The March MLS data is out. Below is a compilation of indices I created to track and, dare I say–forecast–the direction of the local market. If you follow the blog regularly, you’ll recognize the Inhabit Index near the bottom. But before we delve in, please note the images below depict general trends in the market. Without exception, there are various neighborhoods and price points that out/under-perform the broader market.
Price and Inventory
Prices dropped 4% this March compared to March 2008. The year-to-date figure is less than 2% decrease for single-family homes. Notably, prices and inventory levels have seen dramatic fluctuations over the past 6 months. And the trend line for prices suggests a slight decrease in prices ahead. The question many are asking still remains; how low will they go? Some predict a few percentage points, other say perhaps more. One large determinant will be the level of inventory or supply through the remainder of the year. As with the prices, the absorption rate has been teetering between 6 and 10 months on a monthly basis. For now, 6 represents a very balanced market. The national average is closer to 10 months.
Supply and Demand
While the current level of inventory is historically high for Austin, the rate at which homes are coming on the market is slowing. This will change as we head in to the summer selling season. Yet, the silver lining with respect to supply is the drastic reduction in new home starts. As the market shifted, developers and builders slashed planned projects, some due to tighter financing restrictions, others due to solvency issues. But believe it or not, some economists posit Central Texas will experience a housing shortage a few years from now, assuming population projections hold true. We’ll have to revisit that point at a later date. For now, fewer homes are selling given the larger inventory. In fact, 20% fewer homes sold in March 2009 compared to 2008, which was another 20 to 30% down from 2007. Last month there were roughly 9,700 homes on the market while only 1,421sold.
Months of Inventory (MOI)
Will Austin remain in the single-digit MOI range? Again, I think it all depends on what seller’s decide to do over the summer. Based on what I’m experiencing in the market right now, I sincerely believe demand levels will pick up stop sliding over the next quarter. But if seller’s regain their confidence and flood the market, or if another wave of mortgage default transpires, then a likely surge in inventory will adversely affect prices.
The Inhabit Index is just shy of 20% for March–a nice little climb out of the sluggish winter months. Austin is still, unequivocally a buyer’s market though. Will we reach 30% on the city-wide index this summer. Probably not. But, there are nearly 20 MLS areas that are now in or flirting with the seller’s zone. So, don’t expect soft prices and motivated sellers everywhere you’re looking to buy. Most of these areas have an average sales price under $300,000. And with interest rates below 5% for some buyers, I expect many of the $150-250,000 areas to perform well this summer. Homes over $300,000 are still selling, they just take longer and need to be priced competitively.