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Bill Morris
RE/MAX Capital City
13018 Research Blvd
Austin, TX 78750

Direct or Text: 512-785-3345
Email:              bmorris@remax.net

Texas Broker License # 505218

We take pride in our homes.  For most of us, our home is our largest physical and financial asset.  It's where we spend time with friends and family, where we may go for peace and quiet, and where we spend a lot of our hard-earned money.  It is much more than shelter, more than a residence.  It is "our place," with all the physical, mental, and emotional ties that implies.

Investment real estate shouldn't carry the emotional attachments of a home, but it can be a critical source of income and financial growth.  Financial assets -- stocks, bonds, etc. -- are an important foundation for many investors.  Real estate can provide more stability, current income, and predictable long-term growth.

I represent both buyers and sellers of residential and investment real estate throughout the Austin metropolitan area, which means first-hand market knowledge is brought to bear on serving your needs:

  • My relationship with a home seller begins with a thorough understanding of the client's objectives, needs, and timing. My ongoing analysis of properties and market areas throughout Central Texas provides the basis for a comprehensive analysis of each client's home.  Price consultation, property preparation and staging, and broad promotion of each property follow, and frequent communication -- showing feedback, market updates, and ongoing advice and counsel -- round out a successful listing engagement.  As a starting point, just ask me for a FREE Market Analysis. That may answer your immediate questions, or it could become the basis of a more comprehensive discussion.  That choice is yours.
  • My approach to buyer representation is also full service – shopping, previewing, price and market consultation, contracting, negotiating, coordination of inspections, appraisals, repairs, and closing details, and follow-up beyond the closing of your purchase to ensure your lasting satisfaction.  Looking for a new home?  Use Quick Search or Map Search to browse an up-to-date database of all available properties in the area, or use my Dream Home Finder form and I'll conduct a personalized search for you.

In both roles, honest advice and clear communication are what my clients expect.  The fact that more than 90% of my business is with repeat clients and their referred friends and family is a sign of success in meeting those expectations.  Client ratings that earned my selection for 6 consecutive years as a Five Star Professional -- representing less than 7% of Central Texas agents -- are also very gratifying, and humbling.

As you consider selling or buying Central Texas real estate, you'll find a lot of information on this website that can help.  Much of it is updated regularly, so come back often:

  • National and regional Market Trends is a thorough monthly e-newsletter you'll enjoy.
  • Average Mortgage Rates are up-to-date weekly.
  • As often as time allows, I update My Thoughts ...  on topics that I find important and interesting.
  • You'll also find regular market news on my Facebook and Twitter pages.

You'll find a details About Me and my approach to the practice of the real estate profession, and about why I am proud to be affiliated with RE/MAX and RE/MAX Capital City.

My business and personal experience tell me that service is the key to success and I look forward to serving you.

 

My Thoughts on Central Texas Real Estate

Confirmation?

Timely information from the Austin American-Statesman, following my earlier post about a possible market shift.  Despite a year-over-year dip in sales in June, the chief economist at the Texas A&M Real Estate Center projects strong sales through 2018 and into next year.

At midyear, Austin-area home sales remain on record pace

By Shonda Novak – American-Statesman Staff

Austin-area home sales rose 3.7 percent in the first half of the year, according to the Austin Board of Realtors.

Posted: 11:48 a.m. Tuesday, July 17, 2018


Highlights

Sales rose 3.7 percent through June, and median home-sales price was $313,000, up 4.3%

Sales for the month of June slid 2.7 percent year-over-year, while the median price rose 4.9%, to $326,250.

Board: Home prices continued to climb and supply slowly declined in first half of 2018 amid strong demand.

Despite dipping in June, Central Texas home sales were up in the first half of the year over the first six months of 2017, likely putting the region’s housing market on track for another record year, the Austin Board of Realtors said Tuesday.

A total of 15,364 sold in the first half of the year, up 3.7 percent from the first half of 2017, the board said.

Half of the homes that changed hands went for less than $313,000 and half for more, a 4.3 percent rise in the median sales price compared to the first half of 2017, the board said.

In June, sales declined 2.7 percent compared with June 2017, marking the first monthly dip in year-over-year sales in 2018, the board said.

Of June’s 3,299 sales, half went for $326,250 and half for less, for a 4.9 percent increase in the median price compared with June 2017, the board said.

“Despite a decline in home sales volume across Central Texas in June, 2018 is on track to be another record-setting year for the region’s housing market,” Steve Crorey, president of the Austin Board of Realtors, said in a written statement.

“Consecutive years of record-breaking sales activity have set the bar incredibly high, and it’s important to remember that we’re comparing June 2018 figures to that strong activity. The Central Texas housing market remains strong and continues to move at a demanding pace.”

The board’s figures cover the five-county Central Texas region from Georgetown to San Marcos.

Jim Gaines, chief economist at the Real Estate Center at Texas A&M University, said the June sales dip is not an indication that the Austin-area housing market is cooling off.

