Austin Market Update - July 2023

[David Ivy]

The July 2023 real estate market numbers are out from the Austin Board of REALTORS® (ABoR). The median home in Austin sold for $550,000, which is down 12% from July 2022. The greater Austin metro had a slightly lower annual decline of 10% to a median price of $462,000. Inventory for Austin and the metro area remained unchanged from June at 3.9 months and 3.7 months of inventory respectively.

Clare Losey, housing economist for ABoR, made this comment:

“With a rise in pending sales and closed sales remaining consistent, this further indicates that buyers are becoming more accustomed to the higher interest rate environment and understand that elevated mortgage rates may continue. We are seeing a year-over-year decline in median sales prices, as buyers cannot afford the same price points with these higher rates. Looking ahead, the odds of Central Texas experiencing a recession continue to decline with each passing month. Despite mortgage rates rising, Austin’s economy–which is fueled by a strong labor market– continues to outperform national expectations.”

Here are additional stats for Austin and the greater metro:

Even though housing prices have fallen 10% from the previous year, the Austin metro still faces an affordability problem. Dr. Losey notes, “In 2023, the median family income in the Austin-Round Rock MSA is $122,300. This means buyers generally can afford a home priced between $300,000 to $400,000. However, less than 40% of homes sold in the Austin-Round Rock MSA in July of this year alone fall into this price range. ABoR’s July housing market data stresses not only the strong, ongoing housing demand in our region, but also the critical need for more housing stock at all price points.”

We’re heading into the fall with rates around 7.25% for a 30-year fixed mortgage. That's the highest rates have been in over 20 years.

This has directly cooled buyer demand by making home ownership more costly. Moreover, with interest rates previously in the 3-4% range for many years, lots of would-be sellers are feeling “trapped” in their current homes, not wishing to swap their much lower rates for rates in the 7%+ range. This has kept inventory much lower than it otherwise would have been given the fairly rapid decrease in buyer demand last year.

As a result, many buyers are turning to new construction (WSJ article) both as a source of available inventory and for incentive packages, which often include reduced interest rates. Nationwide, new construction is making up over 30% of single-family home sales:

Current market conditions have also been a boon to “Baby Boomers,” who often have substantial home equity from years of home ownership and can tap into retirement savings to buy all cash or afford significant down payments to soften the sting of 7%+ interest rates. In fact, according to the National Association of Realtors, Boomers this year now make up nearly 40% of home buyers.