March 2020 Austin Market Report
The COVID-19 pandemic and local shelter-in-place orders had little effect on March 2020 home sales in the Austin metro area. According to the Austin Board of REALTORS (ABoR), Austin's median residential sales price rose by 14% to $415,000 compared to March 2019. Suburbs and outlying communities were up 11% to $335,200. However, active listings in Austin and the metro area were down by 27% and 26% respectively, continuing the recent downward trend. As is typical, inventory in Austin was down compared to last year to 1.2 months. This continues (at least for March) the familiar pattern of low inventory, high buyer demand, and rising home prices.
However, the local shelter-in-place orders didn’t go into effect until March 24th. All of Texas was placed under a similar order a week later on March 31st. So, March is not representative of what the full impact of COVID-19 will be on the market. As Romeo Manzanilla, 2020 ABoR president, commented, “For most of March, it was still ‘business as usual,’ and REALTORS® adapted early to continue serving homebuyers and sellers safely. Declines in listing activity and pending residential sales in March indicate that we won’t begin to see the true impact of COVID-19 on the housing market until our April report.”
I have been tracking the local market on a more fine-grained time scale. As you can see, the market is still active and moving:
The week ending March 28th on the graph best represents the immediate market reaction to the March 24th shelter-in-place order. As you can see, new listings dropped from the previous few weeks with some sellers deciding to hold off on listing or cancelling plans altogether. There was also an immediate spike that week in withdrawn listings and listings pulled temporarily off market. This led to fewer listings going pending and eventually a drop in sales/closings that we started to pick up the week ending April 11th. New listings also dropped again that week to a new low compared to the weeks before.
What about prices? Price reductions jumped at the end of Feb. and peaked the week ending on March 28th. US financial markets reacted bearishly to the pandemic at the end of Feb. and continued a major selloff through most of March. During this time, there was a spike in previously pending listings falling out of contract and coming back on the market. Many came back with lower prices. There were surely also many sellers reacting to general uncertainty/fear in the market and others deciding to get serious after “testing the market” with an overly ambitious asking price.
A price reduction, though, does not equate to selling a property for an real discount or for below market value. Also, price reductions were down last week roughly 70% from the peak a few weeks ago. So, the pace of reductions has already slowed greatly. It is much too early to tell what effect these market conditions will have on prices in the middle and long terms. We will need the full April 2020 data and beyond to tell if prices in Austin have come down from their pre-pandemic highs.
Here are basic stats on residential sales for March 2020 for the City of Austin and the greater Austin area:
It’s tempting to look at how the Austin area housing market fared in previous recessions for insight on the current situation. Here’s a chart of the House Price Index for the Austin MSA with shaded columns representing recessionary periods:
However, compare the above with the below chart of initial jobless claims from a few weeks ago. According to the US Labor Department, the running four-week total of displaced American workers filing for unemployment is a whopping 22.03 million. This means that coronavirus-related layoffs have effectively erased the 22 million jobs that the US economy added since the post-Great Recession recovery starting in mid-2009.
Yes, the market is still moving in Austin, albeit at a slower rate. Buyers are still buying and sellers are still selling. We're currently still in an extreme seller’s market according to the latest inventory data. However, nobody knows exactly how long this will last, or what the ultimate impact will be on real estate values. I'm confident that the Austin area will fare better than most other metros in the US. But “faring better” is not the same as “doing well” or even returning to pre-pandemic market conditions. We are in completely uncharted waters with job losses and potential changes in consumer behavior that may far outlast the pandemic.
