The Austin real estate market looks a lot different than it did just a few months ago. Where buyer’s once had to offer over asking price, free seller leasebacks, and stipulations to name their first born child after the seller just to purchase a home we are now seeing something very drastic. Sellers are, more times than not, getting one offer rather than twenty-six, offering monetary concessions to the buyer, and even accepting offers lower than their asking price. This does not imply the greater Austin real estate market is imploding; rather, the market is simply shifting.
This shift is predominantly due to two main factors - rising interest rates and increased supply. Earlier this year, mortgage rates were around 3.5%. Now, they are around 6%, and I wouldn’t expect them to go down in the near future. Let’s break that down a little. Imagine you are buying a $600,000 house with 20% down. Price: $600,000 Interest Rate: 3.5% Monthly Payment (before taxes and insurance): $2,155.41 Price: $600,000 Interest Rate: 6% Monthly Payment (before taxes and insurance):$2,877.84 That 2.5% rise in interest rates, resulted in an increase of $722.43 to a buyer’s monthly payment. As you can see from this example, rising interest rates made home ownership become less affordable on an on-going basis, and less attainable since fewer people could qualify for loans based on a lower debt to income ratio (DTI). Consequently the Austin real estate market, and frankly the entire U.S. market lost buyers. Simple economic theories tell us that if demand decreases, prices should too. However, many sellers were stuck in the mindset of earlier this year, expecting their home to sell fast and for top dollar. Unfortunately, it didn’t and they haven’t adjusted the price or made serious changes so it’s still sitting on the market. Now, Jack and Diane down the street have listed their house, and there’s a for sale sign in Jimmy’s yard too. This is happening at scale throughout the Austin metro. We are seeing way more available inventory in the market than we have seen in years. Last month, we had 9,045 active homes for sale in the Austin-Round Rock MSA. In March of 2022, that figure was 1,731. I honestly had to go back and check my work after pulling these stats because it’s that much of a shocker! Inventory has been steadily rising right in line with ever growing interest rates. However, in the grand scheme of things the Austin home inventory isn’t that high. When a market has six months of supply that is generally referred to as a balanced market in real estate. Anything above six months is a buyer’s market and below is a seller’s market. In the Austin-Round Rock MSA we currently have 2.9 months of inventory. While we may not technically be in a buyer’s market, it’s sure feeling like one. I’ve been negotiating crazy terms for my buyer clients, and I no longer have to rush to show a home the minute it hits the market out of fear it will be gone tomorrow. If you can stomach the short term pain of these interest rates or you can afford to pay cash for a home, it’s not a bad time to purchase real estate in Austin. Prices are dropping, and it’s a ripe time to get a good deal.
2 Comments
2/26/2023 11:50:35 pm
Things are about to heat up here in Austin. SXSW starts soon. I created an ultimate guide to networking, getting around, the best events, and spotting celebrities. Feel free to share with your audience.
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Erika Rae Albert
2/27/2023 08:55:13 am
We would love to share it! Can you email it to [email protected]?
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