Austin Market Update - January 2023

[David Ivy]

The first market numbers of 2023 are out from the Austin Board of Realtors. While the price of a single-family home in Austin is down nearly 18% off its May 2022 high, there are strong signs that the market is completing its normalization trend. Here’s an overview of the January 2023 numbers showing year-over-year changes for both the City of Austin and the greater metro area:

While the Austin area market produced another year-over-year decline in median home prices in January, pricing month-over-month has been mostly stable recently. Year-over-year declines will likely continue for the next 4-6 months, since we’re comparing to the extreme conditions in the first half of 2022. However, we still have very far to go to reach pre-pandemic price levels. Here’s a chart of the median single-family home price in Austin for the past 10 years:

With 2.2 months of inventory in Austin and 2.7 months in the metro overall, the Austin market is still very tight and very much a seller’s market according to that metric. This is relatively unchanged from recent months and shows that Austin is still in dire need of housing inventory. There are some tremendous opportunities at the moment with new home builder inventory as they roll out of the sometimes substantial spec home inventory they began building this time last year and transition into their more usual to-be-built sales process, where a buyer picks their vacant lot and goes through the whole months-long build process.

If you’re a buyer, then you’ll be happy to know that there are ~460% more active listings on the market now compared to this time last year. From an inventory, price, and negotiation perspective, conditions for buyers in the Austin metro are better than they’ve been in many years. Interest rates hovering in the 6%-7% range are higher than you’ve come to expect from the past decade, but they’re not outrageous (or even considered that high) from a broader historical perspective. Moreover, there are ways to mitigate these higher rates. For example, I’m seeing regular success negotiating interest rate buydowns at a seller’s expense. If interest rates are the primary factor holding you back from buying, then it’s important to talk to your lender and agent about rate reduction strategies.

If you’re a seller, then you’ll want to pay close attention to the market as we head into the spring. While it’s too early to say for sure, Austin's usual seasonal market pattern would suggest that spring will be better for sellers compared to Q4 of 2022. Going forward, you have to respect the available sales comparables, and strongly consider pricing competitively compared to other active listings in the area. Buyers have much more selection and can now be more picky about a property’s condition. Preparing a home well, staging when appropriate, and having strong marketing are crucial to help your listing stand out. Sellers often have less negotiating leverage compared to previous years. It’s becoming common for buyers to request a closing cost credit from a seller up front on an initial offer before any further negotiations related to inspection items or repairs.