Austin Real Estate Market Can Be A Mixed Bag
By Cyndi Bell
Is the Austin real estate marking going to collapse? Short answer, No. However, Austin real estate market in 2023 is not a straightforward one.
Is the Austin real estate marking going to collapse? Short answer, No. However, Austin real estate market in 2023 is not a straightforward one. We're no longer dealing with the rapid inflation of prices seen in 2021. But the prices haven't dropped as much as they rose, meaning we're at an all-time high compared to any year before 2020. This mix of conditions creates an environment that's both challenging and exciting for prospective buyers. To navigate this market successfully, you first need to understand it.
Our exploration begins by rewinding the story to understand the key factors that laid the groundwork for today's market scenario. It's crucial to comprehend the conditions and catalysts that led to the swift price spikes in previous years and how they shaped today's market trends.
Supply chain and labor issues have been one of these key factors. With disruptions caused by the COVID-19 pandemic, the construction industry was particularly hard hit, with delayed deliveries of crucial building materials and the labor to complete construction. This hampered the timely construction of new homes, reducing the available supply and contributing to price hikes.
Concurrently, during COVID, many sellers chose the sidelines and did not list their home during the two years prior (2020-2022) due to a variety of reasons. Coupled with a significant influx of people relocating to Texas during the pandemic, this further strained the housing supply. The shift to remote working enabled many to choose where they lived independent of their workplace location. The appealing combination of Austin's thriving tech industry, vibrant culture, and comparatively lower property values and taxes turned it into a prime destination for those seeking a balance of work and leisure.
This influx of newcomers, coupled with historically low interest rates and a low inventory of available housing turbocharged the Austin real estate market. The low rates made homeownership more attainable, and lower inventory drove prices up.
As prices soared by 50% to 75% from 2020 to 2022, the Federal Reserve acted on this inflation in an attempt to cool the super-heated economy and rein in the rampant price inflation, raising interest rates and doubling them from 3% to 7% in 2022. This increase was intended to act as an economic ice bucket, dousing the feverish market, and it has worked to a point.
Nevertheless, despite this pressure and the economic cooldown, the resilience of Austin's market is remarkable. Even with the attempts to chill the market, 2023 still brought higher sales prices than 2022. This resilient trend underscores the robustness of the Austin economy and its real estate market.
Many buyers are waiting for the “market to crash”; from the perspective of data, a crash isn’t coming. What the projections of many are, prices will continue to adjust in a downward trend, but overall appreciation will continue. Historically, looking back on a macro trendline, Travis County SFR (Single Family Residence) appreciates about $20,000 every year. The below graph reflects this nice appreciation over time; then COVID comes into play through normal appreciation. If you take the same trendline, extrapolating if COVID never happened, appreciation will level out in 2025. And as a buyer in this market, waiting isn’t in your favor because while many homes in Austin are in a price adjustment, overall, the market is still appreciating, hence the “mixed market” analogy.
Navigating such a mixed market requires understanding these complexities and formulating an effective strategy. Making an offer in this complex market requires careful planning and smart negotiation to secure a favorable deal while remaining aware of potential pitfalls.
Thus, by understanding the influences, intricacies, and idiosyncrasies of the Austin real estate market by working with a qualified REALTOR, potential sellers & buyers can navigate this mixed market of 2023 with confidence and success, ready to seize opportunities amidst the confusion and challenges.