Tuesday, October 21, 2008
In September, Central Texas home sales fell for the 15th consecutive month as the Austin area continued to feel the effects of the national real estate slowdown, tighter lending standards and heightened uncertainty about the economy. But the median price of $182,600 was unchanged from last September, ending an almost four-year streak of increases, the Austin Board of Realtors said.
Local real estate experts said it was a sign that prices will begin to fall, which could bring more buyers into the market.
Some observers say prices could drop as much as 10 percent within the next year as a near-record supply of homes for sale, anticipated rising mortgage rates and aggressive incentives by new-home builders pressure sellers to cut their prices.
Nationally, the median home price is down almost 10 percent this year. But Austin area prices have held up despite sales declines across all price ranges.
Last month, however, there were signs of change. Though prices kept rising in many areas, the median fell 26.4 percent in the real estate zone that includes affluent neighborhoods such as Barton Creek. It was down 7.6 percent in Pflugerville, 6.3 percent in eastern Round Rock and 18.2 percent in western Georgetown.
September sales of single-family homes totaled nearly $407 million, down 11 percent from a year earlier. To local real estate consultant Charles Heimsath, that suggests a turning point on prices. “I bet (the median price) goes negative before the end of the year,” said Heimsath, president of Capitol Market Research.
But Heimsath said a drop would not be “a bad thing, and I don’t think it will last very long.”
He noted that Austin is still creating jobs, although the rate of growth has cooled to below 2 percent.
“I still believe the fundamentals for growth in Austin are solid … and as long as we continue to grow some in the economy, we’re going to continue to generate demand for housing.”
He said the area’s median price had been “artificially inflated” by sharply slowing sales in lower price ranges, where the credit crunch has severely curtailed first-time buyers’ ability to obtain mortgages.
A decline in the median price, he said, would more accurately reflect a market in which sales have been falling and homes are sitting on the market longer. The 1,670 sales last month were 8 percent below September 2007 and the lowest for the month since 2002.
It took an average of 71 days to sell a house — 11 days longer than a year earlier.
Heimsath didn’t predict the amount of the price drop. But at a real estate forum last week, John McClellan, branch manager of Supreme Lending in Austin, and Jay Otto, chief executive of Dwellgo.com, a real estate Web site, said how much they expect the median to fall. Otto’s prediction is 5 percent to 10 percent by June. McClellan said a decline of at least 10 percent could be in store for homes in the upper price ranges, with smaller declines for homes in lower-price areas.
McClellan predicted that mortgage rates, now about 6.25 percent, could climb to the mid-7 percent range in the next six months, further squeezing buyers and forcing some sellers to cut prices. He said more-affluent buyers will be affected also by declines in the stock market.
Helen Edwards, Central Texas regional president of Coldwell Banker United Realtors, said a recent national price-cut promotion brought in offers to 10 percent of the 160 Central Texas sellers who participated.
“This proves that buyers are, in fact, willing to buy as long as the sellers understand that they want an excellent value for their dollar,” Edwards said, adding that clients have been having to price their homes “very aggressively” to compete with new homes.
“The rate at which prices have been increasing in the area has been slowing for a number of months,” said Eldon Rude, Austin director of Metrostudy, which tracks the housing market. “Over the next year, I expect that resale prices will come down, with some areas experiencing greater price declines than others.”
Ryan Rodenbeck, owner of Spyglass Realty and Investments LLC, disagreed.
“While we are seeing an increase in inventory, houses are moving, just at a slower pace,” Rodenbeck said. “That — coupled with the upcoming bottom of the market nationally that most experts predict — should help a national recovery, which in turn will allow people in other parts of the country who are trying to sell their home and move to Austin” to do so.
Heimsath said he expects consumer confidence and the stock market to improve by spring, when there will be more certainty about the direction in which the country is moving under the new president. He predicts interest in home purchases and other big-ticket items will pick up by then.
“If you have to sell, I would just hold off until the spring buying season,” Heimsath said.
And if you’re a buyer? “Look for the bargains,” Heimsath said. “Look for the people that have to sell.”