We’ve been seeing a lot of changes to the Austin housing market over the past 3 months. Interest rates that were promising to go up finally did. Central Texas county assessors increased assessed values more than they have in years past, drastically increasing property taxes. Homeowners insurance rates have also sharply increased. Combine those factors with inflation and other world events and home buying isn’t at the top of people’s minds as much as it was 6 months ago. Which begs the question, is the Austin real estate market slowing?
Austin Housing Supply is Up and Buyer Demand is Down
As you may have seen in our recent Austin real estate price report, supply is up 47% and demand is down 40%, creating a unique opportunity for home buyers that they haven’t seen in years. More choices and less competition. This created a 227% increase in year over year housing inventory. Though we are still at three and a half months inventory, which is still considered a sellers market, buyers are definitely feeling more in control than they were when inventory was at 1-2 weeks.
More Homes are Being Taken Off the Market
Though we are still technically in a seller’s market, we are seeing quite an increase in homes being taken off the market. In our most recent Austin real estate price report, there was a 165% increase in year over year numbers when you consider homes taken off the market. Sellers have gotten way too used to having multiple offers within hours of listing and instead of having patience and sticking it out, they panic and take their home off the market thinking buyers aren’t out there. And, that’s an understandable conclusion with their limited experience in the market. But, is it true?
Are There Still Buyers Out There?
The short answer is yes, just not as many of them. Last month we saw 721 Austin homes close and 708 accept a contract. This is about 40% less than we saw at this time last year. But, homes are selling. One thing that is puzzling sellers is the flurry of activity is gone. A few months ago, homes were listed for sale and had back to back showings the first several days it was listed. Now, buyers seem to be taking their time and seeing homes when it is convenient for them. There is no longer an urgency to see homes quickly because they are taking longer to sell. So, buyers are fitting home buying into their lives rather than building a life around home buying.
Prices are Still Up from Last Year
Despite buyers having more choices, less competition and being able to dictate some terms, prices are still up from this time last year. In last month’s report, we saw median prices up 8% in year over year numbers, which shows that if sellers are patient and adjust to this new market, they will be rewarded.
Is the Austin Real Estate Market Slowing?
If you had to answer this question with just a yes or a no, I would answer yes. The market is slowing. It’s not tanking. But, it is slowing. And I don’t think it’s a bad thing. 25+ offers well over asking price on every house within hours was not sustainable. Motivated buyers who were able to devote their lives to home buying were sometimes successful. Other times they just became incredibly frustrated and gave up. Sure, sellers were happy, but they also could only sell to one person. So 25+ offers just caused a huge stack of paperwork to wade through.
Is Now a Good Time to Buy?
If you’re looking strictly at market conditions, yes. More choices, less competition and more time to make a decision are all things buyers have been missing for several months now. They’ll actually be able to pick a house that they like and meets their needs. Not just make offers on everything listed and settle for whatever home they win in a bidding war.
What About Interest Rates?
Interest rates are up compared to what we’ve seen in previous years. And, since interest rates do have the biggest effect on monthly payment, payments are also up. That being said, there are ways to reduce the interest rate and lower your payment. You can prepay interest and reduce the interest rate for the life of the loan. You can choose a different loan program that locks in a lower rate for the first few years and adjusts after that. If you don’t plan on staying in the home for longer than a certain amount of time, and that time is less than the lock, you’re basically in the same boat as you would be with a fixed 30 year loan. And, remember, as long as you don’t have any prepayment penalty clause, you can refinance to a lower rate when interest rates drop. So, yes you might be paying a bit more in monthly payment than you would have months ago, you’ll be in a house you want to be in (something that didn’t happen months ago when interest rates were low) and get in at this year’s prices instead of next year’s. If history is any predictor, next year’s prices will undoubtedly be higher than this year’s and that will increase your payment as well.
How Can Buyers Take Advantage?
Buyers who think outside the box will take advantage of these more favorable buying conditions and get into a house now. We can help you structure your offer and get the seller to pay the costs associated with reducing the interest rate, so you won’t have to bring more money to closing and will have a reduced payment. If you’re willing to be flexible on timing, new construction is another option as many builders are offering incentives to buyers that will reduce their interest rate.
Also, stay within your comfort budget. Know that property taxes will likely continue to increase and homeowners’ insurance as well. You don’t want to buy at the very top of your budget and have to scramble when expenses go up.
Put Money Towards Your Investment, Not Your Landlords
As you might have noticed, rents have gone up substantially as well. They’re nearly as much, if not more, than your own mortgage. Rents go towards paying the landlord’s expenses and is basically money down the drain for a tenant. Sure, the landlord maintains the property, but they also capitalize on equity when they sell the property. Renters move out, pay for the damage they’ve done to the property and have to start again somewhere else.
Mortgage payments do go up when property taxes and insurance increases, but the loan payment remains the same if you have a fixed rate. Typically people who own their property for a few years are paying less than they would be paying if they were to pay market rent.
Thinking of Buying a Home in Austin?
Our team of buyer’s specialists can help you analyze your situation and the Austin real estate market to determine if now is a good time for you to buy. We can also help you find the right neighborhood and home and negotiate the best price. We have a combined 60+ years of experience in all types of market and can help you navigate the market to serve your best interests. For more info about our home buying process and how we’re different from other Realtors, check out our Austin Home Buyers section. Then, call us at (512) 827-8323, email us at info@11OaksRealty.com or fill out our Buyer Survey to get started.