24 July 2008
Is now a good time to buy or sell a home in Austin?
Posted by admin under: Uncategorized .
After thirty one years of full time Austin Real Estate brokerage, I can safely say I’ve seen my share of bull and bear residential markets in Austin since 1978. This loaded question is particularly difficult because different segments of our Real Estate market are behaving differently, or better values in some price ranges than in others, for example.
A simple rule of thumb is that when stocks are down, rich people do not ‘feel’ as rich and homes in the $500k to $5 million range suffer the most. When interest rates are up, middle America, with both partners working, cannot afford as much of a house payment, so homes in the $300k and under suffer most. Does that make sense to you? Lower home prices, look at interest rates, higher priced homes, look at the stock market.
Right now, conventional money is a bit tougher to qualify for. And even those folks with good paying jobs are having to jump through a few more hoops than what their neighbors had to do, just three months ago.
My guess is that Austin Real Estate in general, in the last six months, is down 7-10% in the $500k and up market and down a bit less (5% to 7%) in the $300k and under market. Condo and loft Realtor insiders will tell you that the toughest condos to sell out in these condo high rises are the $600 to $800k range units in these buildings downtown. My guess is that the stock market is affecting that the most, moreso than interest rates. By the way, the condo crash may not ever happen. You heard it here first. And we are not recommending buying them unless you really dig the downtown fever.
Here’s a funny personal story that exemplifies what is happening right now in Austin.
I offered a long time acquaintance $250k for a home off Mopac and Northland that he wanted $300k for. He wanted to ”leave some meat on the bone” and get out of town to start over in Colorado with his new sweetie.
A former appraisor himself, he thought his 1,750 sqft single family home in less than stellar condition was worth $325k to $350k and that surely I would be able to make more money for myself buying his home outrightfor $300k and ‘flipping’ it for $350k, than earning a 3-6% brokerage fee to help him sell on the active MLS or on our infamous Austin Silent Market.
After seing the inside of the home for the first time, I realized the home was not the layout or condiition I thought would be easy to sell. I told him I was not interested, at all.
When he pressed me with ‘OK what will you give me?’ I said, “I will give you $250k, yet you could probably do better letting me help you market the home and get $300k net. The appraisor/owner/’don’t wanter’ looked at me and said, “George, you’re old, lazy, and scared”.
At first I was offended. Gee, just because I wouldn’t give him $300k for his place was no reason to get personal. Then, I realized he was right. I am older, lazier, and I am scared or at least a bit tentative about what the Real Estate market is going to do. So I responded to his charge with, “Bingo, nailed. You are correct. Guilty as charged, I am old, lazy, and scared!”
To which he smiled and replied, “I’m scared, too.” And then we were friends again. He went on to reveal that his neighbor had offered him $265k for the ‘dump’, I mean, property with potential, and he was just trying to see if he could get more ..out of me.
I said, “Sell the home to your neighbor! Even if you might be leaving $5k to $15k on the table, fixing the home up and hoping to get more is unlikely and you might end up getting less if the market continues to lose momentum. He said, “Thanks for telling me that George, I think I will.” And as far as I know, he did just that.
So, is now the right time to buy? Maybe. If you run across someone who is willing to accept that the market has lost some ‘air’ and might be 7-10% under sales comparables from six months to a year ago. Remember, the time you buy is not as important as the amount you pay. Capeche?
And most people make money in Real Estate when they buy. Not when they sell.
One other question to ask yourself as to whether this is a good time to buy or sell is - Am I moving up or down in home sales price?
In a contrarian viewpoint, if the market is down 10% then the the $30,000 you “lose” on your home is what helps you save $60,000, or 10% loss of value on the $600,000 house you are moving up to. And you cannot have it both ways. Most people will let the fact that they are not going to make as much as they want from the sale of their current home keep them from being in a position to make a killing on the one they want to buy. “Fear of loss is stronger than desire for gain” is one of my mantras, if you have ever been around me.
Sort of like the saying, “You can’t steal second with your foot on first”.
So, my thougths are if you are planning on moving up in the next three to five years, sell now and rent for a few months/years while you make offers one homes waiting for the owners that can afford to or are willing to take the ‘hit’ you were willing to take on the sale of your home. And if they are not, they can just ‘camp out on first, right?’.
I suggest, buy today and try to get the sellers to accept today’s real or tomorrow’s prices, which seem to be equal or lower than last years, in most cases. If they will, a purchase might be a great thing RIGHT NOW.
The ASM Group sold two homes in the million plus range this last month.
One sold for 10% under the current appraisal and our clients are thrilled to be free of that home free to look for the steal sign to take second. In the second example, we helped two doctors referred to us by some clients here buy a home on Bunny Run for less than the seller paid twelve months ago. And they are happy too.
If you disagree with any of my diatribe, by all means, please write me and tell me how full of it I am. All I know is what I see in my little world. And I could be wrong.
After all, I am old, lazy, and scared.
George Sears McGee 6/13/08
2 Comments so far...
Mario Says:
24 July 2008 at 2:52 pm.
I understand 60,000+ people move to Austin each year. I don’t know the demographics, but that should provide a lot of buyers once the lending becomes more available. Meanwhile, it looks like a good time to buy. As far as selling goes, I believe it’s always a good time to sell as long as you do something smart with the money.
Jerry Says:
8 August 2008 at 4:38 pm.
Thanks for the comments and wisdom. I think the entry has honesty not seen enough in the real estate profession. Of course Austin prices are dropping some right now, and yet there are many who deny this. I have been in Austin many years and have heard this one many times: “But Austin is different than the rest of the country”. Yes we are different, but we are not an economic island.
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