Home Sellers Fight Back After Rates DROP!

Interest Rates: What’s Happening Now?

Interest rates have been a hot topic among buyers and sellers, with rates showing a downward trend. While some buyers are waiting for rates to drop even further, the current rate of 6.12%, down from 7.5%, could present a good opportunity for those looking to purchase a home. According to Allan Ratner from Ivy Zelman’s team, a Fed rate cut is anticipated, though it may not significantly impact mortgage rates further.

A notable takeaway: for every one-point drop in interest rates, an estimated 5 million more buyers re-enter the market. However, despite the rate drop, Austin’s market has been quieter than expected, possibly due to buyers waiting for more significant cuts or post-election outcomes.

Austin Market Snapshot: Prices and Inventory

As of the latest data, Austin home prices have dropped to $439,000, a 4.4% decline from last year and significantly down from the 2022 peak of $496,000. Despite this price decrease, inventory levels are dropping, with months of inventory down to 4.9% from a year-over-year high. This reduction in inventory is due in part to fewer new listings as sellers pull their homes off the market.

For buyers, this could be an advantageous time to purchase, especially with homes selling at 93.3% of list price, representing an average discount of 6.7%. As the market heads into the quieter months, there’s more opportunity for negotiation, particularly on homes that have been sitting on the market longer.

Foreclosures: A Non-Issue in Texas

Contrary to what some may believe, foreclosures are not on the rise in Texas, including the Austin area. According to August 2024 data, foreclosure filings are down by 11% compared to last year, with Texas showing only 1,800 foreclosures. This is a far cry from the levels seen during the 2008 financial crisis, where monthly filings exceeded 300,000 nationwide.

While other states like Florida, Nevada, and Illinois have higher foreclosure rates, Texas continues to benefit from strong job growth and economic stability, preventing a significant rise in foreclosure activity.

Sellers Holding Steady

Sellers in the Austin area are adopting a “wait-and-see” approach. Many are hesitant to drop their prices, especially if they secured low interest rates during previous years. With nearly 39% of homeowners mortgage-free, there’s less urgency to sell quickly, and they may be holding out for higher offers once interest rates stabilize or drop further.

This reluctance to lower prices is creating what some call "stale inventory." Sellers are waiting for buyers to meet their price expectations, betting that rate cuts in the future will lead to higher offers. In essence, both buyers and sellers are watching the same economic indicators, waiting for the best possible moment to act.

What’s Next?

With interest rates trending downward, inventory dropping, and buyer activity expected to increase next year, the current market offers a unique opportunity. If rates fall further, we could see a buyer frenzy similar to previous years, pricing out those who could have acted now.

The question remains: Is now the right time to buy or sell in Austin?

For buyers, the opportunity to secure a home at a discount is available now, especially as sellers become more willing to negotiate. On the other hand, sellers who are patient may benefit from waiting, but with no guarantee that rates will fall dramatically, they also risk missing current buyer interest.