Austin Market Update - August 2023

[David Ivy]

The August 2023 real estate market numbers are out from the Austin Board of REALTORS®. The median home in Austin sold for $541,000, which is only down ~1% from August 2022. The greater Austin metro had a larger yearly decline of 7% to a median price of $460,000. Inventory for Austin and the metro area remained stable on a month-to-month basis at 3.9 months and 3.8 months of inventory respectively. The number of closed sales also remained basically unchanged compared to this time last year.

Overall, the picture is that of a stable market that has found a new equilibrium.

Here are the full stats for Austin and the greater metro:

The Austin metro still boasts one of the strongest regional economies and job markets in the US.

So, the engine driving the Austin real estate market is still robust and is showing resilience in the face of recent tech layoffs and a broader economic slowdown as the Fed continues to rein in inflation.

However, no matter how strong the Austin metro economy, there’s no way around the fact that mortgage interest rates–now at a 20+ year high–have made home ownership and investment more expensive and pushed many buyers to the sidelines. In fact, mortgage applications are at their lowest level in nearly 30 years.

Not only has this interest rate environment cooled buyer demand, it has also applied downward pressure on home sales volume. Why? Over half of mortgage holders in the US are paying less than 4% interest.

This has the effect of “trapping” many would-be home sellers and subsequent home buyers in their current homes. Some homeowners wouldn’t be able to afford a similar or better home at current interest rates. Others are simply averse to swapping their low mortgage rate for a higher one, even if they can afford it. As a result, we have both cooling buyer demand and downward pressure on listing inventory. This combination of factors has kept housing prices relatively high/stable while at the very same time interest rates have reached a 20+ year high.

If Austin’s economic engine keeps running long enough to see interest rates fall sufficiently and stabilize at a lower level, then all the necessary conditions should be there for the real estate market to explode yet again. That is why, during this moment in the market, it is crucial for city and regional planners to make policy and code changes that would result in increased housing supply.