US Markets
Thursday, December 21st, 2023 2:51 pm EDT
Key Points
Austin’s Unique Decline in Home Prices:
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- Among the 50 largest real estate markets in the U.S., Austin, Texas, stands out as the only city to experience a decline in home prices for the 12 months ending in November, according to a report by online realtor Redfin.
- During this period, home sale prices in the metro Austin area dropped by 6.2%, with a median price of $424,990. This decline has persisted for five consecutive months.
- In parallel, median rent prices in Austin also saw a significant decrease of 5.4% for the year ending in November 2023, marking the second-largest decline among the 50 largest cities, according to another Redfin study.
Austin’s Real Estate Market Dynamics:
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- Austin’s real estate market reflects the impact of the low-interest house-buying frenzy during the pandemic and the speed at which the market can transition from being undervalued to overpriced.
- The city’s relative affordability in January 2019, with a median home price of $295,000 (slightly below the U.S. median of $298,800), led to a surge in migration during the pandemic.
- By early 2021, Austin became the No. 1 migration destination in the U.S., driven by low interest rates and the appeal of remote work. However, the influx of new residents quickly drove up home prices, peaking at $555,000 in April 2022, reflecting an 88% increase from 2019.
- Despite the recent cooling of prices to a median of $424,990, Austin’s homes are still well above the national median of $408,732, making the city less of a bargain for homebuyers.
Market Challenges and Potential Factors:
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- The Austin housing market is described as having “whiplash” by Daryl Fairweather, chief economist at Redfin. Currently, the market is tepid, and buyers are showing reluctance due to high interest rates, resulting in homes taking about twice as long to sell compared to 2021.
- Fairweather notes that Austin got overheated and is settling back down to a more reasonable market. The recent decrease in prices is seen as a correction to the earlier surge.
- The potential for the market to pick up exists if mortgage rates continue to decline. Despite a recent decrease from the peak of 7.79% in October to 6.95% as of December 14, according to Freddie Mac data, a lower mortgage rate is unlikely to fully offset the significant increase in home prices in Austin over the past four years.
The state of home affordability in major U.S. cities has generally worsened, but Austin, Texas, stands out as an exception, experiencing a decline in home prices over the 12 months leading up to November, according to a report by online real estate platform Redfin. In this period, home sale prices in the Austin metro area decreased by 6.2%, reaching a median of $424,990. This marks the fifth consecutive month of declining median sales prices in Austin.
In parallel, median rent prices in Austin also saw a substantial decrease, dropping by 5.4% for the year ending in November 2023. This ranks as the second-largest decline among the 50 largest cities, according to another Redfin study. Austin’s real estate market reflects the dynamic nature of the housing landscape during the pandemic, transitioning swiftly from undervalued to overpriced.
The unique decline in home prices in Austin is attributed to the city’s earlier status as a hotspot for low-interest house-buying during the pandemic. In January 2019, Austin’s median home price was $295,000, slightly below the national median of $298,800 at that time. The city’s relative affordability attracted a surge of out-of-town homebuyers, and by early 2021, Austin was the leading migration destination in the U.S., according to Redfin data.
However, the influx of new residents rapidly drove up home prices, peaking at $555,000 in April 2022, reflecting an 88% increase from 2019. The recent cooling of prices brings the median down to $424,990, still considerably higher than the national median of $408,732. As a result, Austin is no longer perceived as the bargain it once was for homebuyers.
Rental prices in Austin followed a similar trajectory, surging during the pandemic and subsequently becoming more affordable due to the construction of new rental units and a decrease in migration to the city. The current state of the Austin housing market is described as tepid, with buyers showing reluctance due to higher interest rates, resulting in homes taking about twice as long to sell compared to 2021.
Daryl Fairweather, Chief Economist at Redfin, characterizes the Austin housing market as experiencing whiplash. While it poses challenges for sellers in the current climate, Fairweather notes that Austin had become overheated and is now settling back down to a more reasonable market. The potential for a market resurgence exists if mortgage rates continue to decline; however, the lower rates are unlikely to fully offset the substantial increase in home prices that Austin has witnessed over the past four years, even with the recent decline from the October peak of 7.79% to 6.95% as of December 14, according to Freddie Mac data.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/12/21/home-prices-are-up-in-all-major-us-cities-except-austin-texas.html
