May 2022 Austin Market Update

[David Ivy]

In my Austin market report in January of this year, I said that buyer demand for real estate in the Austin metro is likely to be lower this year compared to 2021 due to higher housing prices, rising inflation, rising interest rates, and supply chain problems. It wasn’t a factor at the time, but we can now add the geopolitical uncertainty introduced by the war in Ukraine to the mix.

The new May 2022 report from the Austin Board of Realtors may indicate that demand is indeed slowing in the Austin area. While median home prices were up 18-19% last month compared to May 2021, active listings were up a whopping 146% in the metro. Inventory was up by 0.7 to 1.2 months. We are still in extreme seller’s market territory with 1.2 months of inventory. However, this is a welcome turn in the right direction for buyers and probably healthy for the market overall.

Why are active listings up 146%? It hasn’t come significantly from the supply side. The Austin metro is adding more housing per capita than any other big city in the US (see here). However, at present and for many years past, the housing supply in the Austin metro has been extremely out of balance with demand. Time will tell if developers, builders, and other stakeholders can eventually add enough supply to make a substantial market impact.

Not only are housing prices in the Austin metro at record highs, we also have mortgage rates up nearly 3 whole points from where they were 12 months ago, sitting at a near 15 year high:

These rates have effectively made Austin metro real estate even less “affordable” and forced many buyers to change their search criteria or drop their search altogether. This is a significant factor in cooling demand that is likely to continue for the foreseeable future. It will take time for buyers to digest this new rate environment that developed relatively quickly over recent months.

However, I want to reinforce that the Austin metro is still in an extreme seller’s market at 1.2 months of inventory and has very far to go to reach even a balanced market at approximately 6.5 months of inventory.