Jun 6, 2023 - News

Austin-area real estate prices drop

Change in Austin-area home prices, by ZIP code
Data: Zillow; Map: Erin Davis/Axios Visuals

A lot of bubble-like air has escaped from our local real estate market, per new housing data.

Driving the news: Average home prices in greater Austin have fallen by more than 10% between July 2022 — when the market peaked — and April 2023, according to the Zillow Home Value Index.

  • That drop-off, from roughly $540,000 to $485,000, is the biggest by percentage in the entire country, which has overall seen about a 1% decline during that same period, from $341,000 to $339,000.
  • The Zillow home value estimates are based on factors including sales transactions, tax assessments and public records.

Why it matters: In the throes of the pandemic, houses landed scores of above-list-price offers within hours of going on sale, as deep-pocketed remote workers and housing investors drove up the local market.

  • Now it appears a return to pre-COVID normalcy has seeped into the housing market, potentially leaving new homeowners holding the bag.

Between the lines: Austin sits amid the choppy cross-currents of strong job growth and high interest rates, making the real estate market hard to divine.

  • Homes in the greater Austin area spent an average of 71 days on the market in April, up 53 days from April 2022, and the housing inventory increased 2.4 months to 3.2 months, per the Austin Board of Realtors.

The big picture: "We're not witnessing a 'crash' in home prices in Austin," Clare Losey, housing economist for the Austin Board of Realtors, tells Axios. "Prices are readjusting to current conditions in the broader economy — persistently high inflation, the doubling of mortgage rates over the past year-plus and a decline in consumer confidence."

  • Those factors have left potential buyers with less purchasing power, Losey said, moderating the demand for home ownership.

Flashback: Analysts a year ago determined the pandemic inflated metro Austin housing prices by nearly 68% above the historic trend line, making the local market at the time the most overpriced it had been in at least three decades.

Zoom in: Even with the drop-off detailed by the new Zillow data, houses remain above pre-pandemic prices in Austin, Austin Realtor Lilly Rockwell observes in her Rockwell Report newsletter.

  • The Zillow index, for example, pegs the value of the average home in greater Austin in February 2020 — just before COVID spread widely in the U.S. — at $241,000.

What they're saying: Rockwell explains the drop-off with her Good House/Bad House theory.

  • Good Houses "are the ones that are staged well, are in good condition and are priced well. Even with higher interest rates, buyers can smell a good house and will pounce on it."
  • "The Bad Houses are riddled with problems that are scaring buyers. It's a bad location, a dirty house, high HOA dues, a small floorplan or crazy layout. … When you have choices as a buyer, why would you go for a Bad House unless it was priced as the deal of the century?"
  • "The Good Houses are the reason our prices aren't tanking. The Bad Houses are why we have higher inventory and fewer sales. And for whatever reason, there's a lot of Bad Houses for sale right now."

Let us know how you're feeling about turbulence in the real estate market.

  • Psyched that buying a new home might be a little easier — or terrified about the future of your biggest investment?
  • Write us at [email protected]
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