”
– Anonymous Austin Realtor
Fueled by stories of sellers getting 97 offers and buyers buying with no inspections it’s understandable why this can happen. Many homes can still be sold “As-Is” with no make-ready necessary but it’s important to think about the buyer profile for your home before putting your home on the market. It’s also important you have a listing agent who is actively working in the market and can give you advice based on what’s happening in the market on a daily basis, not what happened 4 months ago. The buyer pool is strong enough to keep the housing market strong but when there are more homes to choose from you can expect buyers to be a little pickier.
What's The Good News?
The #1 question I’m asked is “I want to sell my home but then what do I do, there aren’t any homes to buy?” The good news is now we may have the answer. All of our sellers who decided to “burn their boats” and put their home on the market this year have landed in a better place. I expect the same would happen for you. Give us a call if you have been holding off until there was more to buy.
In addition to the inventory of homes increasing the builders are also selling homes again! Because we help so many people downsize, I am especially excited about a new 1,000 home Active Adult community that is about to start selling for new home delivery in early 2022. This will be a popular product so you will want to get on the VIP buyer list right away.
Do We Expect More Foreclosures?
With the eviction moratorium and mortgage forbearances ending soon the knee jerk reaction is to say we will see a flood of foreclosures. I’m not making light of the fact that some people will definitely be in trouble and we will see a rise in foreclosures, but you tell me where the mass foreclosures are going to come from?
This is a chart of 20 random sales taken from Cedar Park in May. I like to look at the down payments buyers are making. If I see lower down payments that would put buyers in a greater chance of being foreclosed on if we see a small drop in the market. We would need to see foreclosures for the market to truly crash. The larger down payments here indicate you’d have to see a large drop in prices to see foreclosures with the homes that were purchased even a couple months ago, not to mention all the other homes whose equity has dramatically increased in the last year. In addition, the big difference between today and 2008 the lack of risky loans in the market today.
We know some people will be in a bad situation in the next few months. If that is you or one of your friends contact us before it’s too late for a no-pressure consultation.
Advice For Sellers And Buyers
We have just been hired by 2 sellers whose homes didn’t sell. Both told me a similar story that they thought the market was so good they could hire their friend who works part time and lives in Dripping Springs as their agent. Now that their home wasn’t selling, they realized that isn’t going to cut it in the current market. Small changes in the market can make a huge difference. When you are choosing a listing agent make sure you ask yourself if they have the skills to navigate your home sale. Will they know what to do if your home doesn’t sell the first weekend?
For buyers now is not the time to give up! This may be the best opportunity to buy a home with less competition but that doesn’t mean it still isn’t a competitive environment for the great homes. I expect over the next 10 years your risk isn’t paying $5k too much for a home. Your greatest risk is doing nothing and then be forced to buy a home later 30 miles from where you really want to live.
Where Are Our Clients Moving To?
With so many people moving here it’s easy to forget where people are moving when they sell. Here is where some of our seller clients have moved to recently. Montana, Houston, Seattle x 2, San Diego x 2, Belton, Travisso, Nashville and Leander. Two are renting short term so they have flexibility while they figure out what to do with the rest of their lives. That’s a good position to be in right now. My favorite location are clients who are moving to Cancun as soon as they retire, I wish I could go with them!
Of course, I could be wrong about all of this. As always, be careful where you are getting your information. Make sure you are consulting with a qualified advisor. We don’t want you to make a bad decision because you had bad information. If there are any real estate related questions, we can answer for you contact us today at 512-791-7473.
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Posted by Eric Peterson on