Check out what's up — and down — with home sales, prices, supply in Austin area market

Housing supply in Central Texas reached its highest level in 13 years in May, the Austin Board of Realtors said in its latest report, and that could mean more choices and negotiating power for some potential buyers.

At the same time, continued higher interest rates are keeping other buyers out of the market altogether, or unable to afford a house they had considered purchasing before rates started climbing in 2022, housing experts say.

In May, the Austin area had a 4.9-month supply of homes, the board said. That's the time it would take to deplete available inventory at the current sales pace. Experts consider a supply of six to 6½ months a balanced market, with neither buyers nor sellers in the driver's seat.

Of the houses that sold in May, the median closing price was $459,450 in the five-county Austin region spanning Georgetown to San Marcos. Inside Austin's city limits, the median price was $608,438.
Of the houses that sold in May, the median closing price was $459,450 in the five-county Austin region spanning Georgetown to San Marcos. Inside Austin's city limits, the median price was $608,438.

Of the houses that changed hands in May, the median price was $459,450 in the five-county Austin region spanning Georgetown to San Marcos. That's down 0.4% from May 2023.

The median price means half of the houses sold for more than that amount and half sold for less.

The 2,968 sales in May in the Austin region declined 12.8% from the prior May, the board said. Higher mortgage interest rates have had a substantial cooling effect on markets locally and nationally since they began rising in 2022.

Across most price points in Austin right now, "the current market is exceptionally challenging, and even industry experts find it difficult to predict trends," said Keith Trigaci, an agent with the Compass real estate brokerage. "High interest rates have significantly reduced buyer activity at open houses, in-person showings and calls on listings. Many properties that failed to sell last year remain on the market, with sellers hoping for better conditions."

What about sales and prices within Austin's city limits?

In the city of Austin, there were 1,038 home sales, up 2.4% from May 2023, the board said.

The median closing price last month was $608,438, up 11.6% from the year-ago May. The all-time record for the median home-sales price in Austin was $667,000, set in May 2022, the board's figures show.

Clare Losey, an economist for the Austin Board of Realtors, said there's positive news for potential buyers in the latest numbers.

“This data demonstrates that buyers can continue to be more selective when searching for a home in their price range," Losey said.

However, the picture is more nuanced.

"Although it may appear to be a buyer's market from the outside, it’s important to understand the context behind these statistics, including higher interest rates resulting in a reduction in purchasing power," Losey said. "This market does not offer a clear advantage to either buyers or sellers.”

Housing market undergoing 'correction'

The Austin-area housing market is returning to normalcy after a period of unsustainable growth, including after the coronavirus pandemic, experts have said.

"After several years of demand far exceeding supply, which resulted in huge increases in home prices, the Austin housing market is now in a correction phase," Eldon Rude, a longtime housing market expert, said Thursday.

More: Austin-area housing outlook positive; job growth, slower home prices pluses, expert says

"Although there are numerous reasons for the shift in the market, the most significant include sharply higher interest rates, and the slowdown of in-migration of new residents into the area in recent months."

Rude is principal of the Austin-based consulting firm 360° Real Estate Analytics. For 21 years, he has delivered the annual housing market forecast to hundreds of housing industry professionals each year.

"The spike in interest rates over the past two years has resulted in some buyers no longer being able to purchase a home, while for others the higher rates prevent them from buying the home they could once afford," Rude said in an email Thursday. "The slowing of in-migration into the Austin area tied to tech companies' slower pace of hiring is resulting in fewer relocation buyers in the market who generally purchase move-up and luxury housing."

Rude said that "the challenge for buyers remains that mortgage interest rates remain elevated, and the fact that some percentage of the available inventory remains overpriced as sellers are reluctant to give up the equity they gained during the most recent runup in pricing."

More: Austin region sees uptick in April home sales; median price holds steady, new report says

'Demand will stay strong'

Mark Sprague, a housing industry expert with Independence Title in Austin, recalls how crazy the housing market was in 2022.

"Buyers were freaking out, and sellers got multiple offers over asking price," Sprague wrote in a recent newsletter.

"The good news is the market has definitely calmed down both in Texas and all over the country. Every Texas metro has more active listings, which gives buyers more choices," Sprague wrote.

Sprague predicts that home price appreciation will ease some but not crash.

"Price appreciation has slowed in Texas, but should continue to go up some in 2024, just not as aggressively as the last 5+ years," he wrote.

Why? "With job creation continuing strong in Texas, there is not enough housing inventory," Sprague said, even though housing supply has crept up in all Texas metros.

"Inflation and high interest rates have slowed buyer demand, but it’s still strong. And Texas is still a popular place for people looking to relocate from states with higher taxes and home prices," Sprague said.

Sprague's bottom line: "If you’re hoping for a housing market crash, you’ll be waiting for a while. Like, probably forever. That’s because for housing prices to totally plummet, inventory would have to go way up to exceed demand, and no one foresees that happening anytime soon."

This article originally appeared on Austin American-Statesman: Report: Supply of homes in Austin area hits highest level in 13 years