San Antonio, Texas, USA skyline. (SeanPavonePhoto via Getty Images)

Yahoo! Finance writes, "Real estate prices surged nationwide when the pandemic hit. Bidding wars, all-cash offers, and contingency removals became commonplace.

Now, the tide has turned in some markets.

Home prices in some large US cities declined in April, according to mortgage data company ICE Mortgage (ICE). San Antonio and Austin in Texas, and Tampa, Florida — among the most popular cities during the pandemic — saw the biggest monthly price declines.

The shift comes as these markets recalibrate: Homesellers and house builders are adding more listings, just as fewer Americans are relocating there.

“The key differentiator we're seeing in terms of growing inventory levels in Florida and Texas is a rise in sellers' willingness to list their homes for sale,” said Andy Walden, vice president of enterprise research strategy at ICE Mortgage. Nine major US markets have seen new listings exceed pre-pandemic averages, he said, and eight of those are in Texas or Florida.

A new supply and demand landscape

Monthly home prices declined the most in San Antonio at 0.3% in April, followed by 0.25% in Austin, and 0.16% in Tampa, according to ICE Mortgage.

The cool-downs are a sharp turnaround from when home prices skyrocketed. Austin home prices soared almost 70% between 2020 and 2022, while San Antonio rose 40% and Tampa rose 60%, according to ICE Mortgage data.

Allan Griego, owner of Austin Market Realty, told Yahoo Finance that when COVID hit, homebuyers were making offers 5% to 20% over asking prices, inflating the market with a “hyper-accelerated value that was not sustainable."

The confluence of two events pushed supply and demand out of whack: Many folks moved to these markets for more space during the pandemic, but local homeowners stopped selling.

The number of available homes-for-sale cratered. The lowest monthly active listing counts between 2020 and 2022 were 1,400 in Austin, 2,600 in San Antonio, and 3,000 in Tampa — they represented a 67% to 80% inventory deficit compared to averages during 2017 to 2019. Meanwhile, inbound migration surged. The population grew by tens and hundreds of thousands in these cities.

All that, too, is changing.

In May, active listings reached 10,000 in Austin, 11,000 in San Antonio, and 15,000 in Tampa. The number of days homes are sitting on the market is higher than the national average, indicating these markets are leaning toward buyers.

One factor is a lack of affordable property insurance, which is pressuring more homeowners to sell, Walden said. The average property insurance premium in Florida and Texas were $11,000 and $4,500 in 2023, well above the national average of $2,400. Severe weather events such as hurricanes, tornadoes, and floods have led to an insurance premium surge in these two markets.

Homebuilders have also been ramping up development in the South. Florida and Texas saw the highest number of housing approved to build in April, according to permit data from the US Census Bureau. Year to date, Florida and Texas have 62,000 and 77,000 approved housing units, respectively. Each of the two states had about twice as many units permitted compared to the third-highest state, North Carolina.

“You have a lot of builders coming in and building new home inventory,” Jeremiah Taylor, chief real estate officer at the real estate platform Movoto, told Yahoo Finance. He added that markets like Austin have more landmass to “sprawl,” a factor contributing to growing inventory.

There is also less demand for housing as fewer Americans are moving to Texas and Florida. While many households still favor the South, moving data shows they now prefer Tennessee, the Carolinas, and Georgia over Texas and Florida. Austin is even experiencing an exodus, ranking as the fifth highest move-out city in 2024, according to moving company Pods.

"The affordability factor that a lot of people were drawn to in Austin has disappeared to some degree," Griego said. "Cost of living increased, so it watered down some of the allure of Austin."

Not a market crash

Experts say the cities' price declines don’t portend a crash.

"Those same markets were growing exponentially more than other markets," said Matt Vernon, head of consumer lending at Bank of America. "So the fact that they're now beginning to come down is just a normalization."

Griego said "overnight," hyperinflated prices flooded the Austin market and increased home values beyond what was sustainable during the pandemic. The incremental declines suggest Austin is adjusting back to normal housing market.

Even factoring in recent drops, these pandemic boomtowns have experienced generous average annual price growth over the last four years —11% in Austin, 9% in San Antonio, and 14% for Tampa. The historical US average growth rate is 5.5%.

“[Pandemic boomtowns] saw just such a massively outsized price increase to the rest of the country that you can actually make somewhat of a case that this softness is just a reversion to the mean,” Taylor said. “It got a little oversold.”"

Source: Yahoo! Finance 

Written by: Rebecca Chen

Published: June 19, 2024

Posted by Grossman & Jones Group on


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