In October, I published an earlier edition of the infographic shown to the right. It lists the median price of houses in the Austin market at the end of the year from 2004 through 2016. That article focused on the dangers of trying to time the market. Although real estate prices generally rise over time, that price growth is never a straight line. Like all markets, there are ups and downs along the way.
Today I added December 2016 and January 2017. This post was inspired buy the drop of just over $10,000 between December 2016 and January 2017. What could that mean? Are home prices in the Austin area starting to stabilize or maybe even fall?
It’s impossible to say from just one month’s performance. Housing sales always slow over the winter. This slowdown results from a number of factors, including the holiday season and bad weather (although bad weather is the best time to look at a house). These factors form the “seasonal differences” you hear so much about.
There are other factors at play, too. Inventory (the number of houses available to sell) in the Austin area remains extremely low. The February inventory held only a two month supply. In contrast, a stable market usually has about a six month supply. The inventory alone will ensure prices don’t go down to far and will probably keep pushing them upward.
Then there’s the national debt. The national debt lowers the value of money, which causes the price of everything to rise. General inflation bleeds into the housing market, too. Higher prices create higher prices.
And look at the trend line in that graphic. During the Great Recession, the trend line went up, even when we experienced a temporary drop in housing prices. And now, even with the drop between December and January, prices continue to increase apace. I projected that trend into the future by adding the 10-year average year-over-year change in price to SWAG future prices.
It looks like homes will only get more expensive as time goes on.
Next time, I’ll talk about what I think that means for individual homeowners.