Much More on Austin's March Homes Market

Here are 5 charts showing the history of the most important aspects of single family home sales in Austin through March'08: number of sales each month, average prices each month, average number of days to sell homes, number of listings and price range vs. estimated number of days to sell homes (just for March'08). As you look at the 4 historical charts, note the seasonality of numbers of sales (twice as many homes sell in the summer as in January), slightly higher prices in summer, less time to sell in the summer, more listings in summer. Note also the seasonal patterns are holding so far in 2008.

Austin March Housing Sales

Average and median prices of single family home sales in Austin were little changed in March 2008 from March 2007, which is a far better situation from most of the rest of the country. More on that in a later blog. Numbers of home sales in Austin during March were not looking good compared to a year ago. The first chart shows numbers of sales of single family in 9 price categories. The total number of sales was 1840 (according to the sum

of the categories--the published number was 1832). The second chart shows the % change in each of the price categories and the total, which was down 21%. None of the 9 price categories showed an increase in sales, though $200,000 to $249,999 came close. The worst category was the over $1 million, which was down 68%, meaning that there were only 1/3 as many as in March a year earlier. Active listings were up 23.9% to 9,638, while average days on the market were up14.1% to 73.

US vs. Worldwide Housing Prices

The chart at right comes from The Economist, pg. 81 of the April 5th issue. It shows how overpriced homes are in different countries. The overpricing is said  to be "not accounted for by fundamental drivers of house prices". I take that to mean the overpricing excludes ordinary inflation and probably includes increases due to speculation, perhaps enhanced by differences in currency exchange rates.

The chart below shows the Case-Schiller Home Price Indexes for various cities in the US and the Composite for the whole country. Miami and LA have symmetrical bell curves, now going down as fast as they went up. I have to say in sympathy that I'll bet the emotions are a lot stronger going down that they were on the way up. The despair as the market tanks wasn't nearly matched by the exhilaration of seeing prices go up back in 2004 & 2005. Been there, done that. Don't want to do it again.

Austin vs. National Existing Home Sales Prices

Austin January 2008 Market Stats - A Weaker Market

The Austin market for single family homes looks weaker than it has been. January always looks weaker than the rest of the year, but this is more than the usual weakness. Compared to the market in the rest of the country, however, our market is a pillar of strength.

Here are the stats & charts below:
Sales for the month: down to lowest since Feb'04.
Prices: average and median both down around 1% for the month, but up from Jan'07.
Days on the market: seriously and grievously up. It's taking a lot longer to sell the average home.
No. of listings: there are a lot of homes on the market, but not as many as a couple of months ago.
Pending sales: a bounce up in January, though still only 17% of active listings.
Summary: you can't avoid the evidence that there's a slower market now, but it's no catastrophe.

Market strong above $180K, weak below $180K

The average and median prices of homes sold in Austin rose in 2007, but numbers of sales declined. Here's the catch: sales of homes below $180,000 were weaker and homes above $180,000 were generally stronger from December 2006 to December 2007. Fewer sales in lower price categories pushed up the median and average, so it's impossible to say whether prices of individual homes rose, fell or stayed the same.

Housing Price Index in various US Cities

We've been saying that Austin was in good shape to withstand a downturn in home prices because our prices were not so inflated as those in other cities.

As evidence of this, here's a chart showing the S&P/Case-Shiller Home Price Indices for a number of US cities. The index value is determined by resales of the same homes over the time period. The COMPOSITE is a nationwide index. All started with an index value of 100 in January 2000. For most cities, data goes back to 1987, so there was substantial data available before January 2000. These numbers go through September 2007, as they are released 2 months late.

Miami and LA led the pack up and they are leading it down, as well. There is no index available for Austin, though our guess puts it in the range of Denver or Atlanta. Over the January 2000 to September 2007 period, average prices are up 42% and median prices up 33% . Using this method, not the same as the index, we stand at 142 or 133. We're guessing a little stronger, maybe 150-160 for Austin.

After home prices in Miami and LA nearly tripled in 7 years, wouldn't you think there might be an "adjustment" at some point?

But hindsight is always 20-20. The Chicago Mercantile Exchange has a futures contract for many of the cities and for the Composite, so you have the opportunity to trade and go short on housing prices in the future if you have a strong stomach and are willing to take that risk.

Austin Jobs vs. Unemployment Rate - A Healthy Situation

First, if you didn't understand the Fed's diagram in my last blog, that outlined the sub-prime mortgage crisis, you have lots of company. The professionals who were buying these things for banks and other big institutions didn't understand the situation, either. That lack of understanding is why they have lost hundreds of billions of dollars and why we're in this mess.

Austin is very lucky. We have a strong job market, so far continuing to grow with low inflation. Imagine if we had a high unemployment rate and were losing jobs on top of having this mortgage problem. Job growth will continue to be the second most important factor in the real estate market after the morgage crisis. These figures include September 2007.

Understanding the Sub-Prime and Banking Crisis

Just in case you don't grasp the current sub-prime mortgage and financial market problems, here's a diagram from the Fed that illustrates the flow of money in the system that has been affected. If you understand conduits, collateralized debt obligations and this diagram, please let me know. You can explain this diagram to the rest of us.

If you don't understand it, you're normal.

More on Austin's Sept Stats & Where We're Headed

Here are some more thoughts and info on Austin's September housing stats.

The number of pending sales from one month is typically a good clue to the next month's closed sales. In the chart below, I've moved the pending numbers a month ahead, so the last entries show September's closed sales with September's pendings moved to October. Note that the previous month had considerably fewer closed sales than were pending from the month before. That's because many of the sales fell through, presumably because of unexpected financing problems.

If the same thing happened in October, with many sales not closing because of financing problems, we could see the fewest monthly closings in a couple of years. If October's sales number turns out to be only slightly lower than September's, we'll be seeing a healthier market.

One thing for sure, Austin has had a healthy market overall, so the problems here are almost entirely due to financing conditions. Many other places have to fight the battle of weak, overpriced markets, as well.

Austin's September stats--where are we headed?

AUSTIN'S SEPTEMBER 2007 HOUSING STATISTICS: The facts: Sales are down sharply, the number of listings is up and both the average and median sales prices are down. Question: How much of these changes are due to normal seasonal variation? Answer: A lot, but not all, as you'll see when you look below...

The number of sales is down sharply to the lowest September figure in 3 years. While there's an obvious seasonal drop-off in every September of the past 6 years, this is much more severe than any other.

The number of active listings has skyrocketed to an all-time high. It passed 10,000 in May, which should have been an early warning, but who guessed then that sub-prime mortgage problems would get to be such a problem?

Average prices since 2002 show a seasonal drop-off after July or August, so there's no obvious sign of trouble here. However, many contracts below $200,000 fell through in September because of financing problems. Taking those away pushed the average up, so we're getting a picture that's not quite true to the climate of the market.

The months of inventory on hand gives us a little more optimistic picture than the record number of active listings. This chart looks all the way back to 1990, so we see a lot of variation over time for comparison. We were down a 3-month supply of homes last January and we're up to nearly a 5-month supply now. But that's a far cry from the over 7-month supply we had in 2003.

So, this pretty much tells us where we are.... Now the big question: Where are we going? Answer: We haven't seen any kind of break or reversal in these trends, so we can expect them to continue in this direction for an uncertain length of time. One clue to what we're headed for is the number of listings, which has been climbing at a rapid rate and appears to have slowed down. The monthly dots on that chart are coming closer together, which probably means we're approaching a maximum number of listings. More listings means more property on the market, which means more properties to be absorbed at a slower rate. The sooner the number of listings peaks out, the sooner we'll be back to a more normal market.

The most important questions right now are these:
1. How soon will more money flow into the mortgage market?
2. How strict will new lending criteria be after things settle down?