Jan 18, 2024 - Real Estate

Austin's housing supply explained in one chart

Existing housing units relative to population demand in the Austin metro area
Data: Hines analysis of Census Bureau and Moody's data; Note: Population demand is a theoretical housing demand metric based on long-term household formation and homeownership rates by age cohort; Chart: Axios Visuals

Austin is one of just three major housing markets in the U.S. that has enough supply to meet demand, according to figures global developer Hines shared with Axios.

  • But that shift has only happened recently, and local real estate experts say Austin is still facing a shortage of affordable housing.

Driving the news: Austin has a narrow surplus of roughly 5,000 housing units relative to the population's demand, or roughly 0.6% of the metro's inventory as of 2022.

  • The uptick is due to higher mortgage rates and a normalization of home prices following pandemic-era highs, according to Austin Board of Realtors housing economist Clare Losey.

What they're saying: "Here's [a market] that's actually crawled its way, climbed its way out of the deficit," Hines managing director Ryan McCullough tells Axios.

  • "Coincidentally, it's one of those markets in which we did see a meaningful home price correction, because we went from a point of just being in an extreme shortage, to now having — more or less — what we would consider sufficient stock."

Why it matters: The change is "bringing homes closer to long-term affordability," even though prices still remain "high for historic standards," McCullough added.

Big reality check: Despite the new surplus, there remains a shortage of affordable homes in the area as Austin has struggled for years with a "severe undersupply of housing," according to a recent report from the Austin Board of Realtors.

  • The analysis revealed that all racial and ethnic groups in Austin earning 80% or less of the area's median family income faced a shortage of affordable homes for sale in the first half of 2023.
  • Losey with the Board of Realtors called the shortage of affordable housing "one of the biggest constraints" currently facing the Austin housing market.

What's happening: There aren't enough homes to keep up with the increase in the vast majority of U.S. households, but Austin, New Orleans and Nashville showed slight surpluses that put them closer to equilibrium, McCullough said.

  • America needs about 3.2 million more housing units, per the analysis, a big reason why prices are still high in much of the country.

Zoom out: Greater New York and Los Angeles saw the biggest housing deficits among the 55 major markets Hines analyzed, nearly all of which came up short.

What to watch: Losey expects there won't be any significant swings in the Austin housing market this year, including when it comes to the supply.

  • "I don't foresee considerable movement" in the total supply of homes for sale on the market," Losey said.
  • "It doesn't look like rates are going to decline considerably enough to really move the needle on that front."
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