Posted almost 4 years ago

Austin's Real Estate Market throughout the COVID-19 Pandemic

A look into Austin MSA related to real estate before & after the COVID-19 pandemic, and into the future.

I wrote a similar paper almost a year ago today, good cross reference for this read.

Leading up to and continuing through the “Stay at Home” order, which went into effect Tuesday, March 24th — the sellers market went from red hot to, “what do we do next.”

Investment buyers across the board repositioned themselves — with iBuyers like Zillow and OpenDoor stopping purchasing completely, large funds lowered buy price requirements by up to 10%, and local investors were waiting for the dust to settle for the most part.

A 10% drop in buy price standards is substantial and a direct reflection of how low demand was in mid-March through April.

Speaking from a realtors perspective, throughout all of this and despite realtors being deemed essential, the COVID-19 etiquette/standards took some time to develop.

Every governing body related to real estate was looking into and implementing best standards and practices for real estate related job functions.

As a result, listing activity was down immediately — April saw a drop of 21.6% in number of sales year-over-year, while May saw the biggest dip in year-over-year sales at 29.2%. (ABOR)

Unemployment rate for the Austin-Round Rock MSA was 12.2%, a 10% increase year-over-year.(3)

The market today looks a lot different across the entire MSA of Austin — including Hays, Williamson, Caldwell, Travis, and Bastrop counties.

In this article I’ll look back at trends related to the health of real estate throughout the pandemic and into the future of 2020.

What Just Happened?

Almost every variable — active listings, pending listing, number of sales — started to decline in March and continued to decline through April and May.

These initial declines can be attributed to the slow assimilation to new COVID standards in real estate, in addition to avoidance of health risks for a large portion of the population — and different levels of government weighing in and let’s be honest, slowing things down.

Despite these other categories trending down, the median sales price of housing continued to grow for the Austin-Round Rock MSA throughout the entire pandemic.

While this is true for Austin-Round Rock MSA, Travis county and Bastrop county carried the bulk of load.

The City of Austin was the only dataset to see double digit increases in median price sold in every month except June, which saw a 9.7% increase year-over-year.

Caldwell, Williamson, and Hays all saw a decrease in every variable across the board — number of home sales, listing activity, median price, and pending sales. Each of these counties showed strong signs of rebounding related to these variables in June.(ABOR)

There were a few good signs for current and future value in that both days on market and inventory trended down across the entire MSA and continue to through July 2020. (ABOR)

The lower the supply the more aggressive the appreciation becomes, and the less days on market lessens your all-in costs (i.e. taxes, loan costs, utilities).

Is Our Economy Still Strong?

Major factors effecting every real estate market include unemployment and job growth.

In Texas, between March 15 to August 8th, a total of of 3.2 million jobless claims were reported with over 300,000 in one week of April alone.

For reference, weekly claims peaked at between 50,000 and 75,000 during the most recent economic downturns — 2017 Hurricane Harvey and 2008 Great Recession respectively. (2)

Austin's March job growth compared to March 2019 was up 2.5%, though signs of increased unemployment were on the horizon as seasonally adjusted unemployment in March was 3.4%, and up from 2.5% in February. (CoC)

In almost every chart related to COVID-19 April has seen the biggest negative dips, and staying true to form April logged a 9.1% year-over-year drop in job loss with a seasonally adjusted unemployment rate of 11.5%.

By May the unemployment started to correct itself with an addition of 18,300 jobs — still a notably large drop of 7.7% year-over-year job loss, and a seasonally adjusted unemployment rate of 10.4%. (2)

To really put this in perspective, in April Austin’s MSA had 1,008,700 non-farm payroll jobs, in May that number was 1,027,600. (TWC) (Per TWC gap is actually 18,900 new jobs)

Gradual improvements have happened each month in the three major categories — added jobs, percent of year over year job loss, and seasonally adjust employment rate.

Where are things now, and where are we headed?

In July we are sitting at 68,000 total pandemic-related job losses, 4% year-over-year job loss, and a seasonally adjusted unemployment rate of 5.9%, down from 6.3% in June.

Pre-March Austin had 60,000 vacant tech jobs, and we are continuing to add jobs elsewhere. A total of 78,000 expected available jobs by years end, and if this momentum continues, Austin would have a record re-employment by year end. (2)

Almost 120,000 net new jobs are likely to be added through 2023, bringing wage and salary employment to nearly 1.2 million aggregate positions.(2)

Austin ranks number one across the country in “Jobs in Excess of Pre-Recession Peak” at a growth of jobs created since 2009 recession of 38%.

Second place is Nashville at 29%, which is nearly 10% more added jobs than the next strongest MSA — and 29% greater than the national average of 9%.

Another national reference Mark Sprague noted was that only 8 metros have had full recovery (full employment or better, real estate sales/ values and GDP better than 10 year ago) and four of those Metros are in Texas.

Also, throughout the entire pandemic Austin’s MSA stayed in the top 10 of all MSAs — and Texas had at least four cities in the top 10 throughout same period.

A strong state economy surrounding what might be the hottest market within that state is a good recipe for investing.

With double digit YOY appreciation and strong demand, the City of Austin remains one of the best places to buy & hold and even flip real estate.

References

Texas A&M Real Estate Center — https://www.recenter.tamu.edu/research/market-research#!/Austin-Round_Rock/Market_Overview
Mark Sprague’s “What’s on the Horizon?” Economic forecast — available on request
April Stats Unemployed — https://www.twc.texas.gov/news/texas-unemployment-rate-128-percent
May Stats Unemployed — https://www.twc.texas.gov/news/texas-unemployment-rate-130-percent
June Stats Unemployed — https://www.twc.texas.gov/news/june-texas-unemployment-rate-falls-86-percent
July Stats Unemployed — https://www.twc.texas.gov/news/texas-unemployment-rate-falls-80-percent-july
March Job Growth — https://www.austinchamber.com/blog/04-21-2020-job-growth-unemployment
April Job Growth — https://www.austinchamber.com/blog/05-26-2020-job-growth-unemployment
May Job Growth -https://www.austinchamber.com/blog/06-23-2020-job-growth-unemployment
June Job Growth — https://www.austinchamber.com/blog/07-21-2020-job-growth-unemployment
July Job Growth — https://www.austinchamber.com/blog/08-25-2020-job-growth-unemployment
Deemed Essential — https://www.bizjournals.com/austin/news/2020/04/01/realtors-told-they-can-show-properties-again-under.html
Abor March Press Release — http://www.abor.com/wp-content/uploads/2020/04/March-2020-stats-release-FINAL-.pdf
Abor April Press Release — https://www.abor.com/wp-content/uploads/2020/05/April-2020-Press-Release_Final.pdf
Abor May Press Release — https://www.abor.com/wp-content/uploads/2020/06/May-2020-press-release-FINAL.pdf
Abor June Press Release — https://www.abor.com/wp-content/uploads/2020/07/June-2020-and-Midyear-Release.pdf
Abor July Press Release — https://www.abor.com/wp-content/uploads/2020/08/July-2020-Press-Release-FINAL.pdf
Stay at home order — https://austin.curbed.com/2020/3/24/21191812/coronavirus-austin-shelter-in-place-shutdown