Investing in Austin

“You marry the house, and date the mortgage.”  This is a common saying in the real estate industry and mortgage business.  It’s a concise way of saying that when you buy a home you are making a long term commitment; however, the mortgage used to purchase that home can often be refinanced in a short period of time.   Such is the environment we’re currently experiencing; with last year’s increases in rates, the housing market has indeed cooled.   “The single biggest factor in constraining the Central Texas housing market in 2023 was the gradual rise in mortgage rates, which peaked in late October.  This caused sellers, and buyers, to continually readjust to the current rate environment.” said Clare Losey, Ph.D., housing economist for ABoR. Dr. Losey also noted the typical length of home ownership is around 9-10 years.   

Since their peak of near 8.00% in October, rates have continued to soften, and as of January 18th the average 30-year mortgage rate was 6.60%.   According to an article from CNBC on January 21st, investor consensus is that the Fed will make several (four or five) cuts in 2024 worth a cumulative 1.25% beginning in the first or second quarter.

All this is to say, if potential Austin area homebuyers are sitting on the sidelines because of interest rates, they may want to reconsider.   Why?  Two reasons: First, rates have come down and are expected to soften further; therefore, the ability to refinance at a lower rate within the next year or so looks promising.   Second, while the Austin market has slowed, historically, it still appears to be a good long-term investment.  According to the Texas Real Estate Research Center, if you pick any year and scroll back ten years, you can see it is always a good time to buy real estate in Austin. Here is a sample of the data in the Austin/Round Rock area: 

• Average home price in 1990: $82,000

• Average home price in 2000: $189,000

• Average home price in 2010: $247,000

• Average home price in 2020: $438,000

• Average home price in December 2023: $525,000

Since the unprecedented “boom days” of Austin real estate circa 2022, the market has returned back to a more normalized market.   In those heady days of mid-2022, homes were often sold on the day they were listed, and many incurred a bidding war and sold for significantly more than the asking price.  To say that it was a “seller’s market” would be a vast understatement.   That has flipped, but not nearly to the past extremes.  While technically Austin is now in a “buyer’s market”,  according to the Austin Board of Realtors homes are currently selling for an average of 98% of the listing price.  This would appear to indicate that the supply of homes is just slightly greater than the demand for homes.

I, and most of my real estate colleagues, welcome the return of normalcy to the Austin real estate market.  With the anticipated rate cuts coupled with a thriving Austin economy, I expect 2024 to be another banner year for real estate.  Personally, I’ve already seen a significant uptick in clients that have contacted me about selling or purchasing a home in the next few months.  Please give me a call if you have any questions about the current market or specifically about the Travis Country real estate market.