If you are interested in buying in the Austin Real Estate Market, here’s an in-depth look at what forces have recently affected it, and where it’s going.

Somewhat like the stock market, the Austin real estate market changes throughout the year and sometimes even throughout the month. Some months are better for sellers and some are better for buyers. For this reason, it is in the buyer’s best interest to work with a Austin Buyers Agent who has long-term familiarity with the Austin real estate market and its history plus a proven tract record.

The Austin Real Estate Market had been an overall "sellers market" since the spring of 1996 until the late Fall of 2007. There were some periodic fluctuations from time to time but generally a Sellers Market. There was a brief change in the Austin real estate market in April 2000 for example. Prices had actually adjusted down about 5% to 7% and marketing times have increased from about 5 days to 30+ days and what’s always quite interesting is that the local media usually is behind the market conditions by about 3 to 6 months. This time around, the news of falling home prices in other parts of the country has greatly affected the Austin Real Estate Market and that has unfortunately affected our market and it’s been somewhat unwarranted.

Lets look at a little history in Austin Real Estate Market. Starting in about 1987 Austin Real Estate has seen incredible appreciation when many Californians started selling their homes in California and started buying homes in Austin. Austin home prices were about half of what they were throughout California. People would sell their home in LA and buy a home in Austin for half the cost and put the rest of the money they made in the bank. Demand rose significantly and prices increased rapidly in Austin. Then in late 1990 the housing boom slowed down. The California boom was over. California (except the bay area) had a sharp downturn in real estate sales and prices fell. Demand for homes in Austin slowed and prices softened by about 6 -10% depending on the location and the home. Interestingly however, really good homes that were in excellent locations and had great charterer were still selling for top dollar.

From about October 1990 to January 1993 prices stayed pretty flatbut maybe increased about 3% a year from late 1992 to the beginning of 1994. Then 1994 was the start of another"up" cycle and by spring of 1995 the Austin Real Estate Market was booming again. Inventories of homes were low and demand was strong, resulting in multiple bids on most homes and we were seeing double-digit appreciation of between 10% to 25% per year depending on the location of the home. This robust Sellers market lasted for about 5 years and the "Nay Sayers" were saying that our housing bubble in Austin was about to burst…it didn’t and prices kept going up. Austin, in the 1990’s was a much different city however from the Austin in the 1970’s and 1980’s. Austin had matured nicely. Trendy restaurants were being opened all over the city, the downtown area was revitalizing with upscale stores. Microsoft and other high tech business were booming and Boeing was no longer the only big business in town. Austin was consistently ranked as one of the most livable cities in the country by Forbs Magazines, and the 1995 Mariners brought a lot of excitement and press to the city with their heroic late season pennant run (well I’m a baseball fan). Austin was growing up fast and it had a diverse and growing economy. It is one of the most beautiful cities in the US with mild weather, great views, and so very close to the water and mountains. Microsoft spawned many new support businesses and the biotech business started to emerge in a big way. The Austin economy was strong and diverse. Traffic however was bad, getting worse, and there wasn’t a really good way to fix it. People saw a huge value living close in and demand for homes in close in neighborhoods was very strong.

Prices kept increasing, bidding wars for a home was the norm and more and more people were moving to the Austin area from other parts of the country.In the months before April 2000, prices rose so fast — especially in "close-in" neighborhoods — both sellers and Austin Real Estate Agents were able to (and did) push prices up and up. And these bidding wars properties were aggravated and fueled by buyers who felt that if they didn’t buy a home the first day it was on the market, it would be gone (and it would have been in many cases). And the reality was that most homes did sell in the first few days they were on the market. Prices in most "close-in" neighborhoods went up 100% or more from 1995 to February 2000. But then in April of 2000, many buyers finally reached the point where they said, "Enough! We are not going to get into a bidding war." The beginning of our long stock market (NASDAC) decline started in April 2000 as well. The Austin real estate atmosphere slowly changed so that by the end of September 2000 inventories in the Austin area had increased by about 25% but were still pretty low, and the average marketing time for a home increased from about five days to over 30 days which is still a very short time for a home to sell. Average prices fell by about 6% percent from the beginning of April 2000 to the end of 2000. Then, we had another short spurt in market activity for the first few months of 2001, but mostly in the lower price ranges (under $500,000, and more particularly under $400,000). In the over $500,000 range, the Austin real estate market remained relativity slow and prices continued to soften some throughout most of 2001.

Then, the Federal Reserve started lowering interest rates and mortgage rates soon followed. That stimulated the Austin real estate market tremendously. ?The Austin real estate market in 2002 was exceptionally strong again, even in spite of the slow Austin economy and the stock market decline. The strong real estate was partly fueled by mortgage rates going record lows, but also because there were so many new people moving to Austinthe demand was high and supply was low.

