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Year end summary: Without a thorough analysis, the 2009 year end stats appear to give mixed signals about the Austin real estate market. Year over year, area median sales prices declined and sales volumes were lower than in 2008. Upon closer inspection, however, the numbers reflect the market was slow during the first4 months of the year but began to quickly gain steam during the last 5 months.
The last quarter of 2009 ended with the market showing signs of stability and potential strengthening with higher year over year sales in December, decreasing inventory levels and price declines leveling off. When comparing Dec. 09 vs. Dec. 08, inventory levels declined substantially from 2008 levels and the median sales price rose 4.8%. In short, 2009 numbers averaged lower than 2008, but the market stats during the last 6 months of the year were significantly stronger.
Looking forward to 2010:
First Time Buyers – The home buyer tax credit was extended until April 30th. As such, we expect sales in that price sector to remain strong through spring and into summer (buyers have until June 30th to close so long as they are under contract by April 30th). Areas that already have low inventory such as areas 10N & 10S in South Austin (south of Ben White), Circle C Ranch and Round Rock should continue to thrive and prices will likely hold or increase. If you own in an area that is priced within reach of first time buyers and qualify for the move up credit, this is a good time to consider capitalizing on the large number of first buyers using the tax credit while using the “move up” credit for yourself (receive up to $6500).
Move Ups - The expansion of the tax credit to “move up” buyers should bolster sales in the $300K – $650K range. As such, the move up credit should help to reduce excess inventory in those price ranges for areas such as Steiner Ranch, Lakeway, River Place and South Austin, particularly north of $400,000. Price declines may cease but significant discounts off list price will continue to be possible with short sales and sellers that cannot wait out the job market.
Luxury Sector - The luxury market ($750K+) will continue to struggle as financing remains difficult and inventory remains high. On an interesting note, we saw many corporate relocations and moves from out of state during the fourth quarter of 2009. We believe many companies are positioning themselves for anticipated growth as the economy recovers. Some pick up may occur in the luxury sector this year, but inventory is high enough that great opportunities will remain for buyers in this sector throughout 2010. It’s likely many builders will continue to cut pricing on new construction in an attempt to get inventory off their books. Discounts will directly correlate with inventory levels, so we expect steeper discounts in areas around Lake Travis where inventory remains high, whereas areas such as Westlake and Tarrytown will begin to see fewer discounts as increased year end sales helped reduce inventory, although it presently remains with an oversupply.
Investment Property - Investment financing will continue to be difficult to obtain, but ample opportunities exist for those with cash or substantial equity. Most investors we work with are seeking CAP rates around 8%. Rental rates for multi-family and residential will likely decline in the year ahead with a large number of newly constructed rental units coming online and still leasing up from last year in the central areas.
Overall, we feel the Austin residential market is not out of the woods, but 2010 should be a stable year baring any unforeseen catastrophes. This year will likely prove the best opportunity for buyers before interest rates rise and prices begin to recover. The true sign of a recovering real estate market will be positive job growth. Expect increases in the real estate market to lag positive numbers in the job growth realm by 6 – 8 months, so long as interest rates remain reasonable.