Fredericksburg Real Estate

As the third quarter for home sales comes to a close in Fredericksburg, TX it is readily apparent that the “national housing crisis” has had a measurable effect on the local market.  Whether through lack of available financing, overpricing or just plain old psychology buyers are buying fewer and less costly homes in Fredericksburg.

The analysis that follows is based on MLS data for the period 1/1/07 through 8/31/07 vs. 1/1/08 through 8/31/08 and only represents homes sold within the city limits of Fredericksburg, TX:

·      The Median Sold Home Price is down 2.55% ($215,500 vs. $210,000);

·      The Average Sold Price is also down by 0.9% ($233,222 vs. $231,100);

·      The average number of days on market has increased by 3.4% (148 days vs. 153 days);

·      The total dollar volume closed YTD has decreased by 7.10%;

·      While 2007 evidenced shows that nearly 70% of properties purchased involved financing (other than cash), only 60% YTD for 2008 involved financing.  This could be interpreted as evidence of the increasingly difficult financing environment.

Clearly the market has cooled somewhat but we have yet to face the problems so commonly reported on the nightly newscasts. The good news is that Fredericksburg’s economy remains among the healthiest in the State of Texas. 

Anecdotal evidence supports the theory that high gas prices over the recent summer months kept folks closer to home.  Our convenience to San Antonio, Austin, Houston, Dallas, etc. played well into the new economics of summer “stay-cations”.  Only time will tell if tax receipts bear this out.

Our economic fundamentals remain strong and the draw of the Hill Country has not lessened.  We stand poised for a sustainable recovery.  The $64,000 question is when will that happen?

I will never be mistaken for an economist but my crystal ball tells me that real estate sales will continue to lag behind the “boom” years of 2003-2006.  The continuing shake-out on Wall Street and our lending institutions will continue to make funds scarce for all but the most highly qualified buyers. 

Buyers that do have cash, sizable down-payments and or pre-arranged financing will continue to see asking prices soften a bit and will see the spread between list prices and sales prices continue to grow.

Sellers should heed the trends noted above and expect longer times on market and lower actual sales prices (prices further restricted by appraisals required by lenders).  Jumping ahead of these documented trends will serve you well.

What do the “greater fool theory”and SUV’s have to do with real estate in Fredericksburg, TX?  These day (unfortunately), plenty!

The greater fool theory holdsthat paying too much for something is o.k. as there will always be a greaterfool willing to pay more. The theory manifests itself in our current marketwhen a seller refuses to lower their price to “market” in the hope that a“greater fool” out there won’t mind overpaying for their particular home.   Of course, that seller (ifsuccessful) becomes a buyer and their logic is immediately reversed when (tothem) everything they see as a new purchase is “overpriced”.

Many of the properties currentlyon the market in Fredericksburg were purchased in the last 5-6 years when themarket could be relied on to appreciate. In many ways, these folks bought at the peak.  The facts and figures of current market conditionsirrefutably tell us we have reached a plateau in sales, pricing, volume,inventory, etc. and some indicators are beginning to decline.  As inventory builds (currently as muchas a 24 month supply in some sectors of the market, equilibrium is generallyagreed to be around 6 month of supply) time on market increases, list price tosales price ratios decrease and downward pressure on pricing builds.

As Fredericksburg tends to be a“discretionary market” (e.g. buyers don’t HAVE to buyer here and (most) sellersdon’t HAVE to sell), we have an impasse. If history is any indication (as we all know it is), a new rule willkick in to break the stalemate…the golden rule.  No, not that one, the more callous one that says “he who hasthe gold makes the rules”.  Inother words,  buyers (who shouldalready have the upper hand, but don’t) who have cash in hand and/orpre-approved financing will soon see more and more sellers willing to “blink”and accept prices more in line with market realities.

SUV’s?  Soaring gas prices has a lot of folks trying to sell SUV’sto replace them with more fuel-efficient alternatives.  The market for SUV’s has been floodedwith inventory that very few folks are willing to buy.  The “value” of SUV’s has plummeted andsales of new units are the worst they’ve been in a decade.  The simple, beautiful and pureprincipals of supply and demand cannot be more clearly evidenced.

My advice (and it’s worth whatyou’re paying for it) to buyers is to be aggressive or wait it out.  Things are definitely going yourway.  You do, however, have toactually ask (make a written offer) for what you want.  All a seller can say is “no”.  To seller’s I advise you to listen toyour agents, read the reams of data they provide you and adjust your expectationsaccordingly. If you elect not to listen, don’t blame the agent for not sellingyour property, the problem lies much closer at hand.

Remember, Experience Matters

It has been said by some verysavvy folks that “water is the new oil”. If businessmen like T. Boone Pickens are to be believed (he’s beenbuying up hundreds of thousands of acre feet of water rights in west Texas foryears now) the increasing scarcity of water in our state, combined with therapid population growth will ultimately combine to make water as precious asoil is today.

As San Antonio drains the Edwardsaquifer dry and DFW pipes water in from Oklahoma and Arkansas pressure willincrease of municipalities to secure the future of their water resources lestthey face the prospects of becoming like Atlanta .  Of all the major Texas cities, only Austin (that I know of)has taken concrete steps to assure adequate water to feed its projected growth.

Water and energy production areinexorably tied together as you need tremendous amounts of water to create“energy” and that “energy” is needed to transport the water.  As we move more and more towards “greensolutions”, water will play an even more pivotal role in that type ofproduction.

How does this affectFredericksburg TX Real Estate? Simple, land with existing water (or, like oil, “proven reserves”) islikely to appreciate at a more rapid clip than will land without this valuableresource.

If you have been searching forproperty to purchase, you (hopefully) have been fully informed of our water“situation” and the need to assure yourself that the property in question hasadequate water for your intended use(s). If you are selling a property you have (hopefully) been told of thevalue that “proven water” can add to your parcel.  If not, please call me to discuss this in more detail. (Bythe way, do you know who “owns” the water in all Texas creeks, streams, riversand lakes? Hint: it’s not the adjacent land owner.)

The Hill Country Underground Water ConservationDistrict has actively been studying and monitoring our ground waterresources for some time. Surrounding counties have their own districts that are (in most cases)not nearly as proactive as the HCUWCD. What does this mean to you? It means that very smart, very forward-thinking people (and politicians)are watching and waiting for the need to REGULATE what we so often take forgranted. It’s coming folks.

There are ways to plan for theinevitable regulation of this resource and this is a tremendously complicatedissue that can’t be covered completely in a simple blog posting.  Be forewarned, however, that “waterrights” (they are separate and distinct from mineral rights) will play anincreasingly noticeable and important role in land valuation and buyerpreferences into the foreseeable future. Remember, ExperienceMaters