The Austin housing market is experiencing a more “typical” real estate cycle this year as the spring selling season kicks into full gear.
With pending sales remaining steady or showing an increase throughout the region, the market is displaying renewed vitality.
In this article, we will look at the factors contributing to this resurgence, the trends shaping the market, and the outlook for the future of the Austin housing market.
Stabilization and Growth in the Austin Housing Market
The Austin housing market has seen a bit of a stabilization in recent months, with monthly inventory levels rising to 2.6 months year over year, providing buyers with more options as they navigate the market.
For much of 2020- 2022, we saw inventory as low as .4 months!
That being said, “months of inventory” have declined from their high of 3.2 months in October 2022.
Home builder confidence in the Austin housing market has also grown as the market stabilizes.
Taylor Jackson, CEO of the Home Builders Association of Greater Austin, noted that builders have a renewed sense of optimism in the direction the market is heading, as evidenced by fewer contract cancellations, and improvements in the supply chain.
Let’s Take a Closer Look at the Austin Housing Market in February 2023
NOTE: Because it often takes several weeks for all of the data to update, we don’t have a full picture of the prior month until 3-4 weeks into the current month.
1. Sales volume for single-family residential units decreased 17.15% year over year. There were 2,542 closed transactions in February 2022 as opposed to 2,106 this February. Dollar volume dropped from $1.54 billion to $1.13 billion. However, we are seeing an upward trend into March, indicating that we are returning to more normal seasonality in the Austin housing market.
2. The average sales price dropped 11.22% from $604,211 to $536,391. The median home price dropped to $436,419, a 12% decrease year over year. Home prices have been coming down since their peak in May of 2022.
3. We’ve seen monthly inventory levels drop since October to 2.6 months, which is a sharp increase from the .3 months’ supply in housing we saw a year ago.
NOTE: Anything under 3 months is still considered a strong seller’s market.
4. We’ve seen an increase 499% in the number of homes for sale year over year. Homes are staying on the market longer, and we’re seeing fewer buyers than in recent years. This is largely attributed to higher interest rates, which have reduced buyer demand and impacted affordability.
5. The average days on market, which is how long it takes a home to sell from the time it goes on the market to the time it goes under contract increased from 76 days to 126 days.
6. Were also seeing the close price to original price come down from 103% of list price a year ago to 91% of list price now (this is a good metric to evaluate when writing up an offer.
7. We are seeing more homes on the market and greater numbers of sellers reducing their price in the past 30 days.
8. Pending sales have increased in March after a decrease in January and February (again, another sign that the Austin housing market is returning to a bit more normal seasonality).
Data from the Past 7 days
Since the full report is available later in the month, it’s also helpful to see what’s going on CURRENTLY to make some predictions about the next few months. In the past 7 days:
- There are 1113 total new listings that hit the market.
- 1199 listings that had a decrease in pricing (120 had an INCREASE!)
- 1100 homes are under contract or pending in the past week, which shows an uptick from February contracts.
This largely appears to be a return to the pre-Covid normal housing market here in the greater Austin area.
So What Does All This Mean?
In a nutshell, we are returning to a healthier real estate market in Central Texas.
We are still technically in a “sellers” market, but in the wake of the buying frenzy, you’re seeing sellers get a little more anxious more quickly than they had previously. A year ago, you could expect to list your house on a Thursday, get 50+ people through the doors over the weekend with multiple offers over list price by Monday morning!
Now, sellers are having to position their homes more strategically and look at more creative options. Their real estate agent should understand various loan programs and creative strategies to help buyers get into the homes given the current interest rate landscape.
Buyers have a LOT more options!
Home buyers also have quite a few “benefits” they didn’t have a year ago! Just a few of these are:
- Buyers can be more selective because there are more options on the market.
- Negotiating the purchase price.
- Negotiating for repair and maintenance items.
- Sellers are covering the cost of title policies.
- Sellers are paying for residential service contracts (Home Warranties).
- Sellers are giving concessions to buyers to cover closing costs, buy down interest rates, and more.
The increase/decrease in interest rates impacts real estate activity from one week to the next and we’re in an unpredictable time right now with regard to where interest rates are going to go, making home buyers a little more cautious about moving forward.
In addition, we’re seeing somewhat lower numbers of homes coming to market, most likely due to the historically low interest rates that people were able to get in 2020 through the very beginning of 2022.
This will, undoubtedly, cause some homeowners to either stay in their homes instead of upgrade or downsize due to the cost aspect alone. It will also cause some homeowners to become “accidental” landlords since they can keep their current interest rate in place and, in many cases, generate a positive cashflow and build equity in the home.
Are We Headed for a Housing Correction?
I know there has been talk about a real estate market “crash”, but the Austin housing market is still fundamentally strong. The factors that caused the crash in 2008-2009 are simply not present.
There are other factors at play that are causing the ups and downs in the housing market across the board, namely the Feds and the fact that they are doing their best to get a handle on inflation. Combine that with the collapse of Silicon Valley Bank and Signature Bank and there are external factors that are impacting supply and demand.
At the end of the day, we still have a shortage in housing nationwide.
After builders pulled back over the past year, we are starting to see an increase for the first time in six months in terms of housing starts. The main reason for the adjustment to the Austin housing market, and nationwide as well, is quite simply interest rates, and the uncertainty in recent weeks regarding the banking/lending industry.
Builders, lenders, buyers and sellers are now adjusting to the new interest rate landscape. And while we are most likely going to see a decrease in the future, nobody can predict when and/or how much, so if you’re wanting to buy (or sell) your home, the right time is now!
As a seller, you can never predict the top of the housing market.
As a buyer, you can never predict the bottom of the housing market.
The one thing you CAN do is make sure that you are doing your diligence. Partnering with an experienced real estate agent (who has weathered the ups and downs of real estate market cycles) can help you make educated decisions that meet your goals in the housing market.
Your Realtor® will guide you through the market, provide analysis for your particular situation and each home and whether buying, selling, or renting is the best “right now” option for you.
