Gone are the days of frenzied home buying in Austin, Texas, where some buyers offered six figures over the asking price.
The Texas capital, where the average home price soared by $170,000 during the coronavirus pandemic, is now seeing a significant price correction. The median price per square foot is down 9.5% from the peak of the pandemic two years ago, according to Realtor.com. As of April, the median list price was $557,000.
Austin's real estate boom was driven by a sudden influx of newly remote and suddenly more mobile workers thanks to early office closures due to the coronavirus. The supply of inventory dwindled, and then home prices soared, hurting affordability in the city.
But Austin's housing boom appears to be coming to an end as mortgage rates rise, new construction finally hits the market, and out-of-town residents begin to leave.
“We mirrored what was happening across the country. We saw a lot of demand and prices rose quickly,” Kent Redding, president of the Austin Board of Realtors, told Yahoo Finance. “But that [housing boom] It was substandard. It was a moment on the map. ”
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“There will be no inventory for two years.”
Austin home prices have soared during the pandemic as out-of-town remote and tech workers decide to trade in the coastal city for more space, affordability and, in some cases, tax benefits. .
For many new entrants, the rapidly expanding Texas tech hub (currently home to major companies such as Google, Tesla, Amazon, and Apple) is cost-effective, especially given that Texas is a state with no income tax. It was a highly effective move.
“The market reached its absolute peak in 2022,” Austin-based Redfin agent Andrew Vallejo told Yahoo Finance. “Prices were rising pretty quickly.”
The Austin metropolitan area added nearly 140,000 new residents from 2020 to 2022, according to U.S. Census Bureau population estimates. Between July 2022 and July 2023, the number of residents in the Austin metropolitan area increased by just over 50,000 people.
The rapid influx of new entrants has shocked the market inventory.
According to Unlock MLS, from May 2020 to February 2022, the number of active listings for all residential single-family homes, condos, or townhomes decreased by just over 64% at one point.
Previously owned homes became scarce as homeowners turned to refinancing at ultra-low interest rates during the pandemic. Meanwhile, the few available listings generated intense competition, with multiple bids and buyers buying well above the asking price.
“It was almost a given that we were going to pay more than we asked for. The issue was the amount,” Stephanie Douglas, co-founder of Open House Austin, told Yahoo Finance. “We found that on almost every home he had overask offers by six figures, with offers ranging from 5 to 25.”
While new construction filled some of the inventory gap, it was not enough to ease demand. The average home price jumped from $420,000 in 2020 to $590,000 in 2022 as demand outstripped inventory, according to Austin's demographer.
“We had no inventory for two years,” said Jeremy Knight, an Austin real estate agent and founder of the Knight Group. “Now we are finally catching up on all the inventory.”
There is currently 3.8 months of inventory on the market, according to the realtor's board of directors. Nationally, the market balances out in five to six months, but in this metropolitan area, four to five months is enough to feel balanced, the real estate agent group said.
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Knight said inventory has been freed up over the past year due to new construction, relocation due to life events, and people returning to coastal cities.
Some counties in the Austin metropolitan area have already registered for the shift, according to census data. Travis County (including downtown and central Austin) experienced negative net migration in 2022-2023.
“More people moved out of the county than into the county,” Dr. Lila Valencia, a demographer for the city of Austin, told Yahoo Finance.
From July 2022 to July 2023, Travis County had 2,411 more people moving out than moving in, according to Census Bureau data. This data only covers net immigration and does not include details of people's origins or destinations.
“I can't say whether there will be a flow of immigrants from Austin to coastal cities,” Valencia noted.
Still, real estate experts feel strongly that there is some trend of people returning to their original locations.
“There was a big movement to move from expensive cities to Texas because of work-from-home, but now people are realizing they might not need as much space after all.” “People were home 90 percent of the time, so Texas wanted a big house and a big backyard,” Douglas said. “So what we're seeing is not a mass exodus, but a flattening of population growth.”
According to Realtor.com, housing inventory rose nearly 30% above pre-pandemic levels in April. This has led to significant price corrections in some areas of Austin, bringing prices slightly closer to reality.
The median list price in April was $557,000, down 2% from a year ago. Still, the median listing price per square foot is up 1% from a year ago, according to Realtor.com. The income needed to buy a median-priced home was $157,000 per year.
“Actually, this is not a new normal. It's just the normal,” Redding said. “Prior to 2019, it was normal. There was a steady price increase, then there was a boom, prices went up a lot, but now they are returning to normal levels. Over the past year, prices have been pretty stable. I did.”
“Rebound in housing prices”
Where home prices are corrected most accurately depends on where you buy your home.
“We have seen home prices in many areas return to pre-pandemic 2019 prices,” Vallejo said. “The suburbs have been extremely affected.”
For example, in Round Rock, just 25 miles north of Austin, the average listing price rose to a peak of $497,000 in 2022 and fell to $399,000 in February. Despite that softening, it's still above its 2020 median listing price of $259,500.
At the same time, there are still some hotspots where you can see multiple bids.
“We still have areas that have multiple offers and are holding their value well,” Redding said, noting that areas closer to downtown often see more demand. .
“We currently have a buyer making an offer against three other companies on a $1 million property,” Knight told Yahoo Finance.
But in most areas, it can be difficult to expect to receive multiple bids on a home, or even hope that someone will offer more than the asking price.
Vallejo said he has put eight homes on the market in the past two weeks, but only received three offers in the first weekend. A couple of potential buyers visited, but he was the only one who made a good offer to each.
“Then other places where there was no traffic at all,” Vallejo said. “And they're all competitively priced to match the market, so if you happen to find the perfect buyer who loves your home, it can be great. But It could also end up being left for 45 or 60 days and requiring a price adjustment.”
“It's unpredictable,” he added.
It's a buyer's market…just not on paper
Austin real estate experts agree that the market has changed significantly.
“It used to be that if you went to a house that had just been listed, you would see 10 people outside waiting for viewings, and you knew you had to make an offer within 10 to 48 hours of the viewing.2-3 It will be on the market within days,” Douglas said.
Not so today. The days of buyers abandoning appraisals and rushing bids with over-assessments are fading in the rearview mirror.
According to Realtor.com, the typical home across the country was on the market for 47 days in April. In Austin, some real estate agents say it can take up to two months for a home to go on the market if it's not priced right.
Nationwide, the share of homes with reduced prices rose to 15.5% in April, up from 12.3% a year ago.
“It might not be a buyer's market on paper just because there's no inventory yet, but buyers have slowed down significantly,” Douglas said. “We're seeing sellers not only providing for contingencies, but also making concessions to sellers in the form of closing costs and providing repairs that they would never have done during the pandemic.”
Gabriela Cruz Martinez I'm a personal finance and housing reporter for Yahoo Finance. Follow her on X @__Gabriela Cruz.
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