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Has the Austin Home Sales Market Peaked?

More real estate agents, more problems—at least according to some investors

Anyone paying attention to Austin’s housing market has suffered the deluge of reports naming it one of the hottest in the country. Real estate brokerages such as Redfin recently put it in the top 20, with average time on the market being two weeks. Meanwhile, magazines such as Forbes have taken to putting Austin on its lists of most overheated markets in the country.

Now, analytics site NeighborhoodX has issued a report highlighting a more arcane, but possibly more accurate, predictor of the housing market, in Texas and elsewhere.

The site reports that, according to some market observers and contrarian investors, membership numbers in the National Association of Realtors (NAR) tend to correlate with real estate market conditions.

NeigbhorhoodX created a chart to represent the NAR membership data alongside the timing of sales by Sam Zell, arguably one of the highest-profile contrarian investors (some call him "the grave dancer," according to NeighborhoodX’s Constantine Valhouli).

In February 2007, Zell sold Equity Office Properties Trust for $23 billion, not including debt ($39 billion inclusive of debt) to Blackstone, in what was then the largest private equity transaction in history. Hindsight has shown that Zell sold at or near the top of the market, or had an earlier sense that drivers for market conditions were shifting.

Between January 2000 and October 2006, meanwhile, national NAR membership almost doubled from just over 756,000 to 1.37 million, reported NeighborhoodX, which added that approximately half of all real estate agents are members of the group, according to NAR. "When everyone with a pulse is becoming a real estate agent because it seems like easy money, it’s a fairly accurate sign that a correction won’t be too far off," the site quoted Ary Freilich, managing partner of Blumberg & Freilich Equities, an investment partnership which he co-founded in 1991 to capitalize on the unusual market opportunities that were created following the real estate crash of the late 1980s.

To put that phenomenon in regional terms, NeighborhoodX explained that from 2000 to 2007, membership in the Texas NAR increased from 48,312 to 87,653, an increase of 81.4% during that time. Membership dipped to about 75,000 after the collapse of Lehman Brothers and the financial crisis—and remained around that level until 2013. As of 2015, the Texas NAR had 98,851 members—more even than at the peak of the last market cycle.

Texas market signals: Have we reached ‘peak broker’? [NeighborhoodX]