For the past year and a half, some real estate agents have used words such as "normalizing," "stabilizing," "correcting" and "moderating" to describe the Austin-area housing market.
Or you could just go with Rob Kellogg's simpler word: "Subdued."
Through the buyers and sellers he works with, Kellogg, a real estate agent with Realty Austin, has a good grasp of the ups and downs of the Central Texas housing market, a five-county region extending from Georgetown to San Marcos.
Nationally and locally, the volume of sales and median sales prices have consistently been down year over year, which was the Federal Reserve's aim since it began raising mortgage interest rates in the spring of last year to curb inflation. Rates are now hovering above 7%.
"I think rates are the biggest driver of this slower pace of sales," Kellogg said. "It's really hurting buyers' purchasing power, and so sellers are forced to reduce prices as a result."
Case in point:
A year ago, a unit comparable to one Kellogg was helping market in a condominium community — off East Riverside Drive in the Montopolis area of Southeast Austin — was fetching a price around $440,000.
As mortgage rates continued to climb, eating away at buyers' purchasing power, Kellogg persuaded his sellers to make improvements, such as updating their kitchen and painting cabinets to enhance appeal.
With an initial list price in June of $400,000, the condo saw healthy interest, but with the slower market (he said it was "dead" in July and August), no offers were received as the summer wore on.
Five price reductions later, the sellers finally got a contract Sept. 5 for $350,000, $15,000 less than the $365,000 list price by then. The sale closed in October, with the sellers' equity enabling them to buy a newly built home they had picked out in Driftwood.
"We reduced it not even close to what the peak of the market was," Kellogg said of the condo price, "but we had to get realistic with the price. There were five, six or even seven units on the market there, so there was a lot of competition. We were fortunate to have the updates."
Kellogg said discounted prices aren't uncommon.
"If a house has been on the market longer than 30 days, you're seeing some pretty serious price reductions all over town," he said.
In the last full week of October, Kellogg said there were 1,542 price reductions among 10,235 active listings.
"That's 15% of the properties; that's a pretty good-sized number," Kellogg said. "Sellers are correcting their prices to entice buyers to react."
By the same token, the market hasn't cratered: In that same week, 335 buyers went under contract to purchase a home, and 634 sales closed.
Kellogg's take is that it could be the spring of 2025 before the Austin-area housing market returns to a more typical pattern.
"Let's call it a more normal Austin market," Kellogg said, compared with the "very abnormal" market of the past three years, when the pandemic buying spree set the market ablaze, with many buyers squeezed out by multiple offers and steep price increases.
Jose and Nidia Gomez, left, receive the keys to the family's new home in Hutto from Shawn Salazar, D.R. Horton superintendent, alongside JBGoodwin real estate agent Annette Von Ahn, on Nov. 13. The Gomezes were able to take advantage of incentives the homebuilder is offering to purchase their first home.
How much are homes selling for in and around Austin these days?
Looking at year-to-date figures, home sales in the Austin region were down 10.4% from January through October, according to the Austin Board of Realtors. Half of the houses during those 10 months sold for more than $454,404, and half sold for less, for a 10.9% drop in the median sales price.
Within Austin's city limits, sales plunged 15.9% during that time. The median price of those sales was $543,013, for a 9.5% drop in the median price from January through October compared with the same months last year.
The overarching picture: "Homebuyers are struggling with affordability due to interest rate increases, which have caused a significant slowdown in both new home sales and resales," said Charles Heimsath, a real estate consultant who has been tracking the market for several decades.
"While midyear predictions indicated a decline in rates by the end of this year, persistently high inflation rates suggest a continuation of higher interest rates thorough the middle of next year," said Heimsath, president of Austin-based Capitol Market Research. "This is likely to affect the existing home market sales more than new home sales, because homebuilders can adjust their product mix to be more affordable by decreasing home sizes and increasing density."
In addition, homebuilders often offer interest rate buydowns as an incentive for buyers.
Builders also are offering other specials, such as those Nidia Gomez, 33, and Jose Gomez, 37, were able to take advantage of on a house they just bought in Hutto, northeast of Austin.
