Investors and Austin Real Estate
As the Austin real estate market has strengthened we have been inundated with investors. A good number of them have been buying new homes in master planned communities or other developing neighborhoods. This has had many residents in these areas pretty angry. They don’t like to see “for lease” signs all over the place.
Most builders, at least the ones I have spoken with, will no longer sell to anyone who will not use the home as the primary residence. Some will sell a very limited number of homes to investors when they open a new part of a development. However, the builder’s reps I have talked with already have a list of hungry agents who represent agents lined up. So any investor without an agent on one of these prized lists is probably out of luck.
Why have the investors become such a big part of the Austin market? Take a look at where real estate prices have run up with huge rates of appreciation over the last few years. Then look at what is happening in some of those markets right now. Then look at Austin real estate market stats at the end of this article.
From Jay Thompson about the Phoenix real estate market:
“A year ago, the Phoenix market was just insane. Last years AVERAGE appreciation was 47 – 56% (depending on whose numbers you use). Some homes more than doubled in value over the last 12 months.
Houses were selling in hours, literally, with multiple offers significantly over list price.
Builders were holding lotteries for lots. No investors could buy new homes, and many builders cut buyer agent co-brokes to 0%. Builders would pre-announce a new subdivision and hundreds of people would show up once a month to see if their name was one of a dozen drawn from a hat. If it was, they had to put some ungodly amount of non-refundable earnest money down and then wait 12 months for their home to be completed.
People were flipping homes before they closed escrow. For profit.
Last March, there were just over 4,000 homes in the MLS.
Move to today….
There are 41,000 homes in the MLS. Builders are offering $75,000 incentives to buyers and some are paying 10% buyer agent co-brokes (on spec homes). DOM is now measured in weeks instead of hours. Countless homes advertise price reductions.
The median home value is flat to slightly depressed. And that’s freaking people out. But we had MONTHS with 10% appreciation. No market can possibly sustain that kind of appreciation rate.
Many people say we are in a “buyers market”. I contend we are in a neutral market. The problem is people compare today’s market to the ridiculous seller’s market we had. Yes, it’s been a huge shift. But it still has a way to go until we’re in a strong buyer’s market, IMHO.”
From Jim Sparrow about Calgary, Canada real estate:
“Calgary’s market is hot …. we’re the new Saudi Arabia of North America, and people are arriving in droves.
I’ll only quote you SF House figures … condo numbers are very similar:
2006 (June): Up 51% from same period in 2005
2005 (June): Up 9.6% from same period in 2004
2004 (June): Up 6.2% from same period in 2003”
I know that Calgary isn’t a U.S. market, but it is North American and this is interesting news. I had a client from Calgary approach me about Lake Travis waterfront property two summers ago, so the stats from Jim seem applicable to me.
From Ruth Arnold in about the Broward County real estate market:
“If you do the math of the ratio of listings to solds, we here in the Broward County area of Southeast Florida are also in a Neutral market (media thinks it is a buyer’s market). Sellers so far are getting the same price they would have at about April or May of last year (pre hurricane season). But, the sellers are so used to inflation in the 25-30 per cent per year rate, they want to list their homes way too high. Can not put a price on it and wait til inflation gets there, because it will not arrive. If you estimate (in normal places in America), people move every 5-8 years or so, then in any one year about 15-20 per cent of the available homes should be on the market. In a “normal” market, it takes 4-6 months to sell a house, so about 7-10 per cent should be on the market at any one time. We are there now and everyone thinks there are too many houses on the market. No, this in normal. It has been crazy and now it is normal. When we get to the point that the number of homes on the market exceeds the ten per cent (about) rate, then we will start to move into a true buyer’s market. The media is doing all it can to make sure we get there.”
From Stan Mackey about real estate in areas east of Seattle:
“Here’s the data (1st 6 months last year to same period this year) for Eastside (which is NOT Seattle, but a few miles away), everything east of Lake WA, included Bellevue and 5 or 6 others cities:
Average sale price for 4/2.5 single family (2005) $572k to (2006) $697k
Median 2005 $460k to 2006 $572k
DOM 56 to 55
Total units sold for 1st half each year (2005) 4,968 (2006) 3,771
It looks like we still have demand, lower supply with 20% appreciation, give or take. You maths guys can provide the exact % #’s.”
Appreciation rates in the Austin MLS area from the Austin Board of REALTORS®:
2006 through the end of May was +12%
2005 was +6%
2004 was -1%
2003 was 0%
2002 was -1%
Does this help explain why investors have been coming here? The other thing is our median price, which was at $174,000 at the end of May, 2006. The average price was higher at $236,406. The median price is still well below the national average. The average price is better than areas like Southern California, Seattle and Phoenix.
So looking at what were hot markets until recently, it looks like Phoenix and South Golf Coast Florida have cooled. Calgary is on fire and areas east of Seattle are doing well. Southern California, from what I understand, has been cooling. So a big reason investors have been flocking to Austin is because other markets they had been investing have peaked. Another is the steady growth in the Austin area. We’re adding jobs, people are buying second homes and people are retiring here. Real more about <a href=http://www.austinrealestateguy.com/Austin_Market_Stats/page_>Austin real estate stats</a>.
Keep watching the Austin real estate market. Investors who can’t get into new homes in subdivisions now are pretty bummed. I think investors who got in a year ago will be very pleased.