Q2 market update here including a condensed video format version! This one has taken MUCH longer than normal – I’ve personally had a very challenging 2nd quarter with the losses of my closest friend unexpectedly as well as my father, who had been declining for a long time. Thanks for your grace and understanding. Lets dive in!
I had predicted stronger Q2 than most were expecting (in spite of covid likely to keep 30% or so of Buyers and Sellers on the sidelines) due to our economic and market fundamentals. The market performed even better than I predicted. Prices moved up a strong 3-4% in Q2 and cumulatively for the year it moved up 6%. Inventory moved up only from a scant 2 months to a still very undersupplied 3 mths. 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.
Q3 has been even stronger so far than Q2. The velocity of pendings in Q3 has been intense. Averaged across all price bands/sectors, market supply is at 2.5 months which is considered a very low inventory/ high appreciating environment. For context, a 6-month supply (enough inventory to meet current rate of demand 6 months out) is an equilibrium market.
- $0-$500k We are at 2 months or less, severely undersupplied and I think we will see 8-10%+ appreciation this year.
- $500k-$1M We’re at a 4-month supply. I’m projecting 7-9%+ for the year.
- $1m-$2m We’re at a 5-month supply. I’m projecting 6-8%+ appreciation for the year.
- $2m+ Has remained undersupplied (as long as it’s highly relevant to today’s cleaner lines and transitional aesthetics), otherwise it’s sitting. I’m projecting 7% appreciation here.
Significant factors in the market (3:12):
The main factors leading to the current market environment:
- Lack of Job Attrition – We’re not going to add the 35k-40k jobs we were on track for pre-covid and unemployment in May was 10%. June’s unemplyoment rate dropped back down to 6.4%. Furthermore, breaking down the attrition to workforce vs white collar jobs, the attrition is only at 3% in white collar jobs. For better or worse, Austin’s economy primarily is driven by tech and white collar jobs. Stability and continued growth there has created major stabitliy in our local market.
- In-migration – In Q2 (and Q3) in-migration from coastal markets bumped another major 20% due to flight from coastal cities and companies relocating. We were already on track for 50k new residents, its now on track for 60k with most of the transplants coming from more expensive markets. This has easily replaced the 30% or so of Buyers that went on the sidelines once covid hit.
- Interest rates – A major factor given rates are at 3% or below. This is pushing new Buyers into the market.
Looking Ahead (4:12):
I see 2020 ending with 7-10% appreciation, possibly higher. We are definitely in a momentum year in terms of appreciation and demand this year.
All price bands will perform very strongly, including above $2m+.
Core sectors up to $5M will be extremely active in central and coveted areas such as Westlake. Within city limits (city limits but not suburbs) it’ll stay robustly active with high demand up to $1.2M. In the suburbs, up to $800k will be very healthy.
I hope this provided valuable insight as our goal is to provide irreplaceable value, always! For more regular updates between each quarter sign up on our email list via our website and follow us via our social media handles found below. And as always, we’re happy to discuss what’s happening in your sector of town so don’t hesitate to reach out. Facebook, LinkedIn, Instagram