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Market News and Trends, The Business of Real Estate

Austin-area Market Variability – first in a series


My clients, and those who follow my blog, know that I often describe the real estate business as “hyper-local.”   I didn’t invent that term, but it applies spectacularly in this industry.

Unlike cars and toasters, homes are products that can’t be moved (in most cases).  The value of a car isn’t affected by the neighborhood where it is kept, assuming that it is maintained as well as a comparable vehicle in another neighborhood.  If I can’t find the bicycle I want in my own town, I can probably find it nearby, or on Craigslist or eBay.  None of that is true for real property.  This is the first in a series of blog posts that will discuss this differentiating fact about real estate from different perspectives.

We know that there are huge variations in the behavior of local real estate markets around the country.  Obviously, property in New York City or San Francisco is “worth” more than similar property in Omaha or Oklahoma City or Austin.  As I wrote a few days ago (Case-Shiller Improvements In Context), while the value of real estate in Phoenix declined more than 50% during this housing crisis,  values in Austin have generally continued to appreciate and, on average, are now about equal to the pre-recession “peak”  in 2006.  

On average, Austin now looks like a very healthy market (and it is), with about 6 months of housing inventory on the  market, and with homes selling in less than 60 days.  It is always worth remembering that averages hide details:

MarketSegment  Avg Sold$/SF  Months’Supply AverageDOM
1,001-1,500
SF
 $   139.12 4.4 46
1,501-2,000 SF  $   131.00 4.5 44
2,001-2,500 SF  $   131.40 4.7 55
Austin – All  $   138.26 5.4 56
2,501-3,000
SF
 $128.29 5.7 70
3,001-3,500 SF  $   128.52 5.8 65
< 1,000 SF  $   195.96 6.3 56
3,501-4,000 SF  $   146.11 8.1 76
4,001-5,000 SF  $   153.17 9.4 80
> 5,000 SF  $250.33 24.2 99

That table shows a few key measures of market health for single family homes in the Austin metropolitan area at the end of June  2010 (MLS Data Only).

Note that 5.4 months’ supply of homes actually means anything from 4.4 months to 24.2 months, depending on  the size range you’re concerned with.  Most analysts consider 6 to 6.5 months’ inventory “balanced,” favoring neither buyers nor  sllers, and without trong upward or downward pressure on prices. Less inventory generally avors sellers since buyers have fewer  aternatives and therefore less egotiating power.  More inventory favors buyers since only the ost unique or the lowest priced  properties stand out and attract offers.  Selling a home surrounded by a 2-year supply of competitors is a very different proposition than selling in a market with only 4 months of inventory, and you can see the effect in the Average  Days On Market column above.

One other quick comment on this data:  I frequently have clients — buyers and sellers — who want to discuss price per square foot.  I honestly don’t think in those terms because it changes so much from one neighborhood to another and from one size or age range to another.  Even using fairly narrow size ranges in the table above, you can see that the average sale price per square foot ranges from $128.29 to $250.33 — almost a 100% change from minimum to maximum!  Moreover, while it us usually reasonable to expect larger homes to sell for less per square foot than smaller ones, you can see that pattern violated in a big way in size ranges above 3.500 square feet.

Unless I am extremely familiar and current with a specific market area, this is why I only discuss market values in the context of specific analysis of a narrow market segment (size, age, location, land area, view, frontage, etc.).

Even within the size ranges in this table, there are very significant market variations. More on that in  Location, Location, Location ….

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About Bill Morris, Realtor

More than thirty years of business experience (high tech, client service, business organization and start-up, including many years in real estate) tell me that service is the key to success and I look forward to serving you. I represent both buyers and sellers throughout the Austin metropolitan area, which means first-hand market knowledge is brought to bear on serving your needs: -- Seller Representation is a comprehensive process that begins with thorough market analysis and consultation, continues with properly staging the home to achieve the highest price possible in a reasonable time on market, a complete program of marketing and promotion, ongoing updates and communication, closing coordination, and follow-up throughout (and after) the sale. -- Buyer Representation is also full service: shopping, previewing, price and market consultation, contracting, negotiating, coordination of inspections, appraisals, repairs, and closing details, and follow-up beyond the closing of your purchase to ensure your lasting satisfaction. Because the real estate industry is becoming more sophisticated and challenging every day, you need a professional that understands the industry and is positioned to stay ahead of the game. I go the extra mile to help you achieve your goals. That's why I constantly research the market and property values so your home is priced effectively from day one. I also make sure the public knows your home is for sale by using innovative advertising and marketing techniques to attract potential buyers.

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