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With rising fears of the credit crunch and financial problems worldwide it is unsurprising that predictions for the property market in terms of sales are somewhat gloomy. Recently a report from an official body, the Royal Institution of Charted Surveyors (Rics) has stated that property sales could fall as much as thirty percent this year. In addition, Rics also released figures that property prices in general would fall by around five percent in 2008.
The consequences to this downturn may well lead to a fall in consumer spending, further worsening the financial situation. Purse strings have definitely been tightened in recent years and naturally sales as property, easily the most expensive investment anyone will make in their lifetime is experiencing the brunt of these harder times.
These are however purely predictions, property sales in recent years have been escalating at astronomical levels and understandably at some point this trend had to be bucked. Thankfully for first time buyers the fall in prices may well grant them access to the property ladder that had previously been denied. Sales of smaller homes and flats may in fact rise as those who have been waiting for a fall in property prices decide to buy homes for the first time.
Sales of these smaller properties may increase but it is dependent upon who will be able to sign up for mortgages. The rumblings in the American lending market have led to a record number of non-payments and repossessions; as a result, lenders in this country are now being more cautious with their money. While this will undoubtedly affect those who are trying to gain high percentage mortgages, those who have been saving for a number of years and have accumulated a considerable deposit may find themselves in the fortunate position of lower prices due to the reduced number of sales.
It is currently the case however that many new buyers, instead of buying property at the moment are waiting for even better prices before they decide to buy. While this may leave estate agents troubled, it does at least show a glimmer of hope that sales figures will improve in time.
The downturn in property sales is in no way endemic throughout the entire property market. While negative reports are estimating a fall of as much as a third in the coming twelve months, one market sector is in fact experiencing a golden age. Million pound properties are experiencing an upturn in sales not present in the rest of the property market. It is believed that over eight thousand properties worth a million pounds or more were sold in 2007. This figured is thirty six percent higher than the figures from the previous year showing that the property sales slump is not affecting all sectors.
Most of these million pound property sales occurred in the London area, particularly around the Kensington and Chelsea area, although areas of Surrey and even Edinburgh experienced record levels of sales for his type of property. Sadly for the property market in general these types of properties only account for around half a percent of the total sold, meaning that even though this particular sector is doing well the middling price range of properties is still suffering.
Property sales trends are however regional and London and the South East are still experiencing good sales levels whereas areas such as the Midlands are feeling the downturn more than most. The property market operates on a boom and bust cycle and after the years of plenty that sellers have experienced it is unsurprising that the bubble had to burst at some point.

While Austin has continued to have one of the best real estate markets in the country, we will finish the year with lower sales activity, higher unemployment and real estate inventory levels, lower rents, and a deteriorating economy. Real estate sales are trending down, even with near 50 year low mortgage rates. Rents are following the same pattern.

Consumer confidence is very low. Consumers are holding cash and focusing on their immediate needs. This has impacted every industry. Though credit is harder to obtain, it is not the driving factor for the reduction in consumer spending. It is consumer confidence. Even if car dealerships are offering huge discounts and zero percent interest, consumers are keeping their existing cars and not going into debt for a car they don’t absolutely need.

We are seeing the same trends in the real estate market. Tenants are staying put and renewing their leases; homeowners are delaying home purchases on fear of job loss or price erosion in the real estate market; and it is getting harder to qualify for a mortgage as Fannie Mae changes its guidelines. For example, a borrower now must have a 740 fico score to obtain the best mortgage interest rate, assuming they have the down payment and reserves for a conventional loan.

For the past two years, we have consistently raised rents. This trend continued until the financial crisis hit us this fall. Many homeowners are not able to sell their homes at a desired price point and are forced to lease their homes and become landlords. Inventory of rental homes is at an all time high in Cedar Park/Leander and Round Rock areas.

We are dropping rents on all existing inventory. Properties priced below $1,100 month have weathered the storm better than higher priced rental properties. The most resilient rental homes are those priced below $1,000/month. Homes leasing at or above $1,200/month earlier in the early part of the year are now leasing for 10% less. As rents increase, the pool of qualified tenants decreases. We are also seeing tenants downsize and move to more affordable homes.

We have transitioned from a landlord market to a tenant market. Next year, we will renew most of our leases at the same price point and may drop rents to keep current tenants. I expect to see more rental applicants affected by job losses, financial troubles, and foreclosures as homeowners lose their homes and are forced to rent. I anticipate the days on market will increase as long as our inventory remains at high levels. Owners will need to look harder at applications to avoid long term vacancies.

Though Austin continues to have one of the best economies and real estate markets it the country, our unemployment rate has increased, and our real estate sales market is deteriorating. According to the Austin American Statesman, our unemployment rate was below 4% in early 2008 and 3.5% a year ago. It has now reached 5.0%. This is still below the Texas and national average. However, Austin is not immune from the national economic, mortgage, and financial crisis. November home sales were down 40% in Austin, a level not seen since 1997. Some areas were down almost 60%.

Long term, Austin will continue to have one of the best economies and real estate markets in the country. 2009 will be a year of recovery. Rents and home prices most likely will trend downward, and inventory levels will remain high. If the job market recovers more quickly, we will see the market stabilize. Now is a great time to purchase a home or take advantage of the down market.

If you have a current mortgage on a primary residence with a rate above 5.75%, it may be a great time to refinance your mortgage. Mortgage rates for primary residence are in the 4.75% range. Our office provides sales, leasing, property management, handyman, and mortgage services.

Article written by our Broker, Chris Warren, Smart Source Realty