Austin real estate in March continues to tell the tale of what happens to the housing market when supply and demand drastically become out of balance. According to a recent article from the National Association of Realtors, the market nationally needs about $2.7 million homes to level out. That’s not only a lot of homes but considering there is a lumber shortage, even new home production cannot adequately make up the deficit.
According to the latest Central Texas Housing Market Report released by the Austin Board of REALTORS® (ABoR), Austin-area home sales declined 8% to 2,389 sales in February. The news follows the devastating Texas winter storms that thwarted the housing market activity for nearly two weeks, showing a dip in Austin-Round Rock MSA home sales for the first time since June 2020.
Austin Housing Market Data
During the same time, market demand drove housing inventory down 1.2 months to a record-low 0.4 months of inventory and the median home price up 22.5% to an all-time high of $395,000.
“Although the winter storms slowed activity in February, this does not indicate a market slowdown. We’re still very much in a sellers’ market,” Susan Horton, 2021 ABoR president, said.
“Across the region, a high quantity of offers, cash offers, and requests to waive appraisals or option fees are increasingly commonplace. Transaction contracts are complex with negotiations that require the expertise of a REALTOR® to navigate.” Across the five-county MSA, home sales dollar volume jumped 15.9% to $1,207,218,785, while pending sales fell 15.5% to 2,573 in February. At the same time, new listings decreased 24.8% to 2,565, and active listings dropped 74.1% to 1,310 listings. Homes spent an average of 31 days on market, 32 fewer days than in February 2020.
The New York Times highlights the Austin real estate market
Lawrence Yun, chief economist and senior vice president of research at the National Association of REALTORS®, said while the Austin market has been acutely affected by the lack of inventory, there’s also a nationwide inventory shortage.
“Until we have more supply, the lack of inventory and prices rising nationwide are going to present challenges for homebuyers everywhere,” Yun said. “Although it’s not visible,
mortgage rates will continue to rise throughout the year. Get all your documents and finances prepared early, and realize you may not buy your dream home, but it will be a worthwhile investment,” Yun concluded.
The storm and its aftermath exacerbated the supply issue the region is experiencing, but Horton says that now is not the time to wait for the market to slow down.“
Anyone interested in buying or selling a home in the next few months should start preparing now by determining what lending options are available to you, any financial or credit changes needed to boost your approval odds, and where you’re flexible in terms of home location and amenities,” concluded Horton. “A REALTOR® can help connect you with a lender and set you up for success through this extremely competitive and increasingly complicated process.”
When interest rates are creeping up, home affordability starts to slide
If you haven’t noticed interest rates have crossed over and have started to tip over 3%. This is the highest they have been since June of 2020. Though the current rates are still incredibly low, the higher they climb the more they can and will affect buying power for some. Interest on a mortgage is part of what makes up debt-to-income ratios when purchasing a home. The higher the interest rate, the more costly it is to borrow money, so a buyer can afford less.
Moving to Austin
Buyers who have been in the market for a while now are certainly watching interest rates, which is also adding to the pressure that already exists to purchase a home. The stress is real, but education remains the key. Buyers who are in the market know their numbers and the inventory well. They are in a far better position to act on an opportunity when it arises than to leave it thinking things will be dramatically different a year from now.