Posted on 02/16/2003 11:23:08 AM PST by MeneMeneTekelUpharsin
When Bear Poth put his Rollingwood home on the market in October 2001, he expected to have no trouble finding a buyer willing to pay $419,000 for the house that has red oak floors, big windows and a canopy of live oak and pecan trees shading the pool. After 15 months and six price reductions, the price was $336,800. But still no takers. Poth's experience is extreme but not atypical in Central Texas, where sellers have had to lower their expectations to match a cooling market. Last year, the median sales price grew by 3 percent compared with 2001, to $157,000, the smallest increase in five years. The number of sales declined by 1 percent.
"A lot of people have lost their jobs, and it's clearly different than it was several years ago when offers were placed at prices above the asking price," Poth said. "I'm hoping the economy has bottomed out and is on the upswing." That may be wishful thinking. Some local real estate experts expect 2003 to be a repeat of 2002, with economists forecasting only tentative job growth in the region. For buyers, that means an abundance of houses to look at. For sellers, it means facing up to tough realities about how much they can get for their houses. Joe Stewart, chairman of the Austin Board of Realtors, thinks price reductions averaging 3 percent will continue.
Stewart says he's persuading sellers of his high-end listings in West Lake Hills to cut their prices by $10,000 every 45 days, hoping to hit the right number. Still, some sellers are in denial. "They don't believe what the Realtors are telling them, that it's a slow market," Stewart said. "We spoiled our sellers 2 1/2 years ago," when the economy was booming, he said, "and now we're having to undo that mess."
Big price, big cuts
The slowdown last year was uneven. In real estate zone 8E, which includes West Lake Hills, the median price plunged 22 percent, although the number of sales rose by 26 percent from 2001. But in the adjacent zone 8W, west of Capital of Texas Highway (Loop 360), the price decline was only 7 percent. Some areas, such as Buda and Georgetown, saw rising sales and moderate price increases of 5 percent to 7 percent. Round Rock remained the top selling area, but the 1,850 sales were down 11 percent from 2001, and the median price was flat at $155,000. Upper-end houses took the hardest hit. Sales of homes priced between $800,000 and $899,999 fell 25 percent in 2002 compared with 2001. There are nearly 200 houses priced at $1 million or more for sale in the Austin area, taking an average of nearly a year to sell.
When mansions do sell, the price reductions are often steep. A 12,000-square-foot house on Stratford Drive overlooking Town Lake went on the market more than a year ago for $7.75 million. Now it's listed for $6.7 million. In the fashionable Tarrytown area in West Austin, agent Karen Kuykendall listed a 1,700-square-foot house for $475,000 in July. The owners are in no rush to sell the Sharon Lane house, but Kuykendall persuaded them to drop the price almost immediately, to $425,000. "We just had a sort of come-to-Jesus on it," Kuykendall said. In September, she lowered the price again, to $395,000.
"It's certainly not the market it has been," said Kuykendall, with Green Mango Real Estate Co. "We're having to struggle with our listings. We don't have enough people looking." There is plenty for them to look at. Listings peaked at 9,000 in July, and fell steadily. But there were still more than 8,000 houses for sale at the end of December -- 25 percent more than a year earlier. "Some of the buyers are overwhelmed by the amount of homes there are to look at," said Scott Betters- worth, an agent with Keller Williams Realty. "I think our market is more depressed than some other areas. We were way more affected by the dot-com debacle." But Jack Harris, research economist at the Real Estate Center at Texas A&M University, says the area's six-month supply of houses is "about normal," though it may seem high compared with the tight two-month supply in 2000.
The local market is "not falling apart or anything. It's just getting back to normal," Harris said. Harris said Central Texas ranked near the bottom on price appreciation in a third-quarter survey of 185 housing markets. During the previous five years, the region saw one of the biggest run-ups, with prices increasing nearly 45 percent. The market was due for an adjustment, he said. "Nobody's talking about a bubble there anymore," Harris said. "Nothing lasts forever." Record low interest rates hovering near 6 percent helped keep the housing market going through the economic downturn. Nationally, existing home sales hit a record level of 5.56 million in 2002. Economists think low interest rates could last until late summer. There is concern that home sales will fall off once interest rates start to rise as the economy rebounds. But Judith Bund- schuh, a loan officer with Mortgages Direct in Austin, thinks those worries are overplayed. "Generally speaking, rates move up when the economy is stabilized and the stock market improves, so people have more money to spend, and that can stimulate the home purchasing market," Bundschuh said.
A time to buy, sell
Bettersworth, the real estate agent, has experienced both sides of the local market. He sold his condominium in the Arboretum area for $100,000 -- $14,000 less than his original price but $25,000 more than he paid for it eight years ago. This weekend, Bettersworth, his wife, Nancy, and their newborn son, Carter, are moving into an 1,800-square-foot house on Laurelwood Drive in southwestern Travis County. He paid about $260,000, about 3 percent less than the seller had asked. "It's a very attractive time to buy, and still a good time to sell if you have a decent equity position in the house and you're realistic about the present market," he said. Harris, the economist, says home sales in Central Texas will begin slowly but will build up steam throughout the year. That may not be soon enough for Poth. He bought another house in West Austin and has spent money expanding and remodeling it. The family will move to the new house in March. Poth, who took his Rollingwood home off the sales listings in December, said he'll put the home back on the market in a few weeks and lower the price once more.
Welcome to the New World Order.
This will only expand further. Watch...
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