Despite the Austin Statesman’s best attempt to put a positive spin on the local market, the Central Texas housing market is in trouble:
Sales of Central Texas homes fell 10 percent in January, the seventh month in a row that year-over-year sales dropped. But prices rose, and Austin’s market is in better shape than the nation overall.
The 1,321 sales last month were a two-year low, based on data from the Austin Board of Realtors. . The median price rose 7 percent to $187,000, contrary to a national trend of falling prices.
Nationally, homes sales fell 22.4 percent in January, and the median price was down 5 percent, according to the National Association of Realtors. And the market is glutted, with 3.7 million homes for sale. That’s up almost 20 percent in the past year. At current rates, it would take more than 10 months to sell everything.
The number of Central Texas homes on the market increased by 24 percent to 8,727 active listings, a 41/2 month supply.
With so much for sale and fewer buyers, it’s taking almost three months to sell a house.
Prices rising with sales falling is a typical pattern we have seen in other declining markets. As prices become less affordable, first time buyers drop out, raising the median when "same house" appreciation has disappeared. For January in Central Texas:
The sales drop is sharpest for homes priced lower than $150,000. But sales rose for homes between $170,000 and $179,000 and between $250,000 and $500,000.
Local agents are playing down the excess inventory:
With mortgage rates below 6 percent, the overall local market is good for buyers, said David Davidson, a broker at RE/Max Heart of Texas. "They have a good selection, and they can negotiate a little bit."
With builders cutting back on home starts, he said, buyers who might have bought a new home may turn to the resale market, helping "absorb that extra inventory rather quickly."
The reality is that starts are down because the homebuilders have a lot of inventory on the market already– homebuilders have been cutting prices and offering incentives in an attempt to move the backlog.
Central Texas, like other regions, is beginning to experience a rise in foreclosures. As in other markets, this is the result of slowing sales and the absence of real appreciation. Austin may be faring better than most of the nation, but it is not faring well.
I have been considering Texas for a couple of years now. I believe they are positioned better then most other markets because of the troubles they had in the late 80’s early 90’s. I am not saying things are great there, just seems like an affordable area with a moderate climate(wifes health is reason). I will continue to watch the progression in Texas very carefully.
Entropy-
Certainly current prices in most Texas markets are not as out of line with fundamentals as other markets. It would be unlikely that they will see the kind of drops we have seen in “bubble” markets.
That said, there is still a big difference between supply and demand, and tighter lending standards are being experienced nationwide.
Central Texas home prices are poised for a decline.
Central Texas? hmmmm….. isn’t it ‘different there?’
Just askin’
Yossarian-
It’s been interesting moving from Phoenix to a “good” market. Agents tell me that yes it’s slow, but I’ll be sorry that I didn’t buy when the market takes off this spring.
Homebuilders are discounting, there are specs everywhere, resales are slow. The trend has been downward.
It doesn’t feel so much “different” as it feels “behind”.
Twist
I know that foreclosures aren’t going to go back to normal this season and I don’t doubt that many sellers are waiting for a spring surge to list. It’s going to be an interesting year. “interesting times”. Isn’t that suppose to be a curse?
Igor says woe
They had a newscast this past Monday on my local San Antonio news channel indicating foreclosures are historically high here.
Link to story
I also noticed that fixed rates have trickled up about 1% since mid January. So, if the price is already high and the cost of financing goes from 5% to 6%, thereby increasing the cost to lend by 20%, what will happen to housing prices……………….
I think we all know where they are headed.
Texas has a big advantage over other states which is helping to attract buyers. One can buy a much bigger home with a larger amount of property for the same price or less, than in many other states. Many people will always be drawn to a bargain.
I’d say the biggest reason Texas is not as out of line as the rest of the country is r/e property taxes, which for me are 1/3 of my mortgage payment. Your mortgage payment (with taxes included) will buy a lot less house in Texas. So that $180K house looks a lot less affordable when you look at the taxes. And you can’t negatively amortize the taxes like you can with interest in some places.
I would give very little credit to Texas for wisdom gained from previous housing busts. It’s all about a regressive tax system that quite accidentally keeps booms in check (most Texans would have been thrilled with an out of control boom).
tc-
I have to agree, the taxes make it much harder to squeeze buyers with prices. The other issue is that Texas wasn’t so much exempt as late to the party. Investors were migratory, and Texas was late to the party.