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Recent predictions for the Austin real estate market suggest that home prices could continue to decline through 2023 and into 2024. This metro area is currently one of the fastest-cooling housing markets in the country, and for a number of reasons.
The Austin, Texas real estate market experienced tremendous inventory growth over the past year or so. For example, the total number of active real estate listings on Realtor.com increased by 258% from April 2022 to April 2023. That was the biggest year-over-year increase of any metro area in the country.
These and other factors have had a significant cooling effect on the Austin housing market, especially when it comes to home prices.
Looking forward, multiple forecasts for the Austin real estate market stretching into 2024 predict that home prices could continue to decline for the foreseeable future. And that’s no surprise, when you consider how much they skyrocketed over the past three years.
From Boomtown to Bust: a Brief Look Back
The Austin area real estate market has become increasingly popular over the past decade. For many years, the Central Texas area offered relatively affordable home prices, a strong economy, and plentiful jobs (especially within the tech sector).
Because of this, the Austin housing market appreciated steadily in the years leading up to the COVID pandemic. The pandemic shifted things into overdrive. Suddenly, anyone with an office job was able to work remotely, and from anywhere in the country. This led to a nationwide migration shift, with people flocking to relatively affordable markets like Austin.
Economists now refer to these cities and metro areas as “pandemic boomtowns.” Austin, Texas; Boise, Idaho; and Sacramento, California all fall into this category.
You probably know the rest of the story. Inventory levels within the Austin real estate market plummeted, reaching all-time historical lows. Home prices, meanwhile, skyrocketed at an unprecedented pace. During 2021 and into the first part of 2022, Austin was experiencing annual price gains in the 20% to 30% range — unheard of at the time.
But that kind of meteoric growth typically doesn’t last long. Eventually, these red-hot real estate markets hit a kind of price ceiling where home buyers begin to pull back, thereby reducing demand. As demand falls, inventory tends to accumulate, and then we have what’s commonly referred to as a “market correction.”
That’s exactly what’s happening within the Austin real estate market right now, as of spring 2023. According to Zillow, the median home value has dropped for the past several months in a row, after reaching an all-time high during the summer of 2022.
And at least one Austin housing market forecast predicts that this downward trend will continue over the coming months.
Austin Housing Market Forecast Into 2024
Like the other so-called boomtowns, the Austin metro area is now one of the fastest-cooling real estate markets in the country. The faster they rise, the harder they fall.
At this point, it’s no surprise to see negative predictions and forecasts for the Austin, Texas real estate market extending through 2023 and into 2024. Granted, no one can predict housing trends that far out with complete accuracy. But a growing number of economists and analysts have suggested that Austin-area home prices could continue to decline over the coming months.
For example, in January 2023 Forbes shared some predictions from the research team at Goldman Sachs. Among other things, this report included a list of housing markets that were expected to experience significant home-price declines during 2023.
To quote the Fortune article:
“In 2023, Goldman Sachs expects double-digit home price declines in major markets like Austin (-15.6), San Francisco which includes San Jose, San Diego (-13.4%), Phoenix (-12.9%), Denver (-11.4%), Seattle (-11.2%), Tampa (-11.2%), and Las Vegas (-11.1%). Those markets are also the very places that the home price correction hit the hardest in the second half of 2022.”
This article also included a chart from Goldman Sachs with a price forecast extending into 2024. It predicted that home prices within the Austin-area real estate market would continue dropping in 2024, but by a more moderate 3%.
A Slightly Different Outlook
We agree with the first part of this prediction, relating to 2023, but have doubts about the 2024 outlook. An alternate (and realistic) prediction would be for house values to find a “bottom” later this year, followed by a gradual upturn stretching and 2024.
The current drop in home prices is driven by a number of factors, including higher mortgage rates, rising consumer prices, and a smaller pool of qualified buyers. The sharp increase in inventory plays a role here as well.
But the fact is that Austin will continue to attract home buyers from other parts of the country, which in turn will drive demand within the local housing market.
Of course, there probably won’t be as many buyers flocking to the area. With a median home value now above the half-million-dollar mark, Austin is no longer the low-cost market it used to be. But it still boasts a strong economy and job market, which will continue to drive demand.
A lot depends on the inventory situation, and that’s equally difficult to predict. In 2023, a lot of homeowners in the Austin area (and nationwide) feel “locked in” by their low mortgage rates. They know if they were to sell their current home and buy another, they would end up taking on a higher mortgage rate. Surveys have shown that many would-be sellers are taking a wait-and-see approach, when it comes to listing their properties.
This kind of hesitancy could continue to constrain inventory levels within the Austin housing market, for the rest of this year and possibly into 2024.
Buyer’s Market Conditions Expected Into 2024
Houses listed for sale within the Austin metro area are taking a lot longer to sell in 2023, compared to the rapid pace of the past three years. This has shifted the supply-and-demand dynamic in a way that favors buyers rather than sellers.
As a result, home buyers in Austin are now in a better position to negotiate with sellers. They can offer lower prices, ask for more concessions, and be pickier about the homes they choose. This is a welcome change for those buyers who struggled to compete in the Austin housing market during the past few years.
Some analysts have gone so far as labeling Austin a buyer’s market in 2023.
According to the online home-selling platform Knock, the Austin and Dallas metro areas are currently the fourth and tenth best markets for buyers in the United States. Their “Buyer-Seller Market Index” considers a variety of factors, including the sale-to-asking price ratio, the number of active listings, and the median number of days on the market (among other things).
One year ago, all four major metropolitan areas in Texas were classified as seller’s markets. However, Austin and Dallas are now projected to shift from “favors buyers” to “strongly favors buyers” within the next year. As far as long-range predictions, Austin is expected to remain the fourth best buyer’s market well into 2024.
Austin Is Now the 10th Largest City in the U.S.
Population growth has a lot to do with the current trends and housing market forecasts for the Austin area. The entire Central Texas region has experienced tremendous population growth over the past three or four years, partly due to a pandemic-fueled migratory shift.
Earlier this year, Austin officially joined Houston, San Antonio and Dallas as one of the 10 most populous metropolitan areas in America. This is based on data reported by the U.S. Census Bureau.
“These population estimates show the city of Austin gaining momentum in population growth and continuing to contribute to the rapid growth in the region,” explains City of Austin Demographer Lila Valencia.
The Census Bureau graphic below shows the 15 fastest-growing large cities in the United States. These figures pertain to the one-year period from July 2021 to July 2022. Four of the top five cities shown in this graphic (Georgetown, Kyle and Leander) are located within the greater Austin metropolitan area.
This is partly why we question those forecasts that suggest the Austin real estate market will continue to decline well into 2024. Yes, home prices in the area probably still have further to fall before finding a bottom. But population and demand-related factors will likely limit the length of that downturn.
Disclaimer: This report contains predictions and forecasts for the Austin, Texas metro area housing market extending into 2024. Such views are the equivalent of an educated guess and should be treated as such. The Home Buying Institute makes no claims about future real estate or economic conditions.
Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author