The Gomez family, a household of seven, received $11,000 in incentives on a home from volume builder D.R. Horton. On top of that, the family was able to choose two free items from a list of four — a garage door opener, blinds, a refrigerator, and a washer and dryer.
Jose Gomez, who works in construction, and Nidia, a stay-at-home mom, bought a three-bedroom, 1,665-square-foot house with two bathrooms and a study, paying in the mid-$300,000s.
Jose Gomez, who works in construction, and Nidia, a stay-at-home mom, are first-time buyers. They purchased a three-bedroom, 1,665-square-foot house with two bathrooms and a study, paying in the mid-$300,000s.
They're renting in Hutto until December.
"The location here in Hutto is great," Nidia Gomez said. "We did want to stay in Austin, but prices are way too high and definitely less square feet. The schools here also seem to be better ranking than in Austin."
Austin-area home prices: Are there more declines ahead?
Between the spring of 2020 and the spring of 2022, the market saw a huge increase in home prices. The spike was fueled by factors including the strong influx of new residents into the Austin region, historically low interest rates, and a short supply of inventory for both new and resale homes, said Eldon Rude, a longtime housing market consultant and principal of 360° Real Estate Analytics.
"During this two-year period, the median home price went from $330,000 to $550,000, an increase of 67%," Rude said.
Now, "with sharply higher interest rates and slowing job growth, it’s not surprising that home prices have declined from their record highs in recent months," Rude said. "The median home price is down 18% in the last 17 months," and the supply of housing has increased from a low of less than a month to four months at the end of September.
Nidia Gomez hugs JBGoodwin real estate agent Annette Von Ahn at the Gomez family's new home in Hutto.
Asked earlier this year how rising home loan rates might affect the market, Rude said: "Higher mortgage interest rates are never a friend of the housing market. While builders report that many prospective homebuyers have been coming to terms with rates in the 6% range, if rates continue to increase and top 7% again, it will result in strong headwinds for new home sales."
Clare Losey, economist for the Austin Board of Realtors, said housing supply is likely to remain elevated, "not necessarily from a surge of sellers entering the market," but because homes are staying on the market longer, as days on market outpace their longer-term average. Also, demand for homes in the Austin region has declined due to the higher interest rates and higher home prices, Losey said.
Given the higher rates near-term, Losey said, "It's likely that on a year-over-year basis, the median sales price will either remain at least slightly negative or essentially flatline."
Along with what some agents expect to be continued declining prices, Rude said the drop in home sales also isn't surprising "as so many current homeowners have mortgages in the 3% to 4% range, which makes it hard for many to think of trading this low a rate for a home with a mortgage in the 7% to 8% range."
Mark Kendrick, director of onsite sales in Austin for real estate brokerage Compass, said home prices will decline if rates go higher but climb up if rates decline.
"You just have to ask yourself, 'What do you think is more likely, higher or lower rates over the next year?'" Kendrick said. "If you think the rates will remain where they are, then we'll have a flat year, where prices hold but don't drop.
Brenda Burke, a real estate agent with ERA Colonial Real Estate in Austin, said many think that "we have found the new low in our market and we expect prices to travel up next year. While year over year has substantial decreases, month over month has been stable in the last few months.
"If you can temporarily stomach the interest rates, we are seeing some of the best pricing since pre-2021," Burke said. "We believe that as soon as the interest rate corrects, prices will see a surge."
Nidia Gomez checks out her new home. "The location here in Hutto is great," she said. "We did want to stay in Austin, but prices are way too high and definitely less square feet. The schools here also seem to be better ranking than in Austin."
Should I buy, sell ... ... or wait?
Kellogg and other real estate agents say that, depending on a prospective buyer's personal situation, now is, or could be, a good time to buy. That's because in a slower market, prospective buyers have advantages — more time to find the right house and make a decision, more inventory from which to choose, and more bargaining power.
"As a buyer, you're going to be able to negotiate price reductions, repairs and closing costs. Those are three things you wouldn't have been able to negotiate three years ago," Kellogg said.
And although rates are high, "there is an opportunity in the market to get a great price," said Brad Pauly, a real estate broker who owns Pauly Presley Realty.
