Mark Sprague is the State Director of Information Capital at Independence Title and he recently gave his take on what is going on in the Austin Real Estate Market during these trying times. Mark has followed & forecast the Texas economy for decades & is highly respected in the industry. It’s important to note that, as the moderator mentioned several times during the brief, “Mark is not known for his optimism.” The reason that is important to note is because Mark is optimistic about Austin.
Since this was a Question & Answer session, we thought it best to summarize the Q&A in that format.
At the beginning of the presentation, Mark presented a number of factual statements:
- We are in a recession. Two negative quarters are the definition of a recession.
- Most residential brokers are optimistic & most commercial brokers are pessimistic.
- We are very lucky to be in Austin. Other markets are not doing as well as we are.
- Pending contracts in Austin are ~18% less than they were in April 2019 in the Austin metro area. This is 30% better than the other Texas metros (Dallas, Houston, San Antonio.)
- We have very low inventory and most inventory is in the luxury $2M+ market.
- Values continue to be robust across the city. They’re still retaining value and increasing in some sub-markets.
Do you see a potential move away from density and therefore could you see the suburbs benefit?
It depends on the city. Someone moving from Chicago/NYC would consider us rural because we have a lot of space around our houses in central Austin. We are seeing people move away from high-density cities. (Austin isn’t really a high-density city.) This is a huge challenge for the denser cities. 30-60k people per acre in those markets. At our densest area (downtown) we’re maybe 700 people per acre. Most of our neighborhoods are around 7 people per acre.
If you’re a buyer who was looking in the exurbs pre-pandemic, is there any indication that this buyer can afford more close in if they wait?
In Houston, yes. In Midland, yes. In Austin, no.
What do you see for the future of interest rates and lending in general?
Rates will stay low for at least the next 3 years. Lending requirements will become stiffer because defaults are higher. It will be a more stringent process where they will check on you multiple times to make sure that you still have a job. This will last for at least 3 years. It will take some time to get through all of the bad debt, that’s not been caused by residential. This hasn’t been caused by Austin; it’s been national.
When is the right time for sellers to go on the market?
“I am not a therapist.” *laughing* There isn’t any inventory, so now is a good time. It’s very difficult to list a home if you live in it. It depends on you personally. I don’t think that values will be greater before or after the pandemic.
Many agents are taking the approach of waiting this out. What do you think of that strategy?
If they’re waiting for the market to return to normal, at the end of the year, they will be surprised by their numbers. If they’re waiting for business practices to return to normal, they will be surprised. Fear is a very strong motivator. You have to learn new skills. The first thing I would tell REALTORs is to not cry in September if your numbers are off if they aren’t adjusting now.
Mark finished the presentation with two thoughts. It’s important to remember the moderator’s initial comment “Mark, you are not known for our optimism.”
- Know this: I think we come out of this still with a record year in 2020. There’s still a chance that we re-open in late May or early June. We are going to be shocked at the re-employment. I’m stumbling because I can’t give enough examples as to why.
- If your clients are waiting, they’re going to find more expensive real estate and harder loan qualifications. There’s not a better time to buy.
Let's all hope that Mark is right. The statistics thru April have looked pretty good for experiencing a total lock down and a once every 100 year pandemic.