Austin Business Journal reports, "Homebuyers and sellers in the Austin metro likely will see little change in prices and inventory in 2025.

That's because median sales prices are likely to hover around the $450,000 mark reported in December 2024, and interest rates are expected to stay high, according to Clare Knapp, housing economist for the Austin Board of Realtors and Unlock MLS. It's a combination that's considered unaffordable for many first-time homebuyers, which means the onus is on homebuilders to build more homes with lower price tags to help move the needle on affordability in the metro.

A first-time homebuyer can typically afford to pay three times their income for a home, putting many in the market for a home in the $300,000 to $400,000 range, Knapp said.

“There’s just not a sufficient supply of those homes in the market,” she said. “In order to really get more on the market, it boils down to new construction.”

To be sure, rooftops are rising across the metro — particularly in the suburbs — at a fast pace. According to an October study by industry research firm Construction Coverage, the Austin-Round Rock metro saw more new single-family housing units authorized in 2023 than any other large metro in the country, with 37 new homes authorized per every 1,000 existing homes.

While all new-build homes are not in that affordable range, many are. For instance, in Liberty Hill’s Santa Rita Ranch, the top-selling master-planned community in the metro, homes start in the low $300,000 range.

Williamson County as a whole has been more attractive to first-time homebuyers, where the median sales price of a home in December was $425,000 compared to $575,000 in Austin.

Another factor keeping home prices elevated is that sellers are pricing homes above what buyers are willing to pay. In December, the average close to list price was 92%, indicating that sellers are overestimating the value of their homes.

“We want to see that ratio approach numbers more like 95%, 96% for us to be in a more comfortable market where we know that sellers are trying to meet buyers where they are,” Knapp said. “That’s just more evidence that sellers’ mentality is such that they’re a little bit too aggressive on pricing right now.”

Some sellers are still pricing homes based on what they would have sold for several months or years ago, said Anthony Gibson, a Realtor for Keller Williams Realty’s Realty Haus Group. He closed 79 home sales in 2023.

“Sellers don’t want to believe what their current prices are since the correction that’s happened in the past two years,” Gibson said.

For those homeowners, a solution could be to present them with options explaining how pricing a home with a high, low or average price would affect things such as days on the market or leverage in a deal, Gibson said.

Mortgage rates are also expected to remain elevated in 2025. The average 30-year fixed mortgage rate hit 7.04% on Jan. 16, according to Freddie Mac, and Knapp said the likelihood of rates dropping below 6% this year is pretty low.

“Will mortgage rates drop to a significant enough level so as to induce a considerable increase in buyers? I don’t think that will be the case,” she said."

 

Source: Austin Business Journal

Written by: Cody Baird 

Published: January 23, 2025

Posted by Grossman & Jones Group on

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