Earlier this week in a Prudential Real Estate quarterly meeting where Mark Sprague with Residential Strategies, Inc was the guest speaker. Residential Strategies, Inc data and opinions I personally hold to be very accurate market research.
Mark shared that Austin area homebuilders started 2,382 new houses and closed 2,732 units in 3rd quarter of 2008 which was one third slower than the same quarter in 2007. As a result the annual start rate fell to 10,541 units and annual closings to 11,903 units through 3rd quarter 2008.
Mark shared that the Austin market has now experienced about a year of more restrictive mortgage qualification standards in the wake of the collapse of the subprime mortgage market and there continues to be tightening in the mortgage lending market, especially with the elimination of the Down Payment Assistance Programs and higher equity requirements for jumbo loans, however there has been a stabilizing trend of sales activity at the current moderate pace.”
Overall new housing inventory in Austin stands at a 6.3 month supply where a 6.0 month supply is considered equilibrium. This is a stark contrast, the national inventory of new homes for sale stands at a 10.9 month supply. While it feels like Austin area builders are battling a weak housing market our region remains in much better shape than most other areas of the United States Sprague shared.
It was projected during this meeting that it will take the national real estate economy 3-5 years to show signs of recovery and the Texas economy 18 – 24 months. Austin is a much brighter picture. Austin is expected to begin to show signs of recovery by next summer and is currently one of only 3 cities in the country sited by Forbes magazine as one of only 3 cities in the country to “buy now”. The others are Chicago and New York.
The outlook for Austin is uncertain for now. “We are hopeful that the current builder discipline will lead to a stabilized market in 2009” comments Sprague. “If current Austin sales trends remain steady for the foreseeable future, then the market should be close to bottoming.” The wild card appears to be the stabilization of Wall Street and the outcome of the current bail out plans for defaulting mortgages. “With the uncertainty of the credit markets and the increased prospects for a national recession, there continues to be a chance for further market erosion” observes Sprague.
So in other words if you are an investor type, in Austin, looking for the bottom, just remember…“He Who Hesitates…waits…and waits…and waits…”
