As financial markets retreat, the credit crisis looms, foreclosures spike, and mortgage problems persist, the national housing market is clearly struggling. In this tough environment, even the Austin market has turned negative with a year-over-year pricing decrease of a little less than 1%.
While times may be rough, the truth is that bad times are relative. Despite the year-over-year drop in housing values, it turns out that at least one Austin zip code is doing well. According to Business Week, Austin Zip Code 78749 is the second fastest moving market for houses in the country. With average days on market of 68 days, only Sunnayvale, CA is faster — at a slightly more impressive 66 days.
78749, in South Austin near Circle C, is definitely doing better than the rest of the local market. While Austin remains one of the strongest real estate markets in the county, the trend is in fact negative. Over the last year, days inventory has grown by 33% to a full 6 month supply. Pricing, however, has remained strong with the both the average and the median increasing year-over-year through August.
The toughest segment of the Austin market seems to be suburban new construction. Here is the full analysis from a recent article in the Austin Business Journal:
New reports show home construction and closings of recently completed homes in Austin remain depressed, but that’s unlikely to bring prices down any time soon.
Area homebuilders started work on 2,382 new houses in the third quarter, a 37 percent decline from third quarter 2007 starts, according to the latest report from Residential Strategies Inc. Through the first nine months of the year, builders started 7,546 homes, a nearly 30 percent drop compared with the same period in 2007.
Meanwhile, the number of home closings fell to 2,732, a 33 percent decline compared with the same period in 2007. The number of closings so far this year dropped 25 percent from the first nine months of 2007 to 8,643. . .
“While Austin area builders are battling a weak housing market, it is important to recognize that this region remains in much better shape than most other areas of the United States,” Sprague says.
That relative health compared with other markets is helping prevent prices from falling. The latest report from PMI Mortgage Insurance Co. shows that the Austin market is one of the least likely to see a drop in prices in the next two years. Also on that list are the other major Texas markets: Dallas/Fort Worth, Houston and San Antonio. While the housing markets of those cities have been affected by the current economic environment, builders have been able to control their inventory better than in most parts of the country while continued demand in Texas is expected to help the state weather the housing crisis.
While this sheds little light on the downtown Austin condo market, the broad strength of the Austin housing market is beneficial to developers and owners of downtown condo units. The worse thing for downtown would be a collapse in the broader housing market. If this were to happen, it much more difficult for buyers to sell their units to purchase downtown housing and much harder for developers to justify downtown prices relative to the weakening broader market. With the relative strength of the Austin housing market, downtown developers continue to survive — and some actually are thriving — as they wait out the down market.