ATX is a crazy seller's market: Explained

In case you haven’t heard, seen, or otherwise noticed, Austin is the hottest housing market in the country. It’s becoming increasingly difficult for buyers to purchase homes in this market, and we are seeing it become normal for buyers to have to submit offers 25% over list on mildly competitive homes. 

What is causing this? 

There's several big factors that keep the housing market in Austin extremely competitive and pricing soaring:

1. Inflation rate of money right now 

All the stimulus checks and government spending has put a significant impact on inflation with the trillions of dollars now floating around the economy. This has been a major factor on home prices skyrocketing. 

2. New construction being delayed 

Most of the parts, down to lumber, for new construction homes (and condo buildings) are imported from overseas. Due to delays in manufacturing and trade, homes are taking longer than expected to complete (a year is the norm in Austin now). 

3. No evictions or foreclosures 

The federal government has continued to ban renters being evicted and default borrowers from being foreclosed on since the beginning of the pandemic. 

4. Mortgage rates at all time lows 

Thankfully for some, we are seeing these rates climb back up. But mortgage rates at 2.75% for a 30-year loan that we saw recently, is crazy low…. Meaning people were able to qualify for home prices they never could before. 

5. No homes to buy so sellers can't sell

Once you’ve owned a home, it’s tough to go back to renting, and most sellers are noticing the limited inventory in the Austin area and continue saying “when I find one to buy, I will list mine.”

6. Significant population boom 

Austin is the boomtown of the US this year (and last, and likely the next few). It’s projected that Austin-metro area will grow from the current ~2 million people to as many as 4.5 million by 2040. These people, coming from around the country (27.6% from Bay Area with an average home price over $1.4M) often have deep pockets and cash to invest. 

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How could this ever change and get easier for buyers?

In order for competition to level out and the market to adjust accordingly (not crash, just adjust), here's what we need to happen:

1. Reduce government spending

Lower the unemployment rate, eliminate additional federal spending (stimulus, unemployment bonuses)

2. New construction needs to be built according to schedule

This means trade and manufacturing would have to come back to the pace they were at pre-Covid (or faster). Once we get new inventory on track to keep up with demand, there will be less competition on resale homes.

3. End foreclosure and eviction bans

When landlords can evict tenants and banks can foreclose on delinquent payers, we can see a healthy amount of short sales and foreclosures hit the market. This could easily result in a mass homeless crisis because these renters who have been evicted are going to find it impossible to be accepted for another rental (to be continued in another article). 

4. Mortgage rates need to increase

When mortgage rates return to over 4%, it could be expected that a significant % of buyers will no longer be able to be pre-approved for the home prices they’re shopping for currently and will be priced out. 

5. Population growth would need to slow down

How could this happen? I don’t have an answer, but I could guess that if companies nationally (and globally) required their employees to go back to the office, we wouldn’t have a huge migration of remote workers come to Texas. That being said, many companies (including Oracle, Tesla, Apple, Facebook, Google, Indeed) have built massive offices here and are continuing to expand the “Silicon Ranch” workforce.

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If some part of this article has inspired you to buy real estate, sell your home, or even move to Austin yourself and rent, let's discuss your options. Glad to additionally share a relocation guide, neighborhood guide, or list of recommended taco trucks.

Chase Cangelosi, REALTOR --- [email protected]