Austin Real Estate Update - September 2023

[David Ivy]

Housing inventory in the Austin metro has reached 4 months, which is the highest level in over eight years, according to the September 2023 market report from the Austin Board of REALTORS® (ABoR). The median home price in Austin remained stable at $536,028, only a drop of 2% from a year ago. The greater Austin metro had a similar yearly decline of 4% to a median price of $452,080. Sales volume was down 13% in Austin and 18% in the metro year-over-year

Overall, the picture is that of a market with relatively stable pricing, moderately declining sales volume, and moderately increasing inventory. The market also appears to be exhibiting its normal seasonal pattern with slower sales and higher inventory in the fall/winter months.

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

Despite the recent macroeconomic headwinds, the Austin metro still boasts one of the strongest regional economies and job markets in the US. By April 2021, Austin had already recovered all of 2020’s pandemic-related job losses. Seasonally adjusted unemployment in the metro now sits around 3%. The metro ranks first in job growth since February 2020.

However, even with the continued strength of the Austin metro economy, home sales are down significantly from their recent highs. The chart below shows the number of homes sold in Austin per month over the past five years.

Austin’s home sales volume in September 2023 was down nearly 50% from September 2020.

This decline in sales is part of a larger trend in the US real estate market as a whole:

The substantial decline in home sales, both locally and nationally, is due in large part to mortgage interest rates reaching 20+ year highs.

This has made home ownership more expensive and, as a result, pushed all but the strongest or most committed buyers out of the market.

All else being equal, this should increase inventory. However, though Austin inventory just reached an 8+ year high, the increase has been lower and more slow to realize than one might expect from just the home sales and interest rate data alone.

Why is this?

Many would-be sellers feel trapped in their current homes when comparing their current lower interest rate mortgages with today’s much higher rates.

In fact, over half of mortgage holders in the US are paying less than 4% interest.

This is one big reason why home prices haven’t fallen as substantially at a national scale. Note in the chart below that the median sales price of a home in the US remained high while, at the very same time, sales volume fell significantly.

Austin also has exhibited this pattern, with prices showing resilience in the face of declining sales:

However, it’s important to keep the bigger picture in view. Here, for example, is a chart of the median sales price of a single-family home in Austin over the past ten years:

As you can see, even with inventory reaching an 8+ year high, interest rates a 20+ year highs, and a pullback in Austin home prices, prices are still well above pre-pandemic levels. Home prices are "only" down around 17%  from the peak in May 2022.

What does this mean as a buyer? In many ways, this is the best market for buyers in Austin in many years. There are more listings to choose from now than any other time in the past eight years. Prices have fallen. Multiple offers are now the exception, not the norm. Buyers have significantly more negotiating power. They can take their time with their search and be more selective about a property’s condition. So, if interest rates are a would-be buyer’s primary reason for staying on the sideline, my recommendation would be to focus on opportunities to negotiate a reduced interest rate from a seller or take a look at new construction, where builders are often offering hefty rate reductions and other substantial incentives.

What does this mean as a seller? Sellers should know that there is still strong demand for Austin housing. However, it’s important to price for today’s market conditions, not those of the previous few years. Days on market are up and the majority of listings are reducing prices at least once during the process. However, properties priced appropriately can still go under contract in a matter of days, sometimes with multiple offers. Now is not the time to “test the market” with an ambitious price to “see what happens.” Since there are many more listings competing on the market than in previous years, it’s crucial to prepare a listing to stand out from the rest and take action to address potential buyer objections/questions before hitting the market.