How Austin’s Real Estate Market Fits in to the National Economic Equation.

The Texas A&M Real Estate Center is a great resource for studying trends and statistics, and I will try to put their January 2008 Texas Economic Review in perspective for you and how it relates to Austin’s Real Estate Market. The Texas economy is showing the effects of the national downturn that the media keeps shoving in our faces, but not nearly as badly as you’d expect. This is a perfect example of how popular perceptions can differ from reality. Figure 1 below is from the January 2008 Texas Economic Review by Ali Anari and Mark G. Dotzour with the RECON Center. This chart shows how Texas is keeping strong against the country as a whole. Although growth rates are down, we do still have positive growth that is strong in comparison to the national average. It is also interesting that while the national average continued to decline in September through December of 2007, Texas saw an increase of growth. Proof that Texas still has a strong economy despite busts in other markets. In addition, “the state’s seasonally adjusted unemployment rate fell from 4.7 percent in December 2006 to 4.5 percent in December 2007″ according to Anari and Dotzour.

Now, to look more locally. Statewide, we are seeing an average growth rate of 2.2% according to RECON. Austin is keeping strong at #3 for the state of Texas, which as I mentioned above is doing well relative to the national average with an growth rate in 2007 of 3.1%. Growth is great for all business, but in particular, it’s great for the Real Estate industry here in Austin. In addition to seeing an urbanization in Austin, we are also seeing growth in general. So although both the sub prime and jumbo mortgage markets are suffering right now, Austinites still have options.

I could show you chart after chart of the strength of the growth in Austin. Instead, I will refer you to the Austin Real Estate & Economy Statistics page of my website for more and show you a chart of general economic growth:

I’m not saying that home sales are still booming. What I will tell you is that home sales are definitely down from 2005 & 2006. However, it is important to note that we saw exceptional growth in 2005 and 2006. Those of us who have bee in the industry for a long time generally agree that late 2007 was a leveling-off period of this boom — which is good! If our market had boomed like the markets on the California and Florida coasts, our market could be busting like theirs rather than leveling off. Basically, the market spent the latter half of 2007 catching up with the prices created when Austin boomed in 2005 and especially 2006. I expect 2008 to continue this trend of leveling off, but I am also seeing an increase in buyers brave enough to turn off CNN and get back with the reality with a lesson they learned in High School Economics: Buy low, Sell high. Those who investors who sold in 2006 are standing proud and are watching for new investments as a leveling market couples with an election year to create a perfect opportunity to buy low.

However, for those of you moving to a new part of town or even to a larger home, you are buying and selling in the same market. So what does this all mean to you? It means that you may not get the same price for your home you would have in 2006. Buyers are more realistic now and sellers are catching on. But you are also buying. That means that you will have the same advantages that potential buyers looking at your home have when you are looking for your new home!

So let’s say you’re moving up from a $175,000 house to a $250,000 house in today’s market. Homes are sitting on the market longer, which means that by the time you get an offer, buyers know you’ve been waiting for it and you’re already frustrated. That offer for $150,000 seems down-right offensive. But consider this, taking that $150,000 offer means you are lowering your price by less than 15%. Put on your buyer’s shoes for a moment sellers because making an offer on that $250,000 move up minus 15% means you can offer $38,000 less.

This is a very basic example and doesn’t take everything into consideration, but I hope you catch my point. For the general public, this period in our market can be good for you! You need to be ready to give your Realtor a while to sell your home, but trust me, we’re hungry too and working hard and creatively to end up with the results you need.

I also think that these challenging times will be good for our industry. Those who earned their real estate license to make a quick buck will find in this climate that they can’t. They will likely move on to other ventures leaving only the committed and best Realtors for your choosing. That in turn means our competition is stiffer and we’ll have to get better and more creative to stay in business — which is something this industry needs anyway. We can no longer get by on expertise alone (and I’ll admit, I’ve met many agents who lack even that), and technology along with amazing service that saves you time, money, and hassle is what top agents will need to have.

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If you have any questions or would like any statistics not found in this post or my Austin statistics page, email or call (512) 771-1776.
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Aria Schoenfelt
BridgeOne Properties
Austin, Texas