The May 2023 real estate market numbers are out from the Austin Board of REALTORS® (ABoR). The median home (of any type) in Austin sold for $550,000, which is down 16% from May 2022. The greater Austin metro had a similar yearly decline of 15% to a median price of $467,500.

Clare Losey, housing economist for ABoR, makes a great point in the report about purchasing power in Austin in the face of higher mortgage rates:

“Nationally, from May 2022 to May 2023, homebuyers’ purchasing power declined by an estimated 8% to 9% due to the rise in mortgage rates–May’s mortgage rates, averaging 6.4%, were among the highest they’ve been all year. However, in Austin, the moderation in home prices has helped to mitigate the decline in purchasing power. In fact, from May 2022 to May 2023, the monthly mortgage payment declined an estimated 3% to 4%.”

Here are additional stats for Austin and the greater metro:

Declines in year-over-year pricing make headlines in the media. However, with the recent shift in the market, this metric should be placed in proper context. This time last year saw peak pricing at the very end of the record-breaking run from mid-2020 to mid- 2022. While the median home price in Austin is indeed down 16% compared to this time last year, this obscures the fact that pricing has stabilized in recent months and even ticked up a bit on a month-over-month basis.

Here’s a chart showing the median price of a single-family home in Austin by month over the past 12 full months:

Though single-family homes were down about 13% from this time last year, the median price of a single-family home in Austin in May 2023 was up nearly 11% from February.

Despite the cooling market, inventory has held steady in recent months, with both Austin and the greater metro sitting around 3.5 months. Why is this? One important factor–aside from Austin’s outdated development code–is the recent sharp rise in mortgage rates. Many who want to move feel locked into their current home by low interest rates they often can’t afford to give up.

Interest rates on 30-year fixed mortgages have crept up again to around 7%:

The rise in interest rates caused a corresponding collapse in mortgage applications (i.e., buyer demand), which are down about 30% from this time last year:

This is keeping inventory unusually low for a cooling market and making the market more competitive and expensive than it otherwise would be. This phenomenon distinguishes the current housing market from past housing downturns, which occurred in a different interest rate environment.

It’s also interesting to note that the number of properties under contract in May 2023 was nearly unchanged compared to May 2022. This indicates that there is still healthy buyer demand in the market, despite the rapid cooling caused by higher interest rates.

Overall, it appears that the Austin metro market has returned to its normal seasonal behavior after roughly two years of incredibly extreme conditions. Home prices in Austin, recently named the 10th largest US city, are still well above pre-pandemic levels. Here’s a chart showing the median price of a single family home in Austin since 2019: