Austin Business Journal writes, "Austin's housing market has had a full year of "normalization," experts say, but we aren't out of the woods yet.

After years of soaring prices and diminished inventory fueled by a pandemic-era buying frenzy, home prices began falling back toward more normal levels and inventory began rising in July 2022. Market observes have framed this as a return of more normal conditions, dictated by actual supply and demand and affected by typical season fluctuations.

A year later, what does that look like? The Austin Board of Realtors this week reported that the metro had a median sales price of $462,000 last month, down 10% from a year prior and much lower than the peak of $550,000 in April and May 2022.

Inventory, which represents how long it would take to sell all of the homes on the market if new listings stopped, also increased by a full month to 3.7 months in July.

"July's housing market activity underscores the resiliency within the MSA's market," said Ashley Jackson, a Realtor and 2023 ABOR president. "We now have a direct year-over-year comparison of when our market began stabilizing, and the big fluctuations we’ve previously seen have started to even out."

Inventory hasn't been this high since August 2012. Experts typically consider at least six months necessary to show that supply and demand are in balance.

But elevated interest rates — the U.S. average for a 30-year fixed rate mortgage was just over 7% Aug. 17, the highest level in more than 20 years, according to Freddie Mac — have certainly slowed sales. Plus, there are serious threats around the corner. A dearth of new home deliveries and a lack of deeply affordable housing are hampering the market, Jackson said.

And while the metro is seeing home prices fall, the median price is still not affordable to most buyers.

The median family income in the metro is $122,300 for a family of four, according to federal statistics. ABOR economist Clare Losey said buyers with this level of income can typically afford a home priced between $300,000 and $400,000. However, less than 40% of homes sold in July in the Austin-Round Rock metro fell into that price range, she said.

Jackson said the disparity between median family income and housing prices reflects both a housing crisis and wage stagnation.

"We need every tool in our toolbox,” she said about making housing more attainable. "We need more affordable housing, we need workforce housing — and, I want to say affordable housing with a capital 'A,' because we want to serve someone in every industry that is part of the Austin metroplex."

For now, rising housing costs are pushing many people farther from the city center. The median sale price of a home in the city of Austin was $550,000 last month. It was lower in the periphery counties of Williamson, Hays, Bastrop and Caldwell, ranging from about $298,000 to $428,000.

"You could be talking about a single-family home in Elgin that’s in the upper $200,000s, which is a fantastic price point," Jackson said. "But when you think about the buyer for that home, where do they work? They could be working at Barton Creek mall, for example."

When asked what housing types the metro needs, Jackson’s answer was simple: "All of it. Every type. Every price point. Everywhere."

Home inventory has steadily increased in the past year. The pandemic trend of homes selling as soon as they hit the market is long gone, largely due to higher mortgage rates that have curbed buying power. Homes sat on the market for an average of 59 days in July, up 37 days from the same month in 2022.

Matt Holm, a Realtor who ranked No. 2 among solo agents in the ABJ's latest Residential Real Estate Awards and leader of the Holm Team at Compass, said the metro's recent inventory boost could be eaten up quickly if interest rates begin to fall.

But if higher rates persist into 2024 and sellers are unwilling to part with their sub-3% mortgages, next year's first quarter might be "the buyer season of our lifetime," he said.

Pending sales were up 14% year-over-year in July in the Austin metro, to 2,892.

Meanwhile, new construction activity is a fraction of the level seen a year ago, Holm said, adding that, "everything the Fed is doing is discouraging builders from putting houses on the ground."

So far this year, the city of Austin has added about 3.4 million square feet of single-family homes, compared with about 8.8 million square feet in 2022, according to data assembled by the Development Services Department. At least 10 million square feet were added each year from 2019-2021, and the added square footage hasn't dipped below the 4 million mark since 2011, although there's still time for builders to reach that mark in 2023.

Austin is not alone in seeing fewer new homes delivered this year. Nationally, builders aren't constructing as many single-family homes as they were at the start of the pandemic, according to an Aug. 17 Redfin report. That comes at a time when higher mortgage rates are dissuading many from selling their homes, gumming up the resale market as well.

Nationwide, newly built homes made up 31.4% of single-family homes on the market in the second quarter, compared with 30.4% in Austin. Building permit activity "soared" in 2021 and 2022, according to the report, leaving many builders with new inventory left to sell."


Source: Austin Business Journal

Written by: Cody Baird

Published: August 18, 2023

Posted by Grossman & Jones Group on


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