The consensus forecast for the Austin, Texas housing market in 2023 predicts a much more “buyer-friendly” real estate scene. That’s a fairly safe prediction, actually. One reason: inventory growth.
A new report showed that Austin is one of the top metro areas in the country, in terms of housing market inventory growth. This comes after a prolonged shortage of properties, and it’s just one of several trends reshaping the market.
Overall, the Austin housing scene has shifted in a way that favors buyers for a change. Our forecast suggests that this shift could continue well into 2023.
Austin Housing Market in 2023: A Better Year for Buyers
All throughout 2021, we heard story after story about the red-hot housing market in and around Austin, Texas. (We even wrote some of those stories ourselves.)
The Central Texas real estate scene got so crazy that buyers began waiving their contract contingencies and offering more than the asking price — just to get the seller’s attention.
Much has changed since then. And inventory has a lot to do with it.
After experiencing record-low inventory levels through most of 2021, the Austin area is now gaining inventory at a rapid rate. We’ll get to those numbers in just a moment. For now, just know that the real estate market continues to move in a more buyer-friendly direction.
As for a long-range forecast, the Austin housing market of 2023 will probably look very different from what we’ve seen over the past 24 months. It could move at a slower pace. It should have more properties for sale, compared to last year. Home-price growth will slow way down.
As a result of these trends, home buyers will likely have more negotiating leverage.
Major Inventory Growth in the Austin Area
Most Austin real estate predictions for 2023 suggest that the market will cool down in the months ahead. Inventory growth is a big reason for such forecasts.
A recent report from Realtor.com showed a significant increase in the number of homes for sale in this market. According to their September 2022 report, the Austin-Round Rock metro area had a 138% increase in active real estate listings compared to a year earlier.
To put it differently: The number of homes for sale within the Austin-area housing market more than doubled in the past year or so.
At the end of 2021, the metro area had about a one-month supply of homes for sale. That’s miles below what is considered to be a “balanced” market. So it’s obvious why sellers were in the driver’s seat back then. By August of 2022, however, the Austin-Round Rock metro housing market had more than a three-month supply of homes for sale.
These changes have altered the local real estate scene in several ways. For one thing, it’s taking longer to sell a home these days, compared to last year. And more and more sellers appear to be reducing their list prices in order to attract offers from buyers.
It’s Taking Longer to Sell a House
Eighteen months ago, Austin-area homes were getting snatched up just as soon as they came onto the market. Homeowners often found themselves flooded with offers, within days of listing their properties. Put your “for sale” sign out and wait for the buyers to line up.
But here too, change is in the air.
As of summer 2022, it’s taking homeowners quite a bit longer to sell their homes. In fact, the Austin metro area real estate market just experienced the biggest increase in “time on market” among the nation’s 50 largest metro areas.
To quote the September Realtor.com report from earlier:
“Time on market was lower across the 50 largest U.S. metros … Forty-eight of these metros posted yearly gains in time on market, with the biggest increases registered in Austin, Texas (+16 days), Raleigh, N.C. (+12 days), Riverside, Calif. (+11 days)…”
There are several reasons for this slowdown.
First of all, the Austin area has gotten a lot more expensive over the past two years. According to Zillow, the median home value rose from $342,000 in May of 2020, up to $590,000 by May of 2022. Surrounding cities like Round Rock and Cedar Park experienced similar gains. So there are fewer people in the area who can afford to buy.
And then there’s the inventory growth mentioned above. With more homes available, buyers don’t have to “scramble” as much as they did in the past. They can take more time to consider their options and negotiate the terms.
For these and other reasons, our 2023 forecast for the Austin housing market predicts a slower pace of sales, compared to the “frenzy” of late 2020 and all of 2021.
Sellers Reducing Their Asking Prices in 2022
Given all of the trends mentioned above, it should come as no surprise that sellers are starting to lower their asking prices. And here again, the Austin real estate market stands out among the nation’s major metros.
As the September Realtor.com report stated:
“In August [2022], the number of for-sale homes with price reductions increased year-over-year in 49 large metros, led by Phoenix (+30.9 percentage points), Austin (+24.8 percentage points) and Las Vegas (+24.4 percentage points).”
Clearly, homeowners have gotten the message. They understand the market is cooling, and that they need to be more flexible when it comes to pricing. It’s a kind of snowball effect. Higher prices reduce demand … which leads to an accumulation of inventory … which leads to a longer “time on market” … and so it goes.
One Thing to Watch For: Falling Home Prices
Our final prediction for the Austin real estate market has to do with home prices. Going forward, house values in the area will probably decline from the peak reached earlier this year.
According to some analysts, the Austin metro area housing market is significantly overvalued relative to underlying fundamentals, and could be headed for a downturn. In other words, home prices could begin to drop in late 2022 and possibly into 2023.
And already, we can see signs of price erosion.
The chart below, provided by Zillow, shows the median home value for the Austin-Round Rock metro area over the past ten years. Two things should jump out at you. (1) You can see the sharp upturn in prices that started in late 2020. You’ll also notice how prices started to trend downward, in the summer of 2022.
Of course, no one can predict future home-price trends with complete accuracy. But it’s entirely possible — if not likely — that house values in the Austin area will decline further over the coming months.
On the one hand, this is good news for anyone planning to buy a home during late 2022, or in 2023. Falling prices should make the real estate market more affordable to a larger number of buyers, thereby enabling them to make a purchase.
On the other hand, the possibility of further price erosion could worry some home buyers. After all, nobody wants to purchase a depreciating asset. For those buyers, a wait-and-see approach might be best.
Disclaimer: This report makes predictions relating to the Austin, Texas housing market into 2023. Such forecasts are the equivalent of an educated guess and should be treated as such. The Home Buying Institute makes no assertions about future real estate or economic conditions.