What we said at the end of 2002 about the following year (2003) was: "We anticipate that the immediate Austin real estate market for 2003 will still be reasonably good (for sellers) as long as interest rates remain low. With a slightly higher unemployment rate, we will not see as many new people moving into the area as in the past several years. We are in a "buyers" market today in the over $500,000 price range, and it will remain that way for now. Even so, really good houses that are priced correctly will sell quickly and may even have several offers — and may even sell for over the asking price. 2003 may be one of the best times we will see in a long time to be a buyer in the Austin real estate market. This is also one of the very best times we have seen for the move-up buyer. For example, while the owners of a $450,000 home have seen their home increase in value over the past 2 years, the $850,000 home they’ve had their eye on has, at best, stayed flat. With interest rates so unbelievably good, it’s a perfect opportunity for them to make that move — with the guidance of an experienced Austin buyer’s agent." I love it when I’m right!

By the late fall of 2003 we started to see inventories drop again and the Austin economy was on the mend. Many new companies were coming to Austin and established companies were expanding. Washington ranks 43rd in the US for producing college BA degrees and Austin ranks #1 for it’s population being the most educated in the US. A lot of highly educated and well paid people were moving to Austin to fill these jobs. The Austin home market was on the upswing again and by 2005 we could say the Austin Real Estate Market was hot, really hot and in the spring of 2006 it was "white hot" even though there was much talk and news of the housing bubble bursting across the country. Austin seemed to be immuneto all the housing problems in other parts of the country. But by the fall of 2007 Austin’s Real Estate Market came to a screeching halt. The mortgage problems and the downturn in the rest of the country finally got to the Austin buyer. People here just kept hearing all the bad news from around the country and WHAMOO; it finally affected Austin Real Estate. Money became a lot harder to get and people actually had to now qualify for a mortgage in order to get one. People that were planning on relocating here were not able to sell their homes in other parts of the country so they could not buy here. By late 2007 Austin’s robust Real Estate Market had a pretty bad cold…but not the flu! Inventories levels increased from about a two week supply in 2005/2006 to a 6 month supply as of June 2008.

However the current Real Estate Market in Austin offers never seen before risks and opportunities right now. We are in a challenging time to buy or sell real estate in Austin right now and the buyer and seller need to be "smart" in what they do. And although the market can be difficult, we continue to see incredible opportunities in our current real estate market. However there are some pitfalls that everyone needs to be aware of.

Pricing is key in this market. Homes that are overpriced, and there are a lot of them right now, will not sell unless the buyer is working with an agent that’s new or not from the Austin market or doesn’t understand pricing. It’s rare that a home will sell for full price today as well, but that does still happen on really special homes that are priced correctly.

Things today are not like they were between 2000 and mid 2007. By early summer 2008,many so called experts believe that we have pretty much bottomed out in Austin and we are seeing more sales, and we are seeing more buyers out looking to buy. There is even the occasional multiple bids, but those are very rare today. This can be an incredible time to buy however, particularly if you are a move up buyer or if you are an investor. For the move up buyer, if your current home that’s worth $450,000 has gone down by about 7% (and that’s about right for that price range) and that $750,000 home you would love to move up to has gone down by about 9%, (which it has most likely)…and, best of all, you can now write an offer contingent on selling your home you could be getting a great deal. Using the numbers here your $450,000 (as of June 2008) home would now sell for about $31,000 less or about $419,000 but that $750,000 home (as of June 2007) would sell for about $680,000 so you would be saving about $70,000 or twice what you loose ($31,000) on selling your home, so you save about $39,000 and interest rates are still at historic lows.

Austin, with our current housing pains and even with all the traffic congestion, is still one of the best places to live in the United States. Austin will continue to see tremendous growth through the end of this decade and well beyond. It’s estimated that another million people will be living in the Austin area by the end of 2020. If you own a good home in a close-in Austin neighborhood, it will be one of your very best investments over the long run, and what a great time to buy!

Will escalating property values ever stop? Will the housing downturn across the county affect Austin’s real estate market over the long run? We believe that Austin has either reached the bottom or is very close to the bottom of this real estate downturn. How long will it take to completely turn around…maybe a year maybe a little more depending on the national economy and other lender factors? Even though the national economy is very important, the local economy is perhaps more important or at worst case offset the negatives of what happening nationally. The lenders have to feel the pinch of tight lending practices and the pendulum should swing back to more relaxed credit requirements over the short run. We think (and we are not alone) that Austin will continue to be one of the top cities to live with one of the strongest economies in the county and a very healthy housing market with good appreciation.