Ah, