Is the Austin Housing Market Really a Buyer’s Market?

As the Austin housing market continues to evolve, many potential buyers are left wondering: Is it truly a buyer's market? With fluctuating interest rates, increased inventory, and shifting dynamics in the market, it can be challenging to determine when is the right time to buy in this fast-growing city.

Over the past several years, Austin has experienced significant changes in its real estate landscape. From the rapid influx of residents seeking a lifestyle change to the rise in property prices, the city has seen it all. So, is now the right time to buy a home, or should buyers wait until the market cools off? Let’s dive into the data and trends to give you a better picture of the current state of the Austin housing market and help you make an informed decision.

National Housing Market Trends: A Glimpse Into the Bigger Picture

To understand what’s happening in Austin, it’s essential to first look at national housing trends. Recently, Housing Wire reported an increase in pending home sales on a year-over-year basis. In fact, according to the data, loan applications are up 18% from the previous year, showing an increase in demand for housing.

However, there’s a caveat. The national interest rates, as of filming this video, remain high, with some hovering over 7%. This creates hesitation for many first-time buyers, especially as they face the reality of higher mortgage payments. Renters are staying in place longer due to the unaffordability of buying, further pushing the demand for rental properties. Even with an increase in pending sales, the unaffordability factor remains a major barrier to a more robust buyer market.

Moreover, as Moody’s downgraded the U.S. debt, it caused yields to rise, pushing interest rates higher. This doesn’t make it any easier for prospective homebuyers to pull the trigger, despite the increased interest in applying for loans.

The Austin Housing Market: What Are the Numbers Saying?

Locally, we’re seeing some encouraging trends, especially for first-time homebuyers. As the Austin Business Journal noted, “it’s a good market for first-time homebuyers in the sense that they have a level of affordable supply they’ve never seen in a 5-year span.” This is largely due to the increase in inventory and price reductions we’re seeing across the Austin metro area.

Currently, the Austin housing market has seen an uptick in inventory levels, with about 14,400 units available. This is the highest level we’ve seen in a long time, making it a great opportunity for buyers looking to find the right property without competing in a seller’s market.

Interestingly, 37% of homes on the market in the Austin area have seen a price reduction. While this may not seem like a massive percentage, it suggests that buyers have more negotiating power than they’ve had in previous years. Sellers are becoming more realistic about pricing, and buyers are reaping the benefits.

However, is it truly a buyer’s market in Austin? Not entirely. The close-to-list price ratio for homes in Austin is around 95.2%, which still suggests that some sellers are getting close to their asking prices. While inventory is increasing, homes are still moving relatively quickly, especially when priced correctly.

Buyer Sentiment: Are Buyers Ready to Jump In?

The question remains: Are buyers ready to jump into the market? Despite high interest rates, the demand for homes in Austin remains strong. According to a survey, 60% of renters have expressed interest in buying a home. This indicates that there is still a significant desire for homeownership, but many are holding off due to affordability concerns.

Homebuilder sentiment plays a big role in this equation. Nationally, homebuilder sentiment is at a low point, sitting at 34, which is the lowest it’s been since late 2023. Homebuilders are cautious, mainly due to high land prices, expensive construction costs, and a dip in buyer demand. As a result, many homebuilders are offering incentives to lure buyers back into the market.

Interestingly, 61% of homebuilders have had to offer some sort of incentive, like discounted prices, better financing terms, or free upgrades, to encourage sales. This is a strong indicator that the market is not as hot as it once was, which could be a signal for buyers to take advantage of these incentives before they disappear.

Is It a Good Time to Buy in Austin?

Now that we’ve explored the national and local market trends, let’s answer the burning question: Is now a good time to buy in Austin?

It really depends on your goals and finances.

• If you’re a long-term investor looking to buy property in Austin, now might be a good time. With more inventory available and interest rates starting to stabilize, you could find a home at a reasonable price and hold onto it as the city continues to grow. Plus, the inventory levels are the highest we’ve seen in recent years, giving buyers more options and better chances of negotiating a fair deal.

• If you’re a first-time homebuyer, it might still be tough due to high interest rates, but there are signs that things could improve later this year. In fact, the second half of the year tends to be the best time to buy, as prices usually drop. If interest rates come down and more homes continue to sit on the market, buyers could find better deals in the back half of 2023.

• For current homeowners considering an upgrade, it might be wise to wait for interest rates to dip before making a move. With more homes on the market and sellers adjusting prices, there could be more favorable conditions for sellers in the second half of the year.

New Construction: Should You Buy Now?

A big question that’s been on many buyers' minds is whether or not it’s a good time to buy new construction. With homebuilders offering incentives like lower interest rates and discounted prices, it’s tempting to take advantage of these deals.

However, new construction is still largely in outlying areas like Williamson County, Bastrop, and Caldwell, which means that you’ll likely have to live farther from downtown Austin. Additionally, property taxes in these areas can be higher than in more established parts of the city, so be sure to consider that when budgeting for your new home.

If you're interested in new construction, it's a good time to buy in these areas, especially if you're willing to work with the builder’s incentives and are looking for something more affordable. However, if you’re seeking a home in central Austin, you may need to wait for more options or work with builders offering more customized solutions.

Final Thoughts: Is It a Buyer’s Market?

In conclusion, the Austin housing market is currently in a state of transition. While it's not a full-fledged buyer’s market, it's definitely moving in that direction. There’s more inventory, price reductions, and incentives being offered, making it a great time for buyers who are ready to commit. However, high interest rates are still a significant hurdle for many potential buyers, which is why the second half of the year could offer even better opportunities.

If you’re interested in new construction, you may find great deals in the outlying areas, but keep in mind the property tax rates and the need for a longer commute.

Ultimately, whether it's a good time to buy depends on your individual needs, goals, and financial situation. But with the right strategy, you can find success in the Austin market, whether now or later in the year.

Ready to Buy? Let’s Talk!

If you're ready to explore the Austin housing market further or need guidance on finding the right home, don't hesitate to reach out. Jeremy Knight, your favorite Austin realtor, is here to help you navigate the market and make informed decisions.