“The Central Texas housing market is among the top three in the country,” Gaines said. “The region’s population growth, particularly along the Interstate 35 corridor, is fueled by diversified economic opportunities that bring jobs, new businesses, and resources across multiple industries. Strong population growth and home sales activity are expected to continue in the Central Texas region for the rest of the year and into 2019.”

Within the city limits of Austin, single-family home sales from January through June edged up 1.3 percent year-over-year, to 4,757 sales, and the median home-sales price rose 3 percent, to $375,760.

For the month of June, home sales in the city of Austin declined 4.5 percent, to 988 sales, and the median price dipped 0.4 percent, to $388,000. Home sales had not seen a year-over-year decrease in the month of June since 2013, the board said.

Market Shift?

It’s no secret that the Austin-area residential real estate market has been crazy-busy for the past five-plus years — supply and demand severely out of balance, multiple offer competition, rapidly rising prices, and frustrated prospective home buyers.  I have heard recent comments that things are changing this year.  I have “felt” something different in recent weeks myself with some listings competing with nearby new construction, but I trust data so I decided to check on this from 30,000 feet …

Market cycles happen, and this one will too.  This “up” market is actually very long in the tooth now, but the usual indicators don’t show a slow-down.  With that said, this is the reason I created my Market Dashboard ten or so years ago.  Even with great data, though, the only way to know for certain that a market has turned a corner is when you can look back at the change weeks or months in the past.  Today’s research looks at a few specific metrics to see what trends are apparent at this point.

As a starting point, here is the history of single family home listings and sales since 2004:

Think back to the over-heated market we saw in 2006 and early 2007, leading up to the mortgage industry meltdown, and you can see that the downturn yielded higher inventory and lower sales volume, as you would expect.  You can also see that year-over-year sales began increasing in 2012 and that listing inventory came down, subject to very noticeable seasonal swings.  Listing inventory is noticeably lower this year and last than in the previous four years.  More on that a little later ….

“Months of supply” is an important measure of market health.  Most market economists consider listing inventory of 6 to 6 1/2 months to be “normal” — i.e., a generally balanced market environment.  Here is how our supply has looked over the same timeframe as the previous chart:

Compare the gray bars to the 6-month level on the right-hand axis and notice that we have generally had 4-months’ supply or less since 2012.  Notice also that inventory is even lower now, just over 2 months’ supply.

Sales prices are another important metric, and here is a look at actual closing prices compared to original list prices:

Yes, across the entire five-county metro area, actual sale prices, on average, have been 97% to 99% of original list price for more than five years!  As I noted above, at least as of June it appears that listing activity is lower this year than last, and that last year’s listing activity was much lower than the year before.  With continuing strong demand, that’s a recipe for increasing prices.  In another week or so, the Real Estate Center at Texas A&M University will publish their “final” figures for June 2018, and I will update my market dashboard with that information so I’ll have a more complete picture.

Slower sales — i.e., longer time on the market — is something that agents are very conscious about.  Unfortunately, most don’t have visibility of enough listings (as a percentage of 10,000 or 11,000 listings at any time) to judge whether it’s a general issue or just one overpriced listing.  While some neighborhoods and some market segments are experiencing the change more than others, this overview of Austin metro area activity supports the conclusion that there is a broader change in “days to sell”:

It is worth noting, however, that market velocity is still higher than in 2004, 2005, and 2006, near the last market peak.

So, are we in the midst of market shift?  Maybe … but job creation and population growth are still reported to be strong.  Moreover, builders of new homes have finally caught up to some degree with our market growth over the past two years, and their unit volumes are not well reported in MLS data.  On the other hand, the challenge of being a buyer in this market is itself a constraint on listing activity — a sort of gridlock that causes potential home sellers to just stay put because they don’t know that they can find their next home in time for a coordinated move-out/move-in plan.  (Or because they can’t afford the next home they really want after five years of price appreciation.)

When I began this today, I conjectured that rising mortgage interest rates might be causing the market to slow, but I reviewed that carefully and don’t see a correlation yet.  If anything, the expectation that rates will rise in the coming months is causing buyers to move more quickly than they might have planned, exaggerating demand at the same time that the creation of new listings slows.  If so, that will exacerbate the gridlock that I mentioned earlier.

Slowing down a bit after this long in a boom market wouldn’t really be surprising, but I’m not willing to reach that conclusion based on this data today.  I will keep an eye on this and follow up, however.  July and August results should be very informative.

What’s the real impact of low lake levels?

Lake Travis is now about 20 feet below full, and is falling slowly despite periodic rains.  I don’t know anyone who believes we’re headed for conditions anything like we experienced in 2011 and 2012, but it’s a fact that climatic conditions have changed for the worse again since 2015:

Drought Graphics 2011 and 2015Drought Graphics 2018

 

 

 

 

 

For details, feel free to visit http://droughtmonitor.unl.edu/CurrentMap/StateDroughtMonitor.aspx?TX.  Just the images are enough for this post.  The dark red picture of Texas at the left shows that almost the entire state was in Exceptional Drought as of October 4, 2011.  The second image, just down and right, shows the state of recovery on June 30, 2015.  The third picture shows conditions today.  These are essentially a timelapse view of the climatological history of Texas — flood and drought.  The state has managed well … and continues to do so … most of the time.

Although the entire state didn’t officially experience a new “drought of record” in 2011, there are certainly observers who believe that that was the worst to ever impact Central Texas.

Economically, Central Texas was severely impacted that year by another event — a very large release of water from the Highland Lakes to support agricultural users near the Texas Gulf coast.

As an active volunteer and Board-member of the Austin Board of REALTORS®, and more recently as a member of the Board of the Central Texas Water Coalition, I have worked on this issue for years.  Whether that 2011 release should have happened has been the subject of very considerable discussion and political debate since then.  Note that the price LCRA customers in the upper Colorado River basin paid per acre-foot of water was (and still is) more than twenty times the price paid by the downstream agricultural customers ($150.00 vs. $6.50 at that time) — contractually categorized as “firm” and “interruptible” customers, respectively.  Assuring that “firm” supply has been a continuing battle.

That said, the purpose of this post is to comment on the economic impact of drought and water management in the upper Colorado River basin and the Highland Lakes.  The water release is a prominent feature of this graph — the lake level change in 2011:

Lake Travis Level

Obviously, Lake Travis has rarely been “full” during that 15-year period, but operating at or above 670 was pretty common until 2011.  After the large water release and amid continuing drought, the lake was 50-plus feet below full for most of three years.

Now, let’s look at what happened to sale prices of single-family homes in the Austin-area during that time:

Metro Prices vs. Lake LevelTravis County Prices vs. Lake LevelLake Travis Area Prices vs. Lake LevelLake Travis View Prices vs. Lake LevelLake Travis Frontage Prices vs. Lake Level

Yes, the first four of those charts are small, but for now this overview will suffice.  The top two charts show average (orange) and median (gray) sale prices in the Austin metropolitan area and in Travis County, and there is no obvious impact of lake levels on prices.  The third chart shows prices of homes in the Lake Travis area but without lake views or frontage, and there was little or no pricing effect of the low lake levels.  The next chart shows homes with Lake Travis views but without frontage.  There was some flattening of sale prices in that market segment, but recovery began very quickly when the water level came back up.

The last chart shows sale prices of homes with Lake Travis frontage, and the relationship between lake levels and home values is obvious.  Average sale prices were down about 25% from 2008 and 2010 peaks for virtually all of 2011 through 2015, and remained more than 10% down long after the lake recovered, almost reaching the previous peak by mid-2018 — three years after Lake Travis returned to normal operating levels!

I have not invested time to duplicate that work for properties on Lake Buchanan, but anecdotal evidence suggests the impact was at least as severe there.  (For those who don’t know, Inks Lake, Lake LBJ, Lake Marble Falls, Lake Austin, and Lady Bird Lake are managed to maintain more constant levels, using Lake Buchanan and Lake Travis for storage.)

The impact on the net proceeds to home sellers during those years is obvious.  Consider a larger view, though.  All Texas real property is appraised annually for the purpose of assessing property taxes.  Those appraisals are intended to represent actual market values as of January 1 of each year.

Consider the loss of 25% of tax revenues on all lakefront homes on Lake Buchanan and Lake Travis for at least three years, and 10% for another two years.  Consider the city and county governments, school districts, and other taxing jurisdictions that depend on those revenues to operate and provide services.  Populations and school enrollments did not decline during those years.  Neither did the need for services.

In addition to the loss of property values compared to previous peaks, these properties failed to enjoy the broad value appreciation seen throughout Central Texas, so the combination of lost and never-realized tax revenues was even larger.  For the Economic Impact section of the 2016 Region K water plan, CTWC estimated this combined effect to be a loss of $2 billion to $3 billion in taxable property values across the region.  Obviously, that loss has continued to mount.  Moreover, low lake levels significantly impacted tourism and recreational uses of the lakes and the jobs and business incomes from those sources for many years.

I am not writing to discourage sales and purchases of lake-area homes.  The Highland Lakes are a beautiful part of our great state, and there is real value in being part of our lakeside communities and in owning property there, and in the long run property values will undoubtedly continue to grow.  My purpose is to point out that water is a precious resource in many ways, and that managing that resource for the long term is vital.  The City of Austin has prepared a 100-year water plan that has not yet been reviewed and approved by City Council.  The sixteen regional water planning groups in the state work to keep 50-year water plans up to date and to keep up with changing demands and developing techniques and technologies.  All of this work is extremely important, and I hope this article has highlighted the impacts that one ill-timed water management decision created.  We can and must do better!

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