As is the case with almost every aspect of our lives, there is a lot of uncertainty around how the coronavirus will affect the local housing market. Over the past few years, the Austin housing market has been increasingly competitive with the average home sales price rising year over year. Will Covid-19 slow sales or will buyers jump to take advantage of historically low interest rates?
The Impact of Covid-19 on Austin Home Buyers
The coronavirus has began to change our daily lives. Many are practicing social distancing, self-quarantining, and generally spending less time outside of the home. Going into someone else’s home is just one more opportunity to come in contact with germs, and surely there are quite a few buyers foregoing showings at the present moment. According to a survey performed by the National Association of REALTORs last week, only 16% of real estate agents said the coronavirus has affected buyer interest. However, I would have said the same thing last Monday when surveyed. It wasn’t until last Tuesday, that I heard from my first buyer client that they would be holding off on their home search until the Covid-19 scare blows over.
Will the Coronavirus Reduce the Number of Homes on the Market?
Sellers may also have fears about letting strangers into their homes. In Austin, we have had incredibly low inventory for far too long. There are simply not enough homes for sale to accommodate the ever growing buyer interest. Will sellers decide not to list their home due to fears of contamination? It’s quite probable, and this will only exacerbate the low inventory issue. Builders too are seeing the affects of the coronavirus. Nearly 1/3 of our raw building materials come from China, and this doesn’t even account for assembled goods such as appliances and fixtures. First hand, I’ve already witnessed supply chain issues, with new home buyer clients unable to get tile they had originally ordered since it was produced in China. If builders are delayed due to material delays, and sellers are reluctant to list, it won’t matter that interest rates are at historically low levels. Buyers won’t have any homes to buy.
How Will the Corona Virus Impact the Seasonality of the Austin Real Estate Market
We are just entering what is typically the spring selling season in the Austin area. Usually, this is when the largest percentage of sellers list their home, and the majority of buyers purchase. Home sale prices are usually the highest in the coming months as buyers compete with one another to move while school is out of session. However, it’s unknown how the coronavirus will affect the seasonality of the Austin market. Will it delay the spring selling season? Will it have no affect at all? Or, will it cause a mass recession leaving buyers unmotivated to make moves. After all, what good is an incredibly low interest rate if you are not sure you will have a job next month.
What Can We Learn From the Past?
In the past, Austin has been largely spared from housing market collapses. In 2009, the median sales price dropped from $192,000 in 2008 to $190,000. It increased to $195,000 in 2010 and stayed the same for 2011. Since then, the median sales price has been steadily increasing. We wrapped up 2019 with a median sales prices of $315,000 for the greater Austin area. While the median sales price changes from 2008-2011 were not too significant, the number of sales dropped significantly beginning in 2007. Between 2007 to 2008, the number of home sales in the greater Austin area dropped by about five thousand, and the number of home sales continued to slowly decline each year until 2011. In 2009, the Austin real estate market saw its lowest number of annual sales with only 18,632 sales occurring. In comparison, 35,437 homes sold in the greater Austin area last year.
It’s not unrealistic to think that the coronavirus may slow Austin area home sales yet again. Furthermore, if there is one area that may be more affected than others, I suspect it will be the luxury home market. After the housing market crash, we saw these types of homes suffer the most.
Overall, it’s still too early to say how the coronavirus will affect the Austin market. If you have questions about how it may affect your specific real estate goals, give me a call. I’m happy to share my opinions with you.
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