June/Mid-Year 2021 Austin Market Update

[David Ivy]

The June 2021 Austin market numbers are out from the Austin Board of Realtors. The familiar story of sky-high demand, cripplingly low inventory, and rising prices continues:

Here's the median sales price of a single-family home sold in Austin via the MLS from June 2020 to June 2021. It shows an increase of ~43% over that period. From January to June 2021 alone, the media price was up ~26% in Austin.

Here's the same chart for the 10 year period beginning June 2011 and ending June 2021. Over that period, the median MLS sales price of a single-family home in Austin increased ~152%.

However, there are some signs that the Austin market is beginning to stabilize. Here are some observations my colleagues and I have made of the past month or so:

• We’re no longer seeing the frenzy of showings and offers (20-50+ offers) on most listings. However, multiple offers are still very much the norm. Even though the offer numbers are way down, those buyers making them are still extremely aggressive. High earnest money, high option money, short option periods, appraisal waivers, financing waivers, and offer prices well above asking are still required to win in many cases.
• Many listings are no longer receiving multiple offers in the first 24 hours and going under contract in the first few days. Over the past 4-6 weeks, I’ve seen many local Realtors make posts on social media groups similar to, “Did activity for anyone else’s listings seem slower than usual over the weekend?”
• We’re seeing clients getting busy with “post-pandemic” activities, such as vacations, travel, and going out on weekends. Many have taken their eye off their home search to enjoy their summer with friends and family. When clients were stuck at home, they had much more time for their home search and probably felt more pressure to improve their current housing situation. Many are also waiting for their employer’s official policy on remote work or working from home going forward.
• Compared to earlier this year, more sellers appear to be reducing asking prices after going on market. Some sellers have seen what’s happened in 2021 so far and try to shoot the moon.
  

What does this mean? For one, it does not mean that median housing prices will drop in the Austin metro area. For median prices to drop, we would need to flip to a buyer’s market where there is more housing supply than there is buyer demand. The Texas A&M Real Estate Center defines a balanced market as one with roughly 6.5 months of inventory. However, the Austin metro area was at 0.6 months of inventory in June 2021. Anyone who believes that Austin is headed for a major correction or sustained lower prices in the foreseeable future needs a compelling and realistic case for how the Austin metro goes from 0.6 months of inventory to well beyond 6.5 months.

I think the most likely scenario is that the Austin market stabilizes and proceeds in a more orderly and predictable fashion at this new pricing level. Obviously, the extreme year over year (and even month over month) jumps in median home prices are not sustainable. As we progress through the 2nd half of 2021, we could see the Austin market return back to “normal.” However, “normal” for the Austin metro over the past 10 years has been a robust seller’s market with high demand, low inventory, multiple offer scenarios, and rising prices. Buyers will be paying these new, higher prices, but it may be easier to get something under contract without being ultra aggressive on terms. Most sellers won't see a line out to the street and get 20-30%+ over asking, but they can still expect to receive multiple offers with very favorable contract terms.