Which Way Are Things Going To Go?

Everything that’s happening in our world right now is so unprecedented. None of us know what to expect even for the next month. For that reason, I’m reading ten times as many articles and watching the stats more closely than ever before — as often as I can get updates. I think we’re all just looking for any indicators we can find that might predict which way all of this will be going.

Below are the macro stats for June and, following it, more commentary.

They say about six months of inventory is equilibrium. Below that number is a seller’s market and above that is a buyer’s market, more or less. I’ve been telling people for several months now that inventory is our key metric, as we try to keep a pulse on this market. That number is unlikely to flip quickly. It may eventually start to increase but it will do so incrementally. It could conceivably take YEARS for that ratio to flip and for Austin turn into a buyer’s market. It also might never happen — or at least not in the 2020s. It’s my opinion that if you buy in Austin, your investment will appreciate for MANY years to come. So, why are there often more than 3 buyers to one seller here (especially at the lower price points)? Because of steady job creation. Second to Silicon Valley, Austin is THE place for your IT staff to reside or even headquarter. Austin is viewed as a place with a lower cost and higher standard of living than many of the coastal areas. Tech companies are HIGHLY incentivized to gradually shift their staff here over places like the San Francisco Bay area. This migration of staff may continue for many years to come. Austin also has other economy pockets that are very robust and stable. I wouldn’t want to be a city with an economy based on gaming (Las Vegas) or tourism (Miami) during this time. Yes, the Austin live music sector is suffering but that’s a smaller portion of our mix of jobs. A MUCH bigger part of our workforce is employed by the government, which is generally considered relatively stable and protected, responsible for much less unemployment when times are bad. Also, note that there as been a LOT of data coming out over the past couple of months to indicate that there may be a mass exodus of sorts from the most dense, urban parts of our country as lifestyle preferences change. This could also even be more of a boon to real estate in southern, less dense cities like Austin.

Anyway, if I’m putting this in a nutshell, I would say “watch the months of inventory” above all other stats. As long as that stays low, prices will increase and your investment will remain strong. The lower total volume of buyers and sellers may remain low for awhile still but as long as the ratio between the two are so disproportionate, the residential market will remain strong.

Does all of this apply to commercial real estate, especially with empty office spaces sitting idle everywhere? I do not know the answer to that but I can, at the very least, say I’m FAR less bullish on that sector. If executives are satisfied with the productivity from the WFH workforce, they may choose not to renew leases and give millions of square feet back to the market. That would certainly result in plummeting prices.

The statistics for Austin proper are above. The statistics sheet for the Austin metro as a whole is below, so you can get a more complete picture: