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Market News and Trends

Austin Sales and Building Permits


A couple of days ago I received some questions on one of my blogsites about my Austin Market Dashboard.  It strikes me that others may have the same questions, so I am pleased to post the following:

QUESTION:

I am a financial analyst for a … company considering entering the Austin market. I have been conducting my own research on the state of housing and non-residential markets in Austin. I came across your article through a google search and I am fascinated by the thought put into the dashboard statistics.  Thanks for sharing your research. I am puzzled by the fact that although the general macro trends for Austin (population and employment) are robust the ytd building permits are down 19% (units) compared to last year. The rest of the nation is on a upward trajectory as far as permits are concerned. It appears to me there is a lag with the Austin  market in terms of permit recovery. Is this purely due to the fact that Austin had excess capacity and slowly the balance between  supply and demand is being met? I would love to hear your thoughts.

ANSWER:

Thank you for your note.  I have found my market dashboard to be a valuable tool in discussing market dynamics with clients and prospects.
 
As you noted, underlying economic strength in the Austin/Central Texas area is encouraging.  Nonetheless, we have felt the effects of the recession and housing downturn, and distortions created by the last two homebuyer tax incentives.  Through November, 2011 unit sales were down 5.5% year to date compared to 2010:
 
Month Units
Sold
YTD
Units
  Month Units
Sold
YTD
Units
2009-Jan 914 914 2010-Jan 1,008 1,008
Feb 1,196 2,110 Feb 1,276 2,284
Mar 1,511 3,621 Mar 1,999 4,283
Apr 1,728 5,349 Apr 2,256 6,539
May 1,875 7,224 May 2,300 8,839
Jun 2,313 9,537 Jun 2,216 11,055
Jul 2,288 11,825 Jul 1,659 12,714
Aug 1,996 13,821 Aug 1,649 14,363
Sep 1,974 15,795 Sep 1,393 15,756
Oct 1,993 17,788 Oct 1,331 17,087
Nov 1,713 19,501 Nov 1,345 18,432
Dec 1,524 21,025    
 
Note that 2011 YTD sales were ahead of 2010 through the first three quarters of the year.   
Likewise, residential building permits are down this year:
 
Month Permits YTD

Permits

Month Permits YTD

Permits

2009 – Jan 488 488 2010 – Jan 419 419
Feb 456 944 Feb 568 987
Mar 490 1,434 Mar 773 1,760
Apr 705 2,139 Apr 653 2,413
May 511 2,650 May 540 2,953
Jun 736 3,386 Jun 559 3,512
Jul 860 4,246 Jul 534 4,046
Aug 570 4,816 Aug 481 4,527
Sep 541 5,357 Sep 455 4,982
Oct 468 5,825 Oct 363 5,345
Nov 378 6,203 Nov 346 5,691
Dec 479 6,682    
 
In this case, the YTD total fell behind last year in July, upon the expiration of the 2010 tax credit program, and by the end of November it was 8.2% below 2010.  This does not reflect market weakness or builders’ lack of confidence.  Instead, it is simply a prudent adjustment of supply to match expected demand as closely as possible.  While new residential construction came to a virtual standstill in the hardest hit U.S. market areas in 2008 and 2009, builders have continued to invest in the Austin area.  Any growth in Las Vegas or Phoenix from close to zero is a large percentage increase, whereas an 8% decline in Austin building permits looks out of step.  (All sales and permit data from the Real Estate Center at Texas A&M University.)
 
There is one point relating to Austin’s new construction capacity that does hold permitting back somewhat:  a shortage of platted lots and subdivisions in outlying areas.  This doesn’t account for much of the 2011 decline, but in the coming twelve to eighteen months I expect that we will see some impact. 
 
By the way, builders limiting their supply is obviously a source of strength for resale property values, and we have enjoyed relative price stability compared to the cities and states that have suffered the most during the downturn.  To the extent that a lot shortage continues to hold construction down we should continue to see resale price strength for the same reason.
 
Thank you again for your comments and questions.  I hope this is helpful.
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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.

Discussion

One thought on “Austin Sales and Building Permits

  1. Great blog, keeping me from working,,.great content, keep up the good job so you get many subsriber!

    Posted by austin home builder | January 20, 2011, 4:48 PM

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