"Inventory is relatively low, but the only people who are selling property now need to sell," Pauly said. "If buyers are thinking about waiting until rates drop — who knows when that is? — you could see prices increase considering there is still low inventory."
Ricky Cain, president of Cain Realty Group, said that "right now and for the next six months, we are seeing the best time to buy a home that we have seen in years, and likely the best time to buy that we'll see over the next decade. With prices being down and sellers offering (interest) rate buy-downs, savvy buyers are taking action" and seizing the opportunity.
Heimsath's advice is "if you own a home and don’t need to sell, I would wait until next spring to list. If you need to buy, look for bargains in new suburban subdivisions."
J.B. Goodwin is CEO of JBGoodwin Realtors in Austin. His perspective comes from decades of experience in the industry, living through the ups and downs of the housing market and economy.
"Buy now — real estate is a long-term hold investment," Goodwin said. "There is more to choose from than there will be in 2024. The people who have their homes on the market now are serious about selling. There is an old saying in real estate: 'The worst time to buy is tomorrow.'
"Don't get caught up in thinking that interest rates will absolutely come down," Goodwin said. "They may not, and whatever you pay in increased interest will most likely be offset by an increase in prices if you delay your purchase," and, he emphasized, "interest rates might even go higher."
Echoing the predictions of other experts and real estate agents, Rude expects home prices to continue to decline in the short term "due to sharply higher interest rates, which have effectively priced out a segment of prospective homebuyers."
Likewise, Kellogg thinks the number of home sales, and median sales prices, will keep heading down if rates keep going up. If rates improve, "then I think buyers will start stepping back into the market," Kellogg said.
As for sellers, Kellogg said that "a lot of people are waiting until spring to list if they don't have to sell. They're noticing the lack of buyers in the market."
Pauly advised sellers to offer to buy down interest rates for prospective buyers (sellers can contribute toward the buyer's closing costs to lower their interest rate and lower their monthly payments, real estate agents say).
Rooftops continue to sprout in Easton Park, a master-planned community in Southeast Austin being developed by Brookfield Residential Properties.
"Also, keep an eye on pricing and adjust as needed based on comps," Pauly said. "If a seller has the ability to hold off from selling, renting is an option."
In the national market, the five D's — diapers, diplomas (think downsizing empty nesters), diamonds, divorce and death — continue to keep the market moving, and Austin is no exception," said Robert Reffkin, founder and CEO of real estate brokerage Compass.
Kellogg also cited the "five D's," saying they are the motivators for people to buy or sell.
"If folks don't have that, they're probably sitting on the sidelines," Kellogg said. "Sellers who can choose to delay are waiting until the February-March time frame."
Kendrick, with Compass, said if he were looking at buying a home now, "I'd consider locking up a home that is in the pre-completion stage. Some projects will take 18 to 24 months to be completed. It's possible that the buyer could take advantage of the downward pressure on the market now to get a favorable price and incentive but close with equity and a lower rate when the home is complete."
More than 1,500 homes have been sold in Easton Park. Population growth is expected to continue driving demand for housing.
Job, population growth key to future of Austin's housing market
The key questions moving forward, Rude said, "will be the direction of interest rates, the economic and job picture locally, and the growing uncertainty associated with global events."
In a forecast in late July, Losey, the Austin Board of Realtors' economist, said that the region has a strong labor market and that its population growth is expected to continue driving demand for housing.
Burke, with ERA Colonial, said the current influx of newcomers "is more 'normal' compared to the major surge of incoming buyers we saw in 2021 and 2022."
"Austin still has a lot of planned growth, and we expect to have a steady flow of incoming neighbors for many years to come as these companies staff up," Burke said, noting that the Samsung plant under construction in Taylor alone is expected to employ nearly 10,000 people.
Although home sales have been down year over year, prices in Austin's city limits have remained steady, said Rachel Hocevar, Compass' president in Texas. As an example, she cited August numbers showing that the median home sales price in August 2022 was $575,00, and the median in August 2023 was $547,750.
"We anticipate that when interest rates normalize, there will be significant pent-up demand in the market leading to a potential increase in median home prices," Hocevar said.
