Tarek Morshed Q1 Market Update 2020

May 4, 2020 – 5 Minute Read


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Hello everybody, Q1 2020 market update here including a condensed video format version!
Q1 2020 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. Currently (0:24): 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.
  • Over 40% of our workforce is able to work remotely . This was pre-covid. Due to being tech heavy and in future growth industries a lot of companies in Austin have been able to pivot to work remotely without a massive hitch.
  • 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 case 3-5% 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 covid due 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.
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.