Q1 market update here including a condensed video format version! This one has taken longer than normal, our apologies!
Q1 ended with very strong performance yet marred in uncertainty with covid and shelter-in-place orders. Prices moved up a robust 3-4% and supply ended at a scant 2 months. Tier-1 homes (priced right, no major flaws and wow factor) sold within days with multiple offers and average of 3-5% over list price. In some cases higher. Tier-2 properties (mostly a Tier-1 but with one flaw such as needing cosmetic updates) averaged 40-60 days on the market and about 3-5 % negotiability. Tier-3 (major issues or work) sat on the market 90+ days and 10% negotiability.
After being on a blazing start on-pace to do 10-12% in appreciation for the year, the market saw 50% drop in market engagement (by Buyers and Sellers) overnight due to covid. At end of April that’s improved to about 60% engagement. In spite of this, prices held strongly across the market through April and negotiability has remained low due to supply of housing remaining very low and well below equilibrium – 2 months in March and only 2.8 mths at end of April. For context, a 6-month supply is an equilibrium market. Supply would need to get above 6 mths before we see price depreciation.
$0-$500k We are at 2 months or less, this price band has remained competitive and will likely still see appreciation this year but not the 9-12% it was on pace for vs 3-5%.
$500k-$1M We’re at a 3.5 month supply. Up a bit from last quarter but barely. I’m projecting 0-3% appreciation here for 2020 due to covid.
$1m-$2m We’re at a 5.5 month supply. No movement up in supply since last quarter. Projecting zero appreciation this year or 3-5% depreciation.
$2m+ Is moving up and reaching oversupplied territory. I’m projecting 3-5% depreciation here unless it’s a solid value.
Significant factors in the market (4:02)
Austin’s market holding well so far through covid due to:
Very little job attrition to date – The unemployment rate moved up from 2.5% to 3.8%, still one of lowest rates in the country. Similarly, hiring dip was one of the lowest rates in the country . In turn, supply of housing per above has remained around 2 months in spite of 40% of Buyers still being on the sidelines.
Real estate and the equities market seldom move in parallel. Stock market moved down 30% in March and bounced back 15% within 2 weeks. Real estate in Austin hasn’t moved down at all on pricing in that same time frame.
Looking Ahead (6:42):
I see 2020 ending with best case3-5% appreciation or at worst 3-5% depreciation in Austin. Likely it’s the middle of that. This is revised from the 7-10% appreciation I predicted, primarily due to coviddue to following:
Unemployment will likely go to 8% locally . This will push supply closer to 6-8 months from the current of 2 months thereby potentially creating the 3-5% depreciation. But I think more likely the prices will remain flat unless above $2M.
Post shelter-in-place, the market likely to see engagement bump up to 70% from 60% currently. Will move to 75% or 80% at best by end of year. Remaining 20-25% likely do not re-engage till next year.
Supply moves to 4-6 mths by end of 2nd quarter or into 3rd quarter and starts reverting back towards 3-4 mths post shelter-in-place. So again, not likely we see much in the way of downward price trending in the market.
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