October 2022 Housing Market Update for Austin, TX MSA
October 2022 Housing Market Update for Austin, TX MSA
October 2022 statistics have been released for the Central Texas Housing market. There was a slight increase in median sales price from the preceding month and a 4% increase from the preceding year for the entire Austin Metropolitan Statistical Area.
The City of Austin saw no change in month to month median sale price from $555,000, and a 3% increase from the previous year. The Austin-Round Rock MSA saw a change in median sale price from $470,000 to $474,990 a month to month increase of $4,990 and an 4% increase from the previous year.
The following infographics and data is courtesy of the Austin Board of Realtors:
Housing inventory for the MSA saw a slight increase month to month inventory from 3.1 months in September to 3.2 months for October, and a 2.2 months increase over the preceding year. The City of Austin saw a slight increase month to month inventory from 2.7 months in August to 2.8 months for September, and a 1.8 months increase over the preceding year.
I have been tracking the withdrawn and expired listings and have highlighted an acceleration with those data points. This metric was the highest we have seen in years for September with 1,506 withdrawn and October has surpassed that figure with 1,877 withdrawn or expired listings. That is 84% of the closed sales, which was 2,244 as reported by ABOR during that same timeframe.
The real estate market has a typical annual cycle approaching the winter months wherein housing activity tends to dwindle naturally each year. October saw a sharp decrease in new listings, down 13% for the MSA and 18% for the City of Austin. Combine this data with the increase of withdrawn sales and it may be more than a typical slow winter season and more akin with what market analysts have dubbed a seller’s strike.
The Federal Reserve holds tremendous sway over interest rates which in turn can affect home prices. The simple but not perfect math is that every 1% increase in interest rates translates to a 10% decrease in buying power. The Federal reserve may well keep on their path of raising interest rates but the laws of supply and demand hold true as well. As homes become less affordable there will be a natural counterbalance of increased renters if there is not equal sales volume. Especially in a growing market like Austin. Additional rate hikes will continue to put downward pressure on prices but watching trends this is the first month since April of this year where a continued decrease did not occur.
Disclaimer: The information provided here is for educational purposes only, past performance is never a guarantee of future performance.
Bryan, was is your outlook for the selling season beginning in Feb/Mar coming up? Do you think buyers will begin hitting the market in the greater Austin area?
, as always I appreciate your reporting. I am a little surprised we saw no change month to month in median sales price. I was expecting it to go lower. I think it will over the next few months, but several factors might be contributing to this no change. Homeowners who have owe nothing on their homes or those who have mortgage rates in the 3%'s or lower (which are most at the current time) are very reluctant to sell as they will probably incur higher cost even if they decide to downsize due to the rise in mortgage rates. AND, all those boomers, myself included, who have their taxes frozen at 65 are reluctant to sell as well because swapping houses will most likely cause their tax bill to increase since they are currently enjoying somewhat locked in taxes year to year now.
Both of these factors result in lower inventory which bodes well for keeping prices propped up. On the other hand, with there trend of increasing interest rates and the beginning of major companies beginning to layoff employees is spooking would be buyers thus causing less demand and lower housing prices. In the Austin MSA the feeling of economic prosperity is still higher than most other parts of the country and thus it may be understandable that the market is showing a stabilization (month to month median prices unchanged). However, I think this is short lived and that the Feds will win out with increasing interest rates and you will see in the coming months the median house prices continue to drop. Inflation is real and we will have to endure some major pain to bring it down and the housing market is a lagging market indicator as to how the economy is trending. I say buckle down as the worst is still in front of us. Cheers.
@Joe Scaparra I agree with your analysis and expect the median price to continue to decline at least for the next 3 months. There is a chance the spring sees a flattening of the median price as buyer demand returns a bit seasonally. I also think the homebuilders will start to thin out their inventory in 2023. If rates remain high and the median price doesn't decline sharper in the first half, I expect another leg down in median values the second half of 2023.
Nobody is talking about supply chain which is a huge component of inflation. Shipping costs from China are back down to pre pandemic levels already. We're seeing month over month inflation drop also which is a good sign. Powell will not stop until his mission is complete, he's been very clear about that. That being said I think he'll raise rates a bit more and hold until things get back where he wants them with inflation.
The wildcard is jobs, it seems lots of companies are takin preventative layoffs at this time. They're laying people off to avoid getting into hot water, not because they are.
I could be completely wrong but I don't see this recession being as bad as we thought a few months ago and I personally think the housing market will be stagnant, not drop abruptly next year.
Y'all have my number. Call if you want to debate!
Honestly there are some great comments here and I appreciate reading the responses and the shared insight. @Jordan Moorhead @Ryan Kelly
@Joe Scaparra One of the metrics I have mentioned in prior posts is the actual PITI cost to the buyer may forecast a market bottom. The simplified theory looks at the holding cost for a median priced home between two time periods and when those costs mirror one another the bottom has been reached. To use numbers for the Austin MSA:
April 2022 the median home price was $550,000 ( market peak)
April 2022 interest rate: 5.975%
Monthly payment $3,739 (loan $2,631 | taxes and fees $1,108)
It is quite likely many April closings locked in at March rates, so let’s include those:
March 2022 interest rate: 5.328%
Monthly payment of $3,559 (loan $2,451 | taxes and fees $1,108)
October 2022 the median home price is $474,900
October interest rate: 7.2%
Monthly payment $3,550 (loan $2451 | taxes and fees $971)
And sure enough, a median price home costs a buyer each month nearly the same now as it did in April ($3,559 versus $3,550, a delta of only $9). The benefit now is that there is likely much more favorable terms for a buyer in October than with a contract written in March.
It is worth noting, this only holds value to the time periods analyzed. If you do not believe April was healthy snapshot for housing market activity then simply adjust the time frame comparisons.
All of this is subject to what lies ahead. If interest rates increase it will likely put further downward pressure on prices. However, as you mentioned Joe, many owners / potential sellers are holding on because they have far more advantageous terms with their current holding costs (interest rate, taxes, etc) and that creates more scarcity and can buck against decline.
@Jason Grote I believe we will see some increased activity with the seasonality norms in the spring/summer. Interest rates are the unknown. If they go up it puts more pressure on prices and makes sellers more reluctant to part with a property. If we see interest rates improve that early in 2023, I think the inherent demand is certainly present in the Austin market.
Keep in mind that the Austin metro is also growing in population tremendously as the job machine keeps cranking out jobs. The unemployment is the lowest in the state at 2.8% The Cumulative labor force has increased month over month by 12k. The folks moving here are either moving into rentals or buying homes to live in. I would expect rents to keep increasing quite a bit.
As a long time investor I am very grateful that this metro is and has been a job creating machine for decades. Btw, there are submarkets that are in such high demand that prices are still appreciating substantially in spite of the interest rate headwinds.
All great points and they get you thinking about where this market is headed. Austin MSA real estate market is unlike most in America. I feel good about the economy in Austin, it is the Nation's economy which has me concerned. We are seeing major tech companies announcing hiring freezes and layoffs. If this trend continues, and I believe it will, then the Nation's economy will have a negative impact to the Austin economy. My thinking now is that Austin is best positioned to weather this coming storm. My thoughts are we are in for a protracted downturn, but let's hope for the best.
What I have learned as a financial advisor, is that as markets go up they can go down as fast or quicker. Also we have been in an extended economic boom. Bust can be extended as well. Bust usually are not as longed lived but can be very sharp drops. Because we have been in such a long, positive economic climate (some of which as been propagated with unusual government influence) I think the downturn will be longer than the average down turn. Cheers.
Quote from @Joe Scaparra:
All great points and they get you thinking about where this market is headed. Austin MSA real estate market is unlike most in America. I feel good about the economy in Austin, it is the Nation's economy which has me concerned. We are seeing major tech companies announcing hiring freezes and layoffs. If this trend continues, and I believe it will, then the Nation's economy will have a negative impact to the Austin economy. My thinking now is that Austin is best positioned to weather this coming storm. My thoughts are we are in for a protracted downturn, but let's hope for the best.
What I have learned as a financial advisor, is that as markets go up they can go down as fast or quicker. Also we have been in an extended economic boom. Bust can be extended as well. Bust usually are not as longed lived but can be very sharp drops. Because we have been in such a long, positive economic climate (some of which as been propagated with unusual government influence) I think the downturn will be longer than the average down turn. Cheers.
I've thought about making my place a STR or LTR, and renting nearby. I think if a downturn comes beyond projected for Austin's specific economy, it'd be cause of China doing something with Taiwan creating catastrophic issues in semis. That's the big looming cloud for Austin and in general, tech, economy. That's where my pulse is at, and according to really any administration that's talked about it, it's not if but when. The institutional thought it's going to come on the eve of Taiwan's new elections(Jan 2024), but China may reserve judgement until our election(Nov 2024). That's going to have a myriad of issues on tech, chips and for companies like Tesla, Oracle, Intel harder among others.
As of right now, I do anticipate a crash when that happens. For me, it's my primary so I am not really concerned. I think Tech won't see it's way of out of headwinds until end of 23, top of 24. And that China-Taiwan issue is the only way to spiral that out of control. Outside of that, Austin has a lot offer non-tech wise. I've been here for almost a decade and enjoyed every year of it thus far with my second home in Miami which has also seen enormous growth. I just wouldn't consider making Miami an investment decision, I think that's the more of an appropriate market to say it could go up as fast as it comes down. Condo's notoriously are the slowest to go up in boom markets, and quickest to decline in recessionary markets.
@V.G Jason why not just STR your place when you're not in town?
Quote from @Jordan Moorhead:
@V.G Jason why not just STR your place when you're not in town?
I hate people messing my stuff up.