Austin home prices still rising, but market frenzy slows in October

The Central Texas housing market is catching its breath, you might say.

While the Austin Round-Rock housing market remains on track for a record-breaking year, the homebuying frenzy that sparked bidding wars over the past 18 months has cooled a bit, leading to a slower-paced market, local real estate agents say.

The number of home sales declined across the five-county Austin region — which stretches from Georgetown to San Marcos — and within Austin's city limits. Sales fell 12.1% for the metro area and were down 11.7% inside the city limits, the Austin Board of Realtors said in its October home sales report Thursday.

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October was the third month this year in which the number of home sales declined, and saw the biggest drop since May 2020, when sales plunged 29.2% in the region and 36.6% in the city of Austin as the coronavirus pandemic took hold.

Despite a dip in the number of sales, the prices of the homes that sold continued to rise.

The median price of the 3,250 houses, townhomes and condominiums that sold in the metro area last month was $455,000, the board said. That's a 24.7% increase over October 2020 and a record for the month.

Within Austin's city limits, the median price was $536,000, which was up 21.1% over October 2020.

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The Austin Board of Realtors said the market was calming compared to its hectic pace early in the year. Median sale prices were still increasing, the board said, but they weren't going up at a "significant rate month to month."

"We are beginning to see a glimpse into what buyers and sellers can expect in our housing market moving forward," Susan Horton, the board's president, said in a written statement. "More new listings are hitting the market, a trend that we have seen continuously for the past eight months, and when coupled with fewer closings (sales) across the (region), prospective buyers have more options."

Eldon Rude, an Austin-based housing market consultant, said it's not surprising that the Austin housing market has slowed, given the sizzling pace it had been on for the past year-and-a-half.

"Looking back, the Austin housing market is coming off the most intense 18 months it has experienced in modern history with respect to the level of demand versus available supply, and the result has been a staggering increase in home prices," said Rude, principal of 360° Real Estate Analytics. "The median home price is up nearly 25% in the last year, and up 41% since February 2020. Considering what we just experienced, it’s not surprising the market has moderated some in the last few months."

But even with those signs of calming, the fundamentals of the Central Texas housing market will keep it as one of the strongest in the nation — and that means prices aren't heading downward any time soon, industry experts say.

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Central Texas home price pressures 'unlikely to ease'

Across Central Texas, the supply of available housing continues to lag behind demand that being is fueled by job and population growth.

"When the lowest inventory on record is factored into the mix, it’s clear that price pressures are unlikely to ease any time soon. Hopefully, the coming months will bring more supply to the market, as materials shortages ease and new development occurs," Jon Hockenyos, president of TXP, an Austin-based economic analysis and public policy consulting firm, said in a written statement.

Adding to the price pressures is the continuing influx of high-wage earners to the Austin area's booming tech sector.

"Prices are rising quickly because of who buyers are competing with," said Earl Proeger, branch manager of Angel Oak Home Loans in Austin. "Typically, many entering our market are big earners with deep pockets for high down payments. These can be folks moving from more expensive markets or highly paid tech workers. Many times, they are flush with cash from selling a home in a much more expensive market, such as California, and are therefore better positioned than local buyers in the bidding process."

The moderating of the Austin market follows a trend being seen across all of Texas and the nation.

A new report from the Texas Real Estate Research Center at Texas A&M University said housing market indicators are signaling that the Texas housing frenzy is over.

“Both housing sales growth and housing price growth have peaked and are slowing,” said Luis Torres, a research economist for at the center. “In addition, months of inventory, listings, and days on market have reached a trough and are beginning to rise."

Torres said it's not surprising that the pandemic frenzy is being replaced by more long-term, sustainable rates of growth. The research center's forecasts for 2021 and 2022 have called for strong demand, improving inventories, moderate price growth and slowly rising mortgage rates.

Slower days ahead for Austin real estate market?

As the Austin housing market shows signs of cooling, a contributing factor in the next few months could be the typical buying slowdown that the markets sees each fall and winter, said Austin real estate broker Eric Bramlet.

"There is generally less competition," Bramlett said. "If you do have the time and motivation to continue searching for your new home around the holidays, you can often get more attractive pricing than you will in the spring, but there will be fewer homes to choose from."

"Homes do sell and pricing remains strong, but it’s a different experience than sellers saw only a few months ago. While we do see many multiple offers, they are not guaranteed," Bramlett said. "The numbers to watch will be spring 2022 sold price numbers and appreciation, at which point we’ll have an indication of what Austin’s 'new normal' will be."

Ultimately, the strength of the U.S. and local economy will play the largest role in the health of the Austin housing market going forward, said Rude, the housing market consultant.

"If the largest tech companies continue to grow at the pace they have in recent years, Austin will certainly remain one of the cities where tech talent will want to live and work," Rude said. "The result will be continued demand for both rental and for sale housing."

Austin home prices by the numbers

Austin-area home sales in October:

$536,000 -- median home sales price within Austin city limits

21.1% -- increase in median home sales price within Austin city limits

$455,000 -- median home sales price for five-county area

24.7% -- increase in median home sales price for five-county area

— Source: Austin Board of Realtors

This article originally appeared on Austin American-Statesman: Austin home prices still rising, but market frenzy slows in October