Fredericksburg Texas

Disclaimer:  This analysis applies only to “singlefamily residences” sold within the city limits of Fredericksburg, Texas fromthe period of Jan. 1, 2007 through June 30, 2007 vs. Jan. 1, 2008 through June30, 2008 utilizing figures reported through the Gillespie County Board ofRealtors multiple listing service.

If you had maintained any hopethat the national trends concerning the strengths/weaknesses of the real estateindustry have somehow bypassed the Fredericksburg, Texas real estate market,you may be interested in the following:

Overall (per the disclaimerabove), the total number of listings available through June of 2008 has increased by 82%, the average time onmarket for any particular property has increasedby approximately 9%, total sales volume ($$) has increased by 1.7%, the average sold price has also increased by 1.7% and the median soldprice has increased by 10.2%.

A similar phenomenon (more on themarket, longer to sell, but higher average prices) has recently been reportedby Austin area realtors.  Thesimple explanation to these seemingly incongruent statistics lies in thenebulous, but all-important, “market timing”.

Simply put, while the problemsaffecting much of the country have not yet slammed Fredericksburg TX realestate, we are beginning to feel the effects of damage created by the sub-primebanking fiasco and the impact this has had on broader credit markets.

The above statistics can be usedboth to report what has happened (ytd vs. same period last year) but they canalso be used to forecast likely trends for the remainder of the year.  The fact that we have (on average) 82%more in inventory is simply staggering. Couple that with lingering creditissues, projections of increases to mortgage rates, stagnant wage growth, theincreasing cost of consumer staples, the weak dollar, record oil prices and apresidential election and all signs seem to point to a market that willcontinue to “soften” via increasing times-on-market and a significantlydeclining list price to sales price ratio.

Great news for buyers, not somuch for sellers. This is a rather classic and routine cycle we are in themidst of and one that (hopefully) will pass in rather short order. A review ofpast economic “downturns” and real estate cycles show them to be happening withmore frequency but with less severity and for shorter periods.

Some free advice:  if you don’t have to sell right now…don’t.  If you’re in the market to buy, “now”is as opportune a time as you’re likely to find in Fredericksburg, TX.  Remember, Experience Matters!

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.