I hope everyone had a great holiday yesterday and are continuing to take time out this weekend to be with loved ones. I know this is a little late in the month, but thought this could provide some reading material for the long holiday weekend.
So what’s the synopsis of the 2014 Austin real estate report? Its good. If you’ve been receiving my newsletter for a few months now, you’ve probably heard me say this a few times. Mid year, what we referred to as the “drunken sailer approach” to buying property, abruptly came to an end. Just to give an example of what happened before then was this: On any given street, property A came on the market and sold at a high price, sometimes $10,000 or more above list price. Multiple offers ensued and, given the right circumstances, buyers agreed to bring money to close over and above what the property appraised for (and bring additional money over and above their initial down payment). Property B (which is a close match to property A) sees the sales price and lists $10,000 above what property A sold for. And with buyers lining up to purchase property, this vicious cycle continued. Well, around June we started to see these buyers “sober” up.
Why did this happen? Not exactly sure, but I would say it’s a combination of things. The national real estate market started slipping and more rental units became available which gave buyers a viable alternative to buying. And there were probably some fears of what would happen after the November elections, in some cases. Whatever the cause, I don’t think it was a bad thing. Days on market for prime properties (desirable areas, in good condition and presented well to the marketplace) went from selling in days to selling in weeks. Inventory increased from two months, with some areas having 5 to 6 months worth of inventory, which is generally considered to be a “healthy market”.
So that brings us to the next question: what happens next? Well, the headlines below would indicate that things will continue and have continued since 2011. But the truth is (in my opinion) that we had a slight lull in 2014. And I believe that things will pick up in 2015, albeit at slightly slower pace. Property values in November are higher than ever but that is for the median home value. The struggles we’re seeing are in the over $500,000 category (And I say “struggle” using it comparatively to the months preceding June 2014).
What I mean by this (and again, this is just one real estate expert’s opinion), is that instead of 10-12% appreciation, we will probably see an appreciation level of closer to 7-10%.
So what can you do to take advantage of this market and when should you do it? If you are a buyer, think about getting into contract before March. That’s when the largest amount of pending listings have been seen in the past 6 years. And have a really thought out plan for submitting an offer on properties that are in multiple offer situations. If you are working with a Spyglass agent, we have a 7 point plan designed to combat the variables involved in the Texas purchase contract, all while still allowing you to conduct your due diligence. It’s super aggressive as far as terms go, and that allows us to work the sellers on price. We ask up front that we be told what we need to bring to make the deal work. This method is really productive and it’s not for every situation, but if you find that perfect home, then you are going to want to hear how we control most of the variables that sellers consider when in a multiple offer situation. If you are buying a property in Austin, you are going to want to have this tool in your home buying arsenal.
If you are a seller, try to get your property on the market either the second week of January or the third week of February through the end of March. The third week of February through the end of March are for obvious reasons mentioned above. Why we recommend the second week of January is a long story. Call or email for further explanation. Sellers, you are going to want to be tactful when selecting price this coming year. There is a real sweet spot for pricing your property that we have found produces multiple offers, combined with our home selling techniques. This is especially true in the $500,000 and up price range, which is where we have seen the greatest amount of inventory increases in the past 6 months.
From our lender partner Max Leaman at Prime Lending:
We expect mortgage interest rates to remain low yet with a slight upward (rising) bias. Reasons here are that the U.S domestic economy is picking up steam. Employment gains with upward movement on wages increasing is a key factor. Latest read on GDP is at 5.0% and showing signs of consumers spending once again. The fall in oil prices has saved American roughly 700 million a day, much of which is going back into the economy. Headwinds are China and Europe which are struggling and will help to keep key interest rates here at home low.
Here are the most recent attention grabbing headlines:
Austin Median Home Price Sets a record for November. Please see below article for what I believe to be a better reporting of the current situation.
Everything’s Up in Austin: Home Prices, Sales and Listings. This paints a very accurate picture of what I’ve been saying for months, which is that we’re doing well and we’ve stabilized some from the previous 24 months.
Where Texas Home Values are Rising and Falling. Interactive map showing the areas of Austin that are falling and (more recently) rising in Texas.