On July 20, June MLS numbers were released, showing the first drop in June sales in five years, even as prices rose by more than 7%. As the strength of the Austin market has defied national trends over the last year, it’s natural to worry whether this might signal the beginning of the end.
In our first posting on this subject, we concluded that the negative statistics do not really effect the downtown condo market which does not include units below $130K where the most dramatic market changes seem to be taking place. Today, thanks to Ki Gray, we have much more detailed statistics to analyze.
These statistics allow us to look more closely at neighborhood-by-neighborhood sales details for the high end area closest to downtown. Here is what this new data shows:
– Price per square foot increased in June in 20 of 23 central austin neighborhoods analyzed by Ki
– In the 20 most central areas in the first Half of 2007 (v. the period one year earlier):
– Prices increased by 12%
– Sales volumes decreased by 15%
– Days on Market increased from 49 to 52
So what does this data add to the picture? As we stated previously, the culprit is clear when it comes to the change in the broader Austin market: the current sub-prime lending crisis means that many first-time buyers with borderline credit can no longer qualify for mortgages. This is resulting in a decrease in sales of low priced sales — i.e. houses priced under $130k in Austin.
To our surprise, It does look like similar market forces are effecting the prime central areas. While there may not be many units priced under $130k, the same trend is occurring: sales volumes are dropping while prices are rising. The most likely interpretation is a strong broad market with weakness at the low end. The high end seems to be strong while sales of lower priced houses — and not just units priced under $130K — suffering.
Will this effect the downtown condo market? The data suggests that it will: buyers with borderline financing qualifications will be excluded from the market. However, with strong price appreciation and low inventory, the numbers still look good for developers and buyers alike. But the thing to note is that the June statistics do show a change in the market which should be closely monitored in the upcoming months.