Austin Market Report - June 2024

[David Ivy]

The June 2024 market report from the Austin Board of REALTORS® (ABoR) shows that the median home price in the City of Austin decreased 1.6% to $600,000 over the past 12 months. The greater metro area’s median price fell 6.8% to $450,000. Housing inventory in Austin rose to 5.8 months, which is up by 1.9 months from June last year. Inventory in the greater metro rose to 5 months. Inventory is now very substantially above the extreme lows seen in recent years, when inventory in the Austin area fell below 1 month (very extreme imbalance between demand and supply) for a sustained period.

Kendall Garrison, CEO of Amplify Credit Union, recently said, “The good news is that we are moving toward a more sustainable level of inventory, which will provide price stability for sellers and more choices for buyers. The real test will come when the Fed begins to cut rates, as indicated for later this year, making it a challenging market for both parties.”

Clare Losey, ABoR’s housing economist, recently said, “From the buyer’s standpoint, there are a number of advantages and disadvantages…The biggest headwind to them are higher mortgage rates and the decline in purchasing power.”

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

Here’s a chart showing the median sales price of a single-family home in the City of Austin for the first half of 2024:

The median sales price for a single-family home in June 2024 was up roughly 16% from the beginning of the year. Compared to the recent pricing peak in May 2022, single-family home prices in Austin are down approximately 11%.

For some broader context, here’s a chart of the median sales price of a single-family home in Austin over the past 10 years:

As you can see, pricing in Austin is still substantially above pre-pandemic levels. In fact, the median sales price of a single-family home in the Austin metro is nearly 60% higher than it was at the start of 2020. For the 10 year period spanning June 2014 through June 2024, single-family prices in Austin nearly doubled, yielding an annualized appreciation rate of ~9.3% in that period.

A 30-year fixed rate mortgage is sitting around 6.85% interest. That is the lowest we’ve seen in several months and well below the ~8% peak seen back in October 2023.

The Fed monetary policy and rate decisions remain the biggest single driver of the residential real estate market overall. The Fed recently adjusted its short term projection to one quarter point rate drop for 2024, though it had earlier predicted as many as three drops. So, we can still reasonably expect mortgage rates to drop this year, but probably not by much, and at a slower pace.

I also wanted to include a note for STR operators and investors in Austin. As you may know, in August 2023, a federal judge ruled that the City of Austin's short-term rental (STR) regulations were unconstitutional. These rules made it very challenging–-and frequently impossible–-for investors and others to operate non-owner occupied STR properties legally in Austin. The city, at the time, expressed disappointment at the ruling and began reviewing its options in response.

We now have some clarity on the city's response to the ruling, and it's overall good news for STR investors wishing to operate in accordance with local law. In this recently issued memorandum, Austin City Council requests that the City Manager modify the city’s STR regulations as needed to bring them into compliance with the ruling.

Going forward, there should be essentially no substantial difference in treatment between owner-occupants and investors/non-owner occupants when it comes to Austin's STR regulations. Investors should be able to apply for and receive STR permits under the same rules as owner-occupied properties. So, the stigma that Austin doesn't allow STR investment properties, outside of special circumstances, now seems inaccurate.

To be clear, this doesn't mean that there are no rules or regulations. For example, the city can still require a license to operate an STR, which comes with a number of requirements (e.g., sufficient insurance, application fees, certificate of occupancy, etc.). The city can also still require operators to collect tax similar to a hotel. Moreover, it seems that condo associations and neighborhood HOAs may still impose their own STR rules.

What if I’m a buyer? In many ways, this is the best market for buyers in Austin in years. There are more listings to choose from now than any other time in nearly a decade. Listings are selling for roughly 95% of their list price on average. Multiple offers are now the exception, not the norm. Buyers have significantly more negotiating power. They can take time with their search and be more selective about a property’s location and condition. So, if interest rates are a buyer’s primary roadblock, then I recommend seeking opportunities to negotiate a rate buydown at a seller’s expense or looking at new construction, where builders are offering rate reductions and other substantial incentives.

What if I’m a seller? Know that there is still robust demand for Austin housing and that prices are still considerably higher than just a few years ago. However, it’s important to price for today’s market conditions. Days on market are around 55-65 days on average, depending on the area. Many listings are adjusting their asking price at least once while on the market. But 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.” With the increased competition among sellers, it’s crucial to prepare a listing to stand out among the rest and work to address buyer objections prior to going on market.