Austin’s housing market, once among the hottest in the US, is cooling

Though Austin was once considered a seller’s market, for now at least it’s considered ‘no one’s market,’ meaning it’s tricky to both buy and sell.

By Kristen CabreraMarch 19, 2024 1:39 pm,

During the pandemic, as housing prices reached record levels, Austin was ground zero. But now – despite recent dueling headlines – KUT’s Audrey McGlinchy says the facts make it clear that Austin’s housing market is decreasing.

The housing reporter spoke with Texas Standard about why it’s currently tricky to both buy and sell a house in the Texas capital city.

This transcript has been edited lightly for clarity:

Texas Standard: You know, I was just reading a couple of days ago, Business Insider was reporting that Austin’s real estate market is getting hotter. And then this Wall Street Journal story from just a day ago is saying what was once America’s hottest housing market is running in reverse. What do you see?

Audrey McGlinchy: All the data that I’m looking at shows that for the past year, the housing market – and by that I mean for-sale housing, housing to own – those prices have been coming down here in Austin.

So, is this a matter of what goes up must come down, or is there more to it?

In part, obviously, there’s things that make those prices come down, right – it’s less natural than, “oh, this is just bound to come down.” And I mean, the big thing in Austin and across the country has been mortgage interest rates, right?

So since 2022, mortgage interest rates have climbed from historic lows. They were at about 2% to 3% for much of the pandemic, and they’ve risen to about 7% or 8%. Now we’re kind of in the 6% range. But what that means is that that makes buying a house much more expensive.

It makes people’s monthly mortgage payments go up. So fewer people can now qualify for mortgages and afford to buy homes. And with fewer people competing for homes, prices naturally just come down. So that’s what we’ve seen across the country and here in Austin.

A couple other things specific to Austin, which is that we’ve seen a slightly changing job market. As many people may have seen, there have been tech layoffs across the country, including companies that have offices here in Austin. So, you know, we’re seeing a slight dip in employment rates. But also just the fact that it’s just much more expensive to buy a house now.

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Well, you know, once upon a time, in the not-too-distant past, Austin was being compared to cities like San Francisco and New York City when it came to prices. How’s Austin looking now?

Well, I want to point out that Austin was never as expensive as San Francisco and New York; that still remains true.

So right now I’m looking at some recent Zillow data I got: In San Francisco, the median home price is just over $1 million. Here in Austin, it’s closer to half a million or $500,000. New York, you know, you’re going to pay at least $600,000 for a condo there.

So yeah, things are definitely still cheaper here in Austin, as they have been.

Yeah, never quite reached those levels, but the fact that people were comparing Austin with those two cities, I think, raised a lot of eyebrows once upon a time.

But, if things are going in the other direction, what does that mean for folks who wanted to jump into the city’s housing market? Is now the time you hold on? What’s the feeling?

Well, so for a long time, Austin’s been called a seller’s market. And what that means is that it was always a good time to sell your house. You were likely always going to make money. You were likely always going to make a return on your investment, if you will.

Now it’s kind of no one’s market. And by that I mean it’s tricky both to buy and sell right now. Like I said earlier, it’s just much more expensive to buy right now. Your monthly mortgage payment is going to be much more than it would have been just two years ago if you had bought the house for that same price or even a little cheaper. And again, selling, you’re going to have to lower your price to sell, and some people just aren’t willing to do that.

So it’s kind of this impasse, if you will, that we’re at. And we’ve seen that change, though, over the past couple of months. I think people are getting used to these higher mortgage interest rates. They’re recognizing that this may be the new reality. And so, buyers are, you know, willing to kind of stomach that. And I think sellers are understanding that they’re going to have to drop their prices a bit.

You’ve been reporting that Travis County, according to latest census data, has witnessed a lot of folks leaving in recent months, moving elsewhere. Does this have an effect on – I presume it would – housing prices, or too soon to tell?

I mean, it certainly could, right? Fewer people moving to Travis County would mean less of a demand for housing, fewer people who need homes to live in.

But it also depends on who is moving here and who is leaving the city, right, and what kind of incomes those people earn. So, yeah, it certainly could have an impact. And I’ll be following that as we go on.

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