Wednesday, September 29, 2021 / by Russ Phillips
Let's start with some good news and optimism: The Wall Street Journal is reporting that the economy appears poised to pick up speed after the recovery has been hampered by a rise in Covid cases and the Delta-variant.
In the local market, we've had the strongest year in history in overall sales and price appreciation, but the last 2-3 months have shown us a normalizing or stabilizing market. In fact, prices for August fell by 2% from July numbers. We think the Delta variant likely played a role in that, along with the usual seasonal slowdown as school starts back up.
You see the seasonal phenomenon in the # of sales per month chart below. Given the slower pace we are seeing right now....if you are a buyer, NOW IS THE TIME TO ENTER THE MARKET AND TRY AGAIN! There's less competition for you!
The local talking heads I listen to are still very bullish on the Austin job market continuing to grow at a crazy amazing pace, which should mean that we won't prices going backwards in a large or meaningful way. Tons of new jobs will mean people continuing to come here to fill them.
Frankly, most agents I know are glad that prices stabilized over the last couple of months. Many of my colleagues have struggled with finding success in crazy multiple offer scenarios.
Check this one out and you'll see how difficult pricing has been this year.
Here's 3 townhomes on the same street with essentially the same size....look at the price differences. The one without a "SOLD" price should be closing any day now for $432k I'm told.
Is there anything that might cause a retreat in pricing locally?
Given the jobs story being so rosy, my initial answer is no. I do expect another strong market coming in the spring, if not before. That said, I had a conversation with an appraiser this week who told me there are a LOT of people in Austin taking advantage of rising values to do a HELOC (Home Equity Line of Credit) to pull some of this new equity out of their homes. Using your home as an ATM machine was something we saw a lot of in California before the 2008 crash. But I think a strong jobs environment will be the story and what keeps us in good shape in Austin.
What else is going on that could be impacting the market?
Here's a theory I have.... "Confusion Prevents Commitment." Put simply, people become hesitant to buy when they don't know what's about to happen. So what might have buyers on pause besides exhaustion from how things went in the first half of 2021?
Some of this normalization/stabilization/slowdown could have something to do with people wondering what is going to transpire with federal government pending legislation.
There's a $1 trillion bill for "infrastructure" and another $3.5 trillion "reconciliation" bill crafted by Bernie Sanders that promises to add incalculable amounts to the national debt, while adding an $80 billion dollar expansion of the IRS.
The IRS expansion looms ominous in that any bank account over $600 would have all in-flows and out-flows monitored. Imagine the IRS having artificial intelligence from monitoring your bank account. If technology like what Amazon and Facebook already use becomes available to the IRS, it would not be long before the federal government would have the capability to use analytics on your spending to determine your habits, preferences, and priorities...and applying predictive analysis about you. Are you comfortable with the IRS having this power? There are privacy questions to say the least. And this would be the largest expansion of the IRS in history.
The scope of this legislation is breathtaking. Discussions have included punishing tax changes in death taxes, raising corporate tax rates (which ultimately get paid as a pass through to consumers), all manner of new welfare handouts and more. It's dizzying how much the government wants to give away and how they believe the accounting will work to pay for it. Here's a good set of articles to help you see what's there.
If you're frightened or confused by the sweeping nature of the legislation and the long term implications hidden in the "free stuff" rhertoric, then you might be hesitatnt to make a large financial commitment too. I'm not saying this is the reason the market stabilized locally...in fact, I don't think Americans pay enough attention to these things....but for those who do, this could be a contributor to them hitting the "pause" button. Many small businesses fear what will be in store for them if this passes.
We actually DID see that just before the 2018 mid term elections. People didn't know if there would be a big swing in the House and Senate majorities.....and ultimately just getting the question answered was the catalyst to a strong market in late November and December in 2018. People just needed that election over, and the real estate market didn't seem to care who won, just so long as the questions were answered.
You'll see that i've linked to and quoted the Wall Street Journal quite a bit here. I've suscribed a few months ago and I confess I love getting a paper in my driveway again and perusing it over coffee. It feels like old time news, instead of a media outlet picking a side and catering to it entirely. I recommend the Journal, actually. I feel like a better informed citizen.
In other news, we have now been empty nesters for a month or so. It was a rough start with some kidney stones for me, but Debbie and I are settling in and enjoying the extra time together.
Our son Scott has one semester left at Baylor (after this one) and our daughter is a newly anointed Texas Aggie. They say "the days are long, but the years are short." Boy that sure seems true. It really doesn't seem that long ago that we brought them home. Now they can both vote and one can legally buy beer. Wow!
Here's hoping your family is thriving and staying healthy! Call me if you have specific questions or want my team and me to look at your unique real estate situation. 512-698-7877