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Austin home sales are down, but we had a 2.4% increase in jobs since October of 2009. Austin still feels relatively healthy, economically, compared to other parts of the U.S.
However the front-page headline in today’s Austin American-Statesman says “Austin-area home sales set for 4th annul tumble.” (The web version says drop, rather than tumble – is “drop” more SEO-friendly?)
According to the Statesman, October sales were down 31% from a year earlier, and sales have been down over the previous year for five months in a row. Last year we had the tax incentive, which bolstered sales. It would be interesting to see how last year’s numbers would have looked without the incentive, but that would involve guesswork.
It takes an average 92 days to sell a home in Central Texas currently, up from 73 days a year ago. This might also be attributable to the loss of the incentive; it could also be because it’s harder to get a loan. The Statesman quotes JB Goodwin Realtor Robin Curle, who said “lenders are scared and are really tightening up their requirements.” She noted that they’re also busy with refinancings and appraisers are being more cautious, so it takes longer for deals to close, like 45 days instead of 30.
Earlier in the article, Curle is quoted as saying she’s working with some buyers that are looking for great deal – Cynthia Mattiza, also with JB Goodwin, is quoted as saying many buyers are dropping prices, though median prices are up 10% over a year ago (possibly another explanation for the increased days-on-market).
The great deals are out there, to be sure – and I can help you find ’em. If you’re interested, email me at mlebkowsky at cbunited.com.
The Statesman has a feature about a high-end modular home prefabricated, delivered in two chunks, and set on a robust foundation. The project, coordinated by MA Modular for Joe Etherton and Karen Cotter, was not exactly what you think of when you think modular. “The couple paid $235,000 for the lot and about $237,000 for the 1,500-square-foot house, including the cost of some upgrades such as massaranduba (Brazilian redwood) siding,” according to the article.
Etherton’s and Cotter’s abode doesn’t scream “modular.” It looks like any upscale, contemporary South Austin house, with a standing-seam metal roof and moss-green stucco along with the rich-looking massaranduba on the exterior. The bathrooms have subway tile, and the kitchen is sleek with Silestone countertops and Merillat cabinets. Bamboo floors and light woods throughout, along with a wealth of windows and a ceiling that slopes from 9 feet to 11 feet, make the house look bigger than it is. Triple sliding-glass doors open from the living room onto a back deck of more than 500 square feet. The master bedroom opens onto the deck, as well. Beyond that, there’s a big, grassy yard for the kids to play in.
Who wears the pants in making decisions about real estate? Coldwell Bander found that, in most cases, it’s a mutual decision – here’s a video showing a few of the specific responses…
Walking Austin’s hike and bike trail around Ladybird Lake on a recent glorious day, my husband and I ran into an acquaintance, Tom, and got into a discussion of the local real estate market. “This market’s really inflated,” he said. “Realtors are driving home prices up so they’ll get bigger commissions.”
“That’s not exactly right,” I said.
“Of course it’s right,” he said. “The commission’s based on a percentage. If you sell the house for more money, you get a bigger commission.”
“That’s true,” I said. “But even if a Realtor saw this as an incentive, she can’t charge more than the market will bear. It’s the market, not the Realtor, that determines the price.”
“But Realtors inflate the market by charging more for homes,” he said.
At that point the conversation was circular. The idea that Realtors can influence market values is embedded in buyer psychology. But we generally can’t produce a sale, however hard we market, if a home is priced too high. We advise a price range based primarily on an analysis of comparable homes that have sold recently, which tells us what people are willing to pay. We also look at what’s currenlty listed, to get a sense of the competition, which is a factor in determining the market.
A good Realtor won’t suggest the highest possible price, but will suggest a range, and relate it to a time factor. If you have to sell quickly, price at the low end of the range; if you have more time, price closer to the high end.
What if a seller wants to price a home well above the high end? A good Realtor may not take the listing. Why? When the property is priced well above market, it won’t sell, no matter how hard or creatively we market. We therefore won’t earn a commission, try as hard as we might, and yet we put hours of time and hundreds of marketing dollars into the effort.
That’s why Tom’s logic doesn’t work. If Realtors were persistently pushing for higher prices, they would almost certainly get fewer commissions. Pricing is as it is because of supply, demand, and specific property features. In a market where prices are truly “inflated,” few homes are selling. That won’t last. If homes really are selling for higher and higher prices, that suggests not Realtor shenanigans but an increasing demand and/or decreasing supply.
Realtors prefer a balanced market, which is good for everybody.
Put another way – under a six month supply of homes (absorption rate) and the real estate market is generally moving and balanced. Over a six month supply and it’s stagnant, a buyer’s market with lots of homes for sale and stable or falling prices.
When it gets much less and is definitely a seller’s market, we see lots of activity, multiple offers on homes and rising prices. Luckily for all of us, the market is self-correcting and attempts to stabilize itself, setting its own prices depending on very localized conditions.
From the Austin Real Estate Blog: in December, for the fourth month in a row, Austin real estate sales were up over the previous year. The average and median sales price were up 6 percent, and the number of active listings is down 5% from this time last year. With 1373 sales, December was still weaker than October (1783 sales) and November (1542 sales). The market’s strength is probably attributable to the Federal housing tax credit, which will expire. According to the Real Estate Blog, “For buyers the trade off is that later there might be less buyers to
compete with in the market later but interest rates might be higher.
For sellers there is no real trade off. Waiting a few months for higher
interest rates and less buyers is probably far from ideal.”