As the Co-Vid 19 health crisis continues in the USA and Globally, I have promised to keep you abreast of the Austin Real Estate Market and its impact here locally.
We are now just over a month of stay in place orders and expect them to last another 7 to 14 days. After that the Governor of Texas has indicated he will gradually re-open the state as he sees it is safe to do so. We anticipate seeing some businesses do a gradual reopening in May and many more in June and July.
In Real Estate what I am seeing and the data supports this are the following trends:
- Last month, new listings decreased 12.7% to 3,770 listings; active listings dropped 26.6% to 4,908 listings; and pending sales decreased 19.2% to 2,852 pending sales. This is over prior years figures.
- Number of listings are down. Showing activity at those listings is down to about 1/3 to 1/2 of previous traffic.
- Inventory levels remained the same as last year in March but they have been increasing.
- Pricing still softening in Dripping Springs, Georgetown, Lakeway, and Manor areas. Also in Luxury segment over 1.2 million. Some limited price reductions through out the city but percentages are not high 2-3 % range on average.
- Also many listings have been withdrawn for now, especially in the Luxury segment over 1 million.
- Days on market increasing and inventory increasing as Buyer activity is lower.
- More properties going Active with Contingency versus Pending. Buyers may have more ability to negotiate a contingency than in the past.
Lease listings show some softening of pricing and increased vacancy periods. Many Landlords opting to do a small increase or no increase in rent at renewals. Legislation has protected tenants from eviction for up to 60 days for non-payment of rent. Payments may be deferred.
As Predicted this means we are no longer in a strong Sellers Market but more of a neutral market at present in Central areas. In outer areas we are approaching a Buyers market with price reductions.
What about future conditions for the USA and Austin as the year unfolds. None of us has a crystal ball for this unprecedented time. However we can turn to economic experts like Angeles Angelou who has tracked successfully many recent economic events and their impact on Real Estate. Here are his remarks on our outlook in Austin.
At a high level, Angelou predicts that the US economy will begin to recover in late June or early July. We will see huge contraction & job loss between now and June, and these will be at a scale that can not be recovered in 2020. At year-end, will have seen 15% GDP loss and 15% to 16% unemployment nationally. The size and speed of this contraction is unprecedented. During the 2008 recession, unemployment peaked at 10% and the GDP contracted at 3%. The contraction will be short and fast with recovery beginning relatively soon, but it will take some time for everything to fully recover. Angelou predicts that 2021 will see +12% GDP gains and job growth to a 6-8% unemployment rate. It’s important to understand that these gains are also historic & unprecedented.
The constants that have always fueled Austin’s economy are job & population growth. That will not change, but it will slow. Austin typically adds ~60k people per year and Angelou predicts that we will add 35k in 2020 (roughly 60% of normal.) Austin will lose 45k jobs in 2020, and will gain 29k of those jobs back in 2021. The hospitality/leisure & retail industries will be hardest hit. Austin’s technology sector seems to be relatively safe. Angelou spoke briefly on the residential housing market. Inventory is very tight, and will remain so. Angelou predicts that will see an overall volume decrease of 12%-15% in 2020, caused largely by the shelter-in-place ordinance. To put that in perspective, the 2008 financial crisis caused a 30% contraction that lasted 3+ years. The local housing drop during this recession will likely be very short and roughly ½ as dramatic as 2008.
Interest rates have now become more stable and are quite low at 3.1-3.25% average for a 30 year loan. These appear to be staying low for a while and another fed cut could drive them lower still.
In interpreting the current trends and experts remarks here are some implications for Clients.
Buyers– Your position is improving but there will be fewer listings. However as we enter May and June this will be a good time to shop for properties and look to negotiate below list price and for some price decreases. The window will last for several months but start contracting as we move toward recovery in August, September. Also low interest rates will help with cash flow.
Sellers– In lower price brackets (650K or less) and good location demand is still strong but traffic is down and properties could take longer to sell. If you have a higher priced home or the option you should wait till the fall or next spring to sell. The seller’s agent will need to due diligence on job security and loan guidelines to avoid failed deals.
Rentals– We will see the number of people in this segment grow as people lose their jobs or need to sell. The number of qualified applicants will decrease and landlords will need to do vigilant screening. Rental rates could stay constant or go down a bit in the short term to keep Tenants for renewals etc.
I am continuing to work with many precautions through this crisis, and am happy to help you with your property needs. I hope some of you will take advantage of these unprecedented times to grow your portfolios. These are the times when we see how Austin Real Estate and the Buy and Hold is much more stable than the stock market and equities which have been highly volatile and decreasing in the past weeks.
Please stay safe and listen to the scientists and do all you can to support your loved ones. You are all in my thoughts.