Will The Austin Housing Market Crash?

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Aerial drone view above the skyline of downtown Austin, Texas. Although home prices are down … [+] slightly from last summer and inventory has increased, an outright housing market crash seems unlikely.

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One of the more unique things about Texas and the Texas housing market is that, back during the great housing bubble and crash of the late-2000s, much of the Lone Star State was spared the worst effects. This was largely due to the fact that Texas home lenders had retained more traditional, conservative lending standards; meanwhile, in so much of the rest of the United States, banks and non-bank lenders had jumped head-first into the lending frenzy of that era.

Nearly two decades later, however, it appears that several major cities in Texas — especially Austin —have been experiencing furious growth in home construction, homebuying activity, and just the rollercoaster ride that the pandemic dealt U.S. housing markets. With the series of rate hikes beginning in 2022, however, both the longer-term effects of an influx of new residents to Texas and the shorter-term effects of the pandemic-induced flurry in housing market activity have slowed significantly. Now, a common question on people’s minds is: Will the Austin housing market crash?

Read on to find out key trends developing in the Austin housing market in 2023 and how likely a housing market crash could be.

Austin Housing Market 2023: Overview

After analyzing housing data sourced from Redfin RDFN , the Austin metro area housing market is showing signs of a substantial normalization in home prices compared with the overall trends of the pandemic years and pre-pandemic years. The median sale price for a home in the Austin metro area reached a peak of $551,273 in May 2022. However, by May 2023, that figure had dropped by 15.6%, to a median sale price of $465,000. As of June 2023 (the latest available data at the time of publication), the median sale price in the Austin metro area was $483,000.

In the city of Austin proper, home prices peaked in May 2022, when the Austin median sale price reached an all-time high of $670,000. Since then, prices have declined steadily, yet the year-over-year decline in home prices has been slight rather than steep: From a median sale price of $623,500 in June 2022, prices decreased by only 2.2%, reaching $609,500 in June 2023.

In the grand scheme of things, Austin home prices remain markedly higher than their pre-pandemic figures. For example, in June 2018, the median sale price in Austin was $369,000, and home prices continued to rise even with the onset of the pandemic, finally reaching $400,000 in February 2020. In the summer months of 2020, 2021, and 2022, there are noticeable surges in Austin home prices:

  • Austin median sale price June 2020: $415,000
  • Austin median sale price June 2021: $590,000
  • Austin median sale price June 2022: $623,500
  • Austin median sale price June 2023: $609,500

June 2023 marked the first disruption in this upward trend in Austin home prices. That said, the pre-pandemic days when median sale prices in Austin were less than $400,000 seems likely to be a permanent thing of the past. Looking at some of the primary cities that make up the Austin metro area, however, reveals much larger fluctuations than what the city of Austin proper has been experiencing.

The table below breaks out the median sale prices in all the cities of the Austin metro area we analyzed, from June 2017 through June 2023. The reason we began our data in June 2017 was in order to allow for two year-over-year periods — June 2017 to June 2018 and June 2018 to June 2019 — to show what home prices looked like in the pre-pandemic period. The table is ranked in order of areas that experienced the greatest year-over-year decline in their median sale price:

The only city in the Austin metro area to not experience a year-over-year decline in home prices was San Marcos, where the median sale price rose by 7.5%, from $372,000 in June 2022 to $400,000 in June 2023. As already mentioned, Austin proper witnessed a very slight decline of only 2.2%, while the median sale price for the entire Austin metro area declined by 9.7%, from $535,000 in June 2022, down to $483,000 in June 2023.

Two cities in the Austin metro area experienced year-over-year declines in excess of 25%: Buda, where the median sale price fell by 25.7%, from $575,000 to $427,000; and Lockhart, where the median sale price fell by 25.6%, from $379,950 to $282,500. Another two cities in the Austin area — Liberty Hill and Bastrop — experienced year-over-year declined in excess of 20%.

Inventory in the Austin Housing Market Presents a Very Mixed Picture

Part of what makes determining whether Austin will witness a housing crash is the mixed picture trends in inventory display. One half of the housing markets we analyzed saw their available for-sale inventory grow year-over-year, while the other half witnessed a decline in inventory. For the overall Austin metro area, housing inventory increased by 8.3%, from 9,815 homes for sale in June 2022 to 10,625 homes for sale in June 2023. However, in the city of Austin proper, the year-over-year growth in available inventory was higher, at 23.1%, rising from 3,077 homes for sale in June 2022 to 3,788 in June 2023. The table below details the change in available for-sale inventory in the greater Austin housing market:

Lockhart, which has seen its median sale price drop by 25.6% year-over-year, also experienced the greatest increase in for-sale inventory: From 41 homes for sale in June 2022, Lockhart’s available inventory grew by 53.7%, reaching 63 homes for sale in June 2023. However, that increase pales in comparison to the year-over-year growth in inventory from June 2021, when there were only 9 available homes in Lockhart, to 41 homes for sale in June 2022 — an increase of 355.6% in just one year. Indeed, for most of the housing markets we analyzed in the greater Austin area, June 2021 saw inventory reach record lows.

Still, a great many cities in the Austin housing market have seen their available inventory decline, sometimes dramatically, like in Jarrell, where for-sale inventory fell by 40.5%, from 42 homes for sale in June 2022 to 25 homes for sale in June 2023. Considering that half of the housing markets we looked at experienced declines rather than build-ups in inventory makes it seem unlikely that an Austin housing market crash will occur.

Sale-to-List Price Trends in the Austin Housing Market

We included a key housing metric called the sale-to-list price ratio because it often can reveal significant trends in housing markets. The average sale-to-list price ratio is, according to Redfin, “the mean ratio of each home’s sale price divided by their list price covering all homes with a sale date during a given time period. Excludes properties with a sale price 50%.” Thus, in housing markets where the sale-to-list ratio is above 100% entails that the average home is selling for more than the initial listed price. If the sale-to-list is below 100%, then the opposite is true, and the average home in the housing market is selling for less than its original listed price.

From June 2017 through June 2023, for most cities in the greater Austin housing market, the sale-to-list ratio in the was less than 100%. However, the month of June 2021 saw many, if not most, of the 20 areas we examined reach very high sale-to-list price ratios. For example, in Pflugerville in June 2021, the sale-to-list ratio reached a startling 113.9%, meaning that the average home was selling for nearly 14% higher than its original listed price. Another notable example is Cedar Park, which saw its sale-to-list price ratio rise to 112% in June 2021, up from 100.2% the previous June.

However, from June 2022 to June 2023, all 20 Austin housing markets we analyzed experienced declines in their sale-to-list ratios. In fact, in only one city — Jarell — was the sale-to-list price ratio higher than 100% in June 2023. Everywhere else, the sale-to-list ratio had fallen below 100% and, for many cities in the Austin housing market, it was the first June since June 2020 that their sale-to-list ratio did not exceed 100%. Below is a table detailing the year-over-year decline in sale-to-list ratios across all the areas we analyzed, as well as sale-to-list ratios going back to June 2017:

Houses for Sale in the Austin Housing Market Are Staying on the Market Longer than Previous Years

Another very useful metric for analyzing housing market activity is the length of time a home for sale spends on the market before getting bought up. Redfin refers to this measure as days on market, which represents the monthly median days on market a home for sale sits before being taken off the market. In the Austin metro area, the median number of days on market of a home for sale rose from 28 days in June 2022 to 48 days in June 2023, equal to an annual increase of roughly 71.4%. However, in the city of Austin proper, the year-over-year increase in the median days on market was smaller — 44.8% — rising from 29 days on market in June 2022 to 42 days on market in June 2023.

Below is a table detailing the trends in days on market in the 20 areas we analyzed in the greater Austin housing market:

The Bottom Line on an Austin Housing Market Crash

On the question of whether the Austin housing market will crash, the data seems to point to such an event being unlikely. As with so many housing markets across the country, the Austin housing market has experienced a moderation in housing market activity, yet an outright crash doesn’t appear to be reflected in the data. A very significant thing to note about America’s housing market today is that the vast majority of current homeowners got their mortgages during the era of low fed funds rates in the 2010s, when interest rates had been slashed across the board in order to help stimulate recovery from the global financial crisis. As such, a much smaller percentage of American homeowners are likely to encounter the level of repayment shock as occurred when adjustable-rate mortgages of the housing bubble era reset at new, higher rates.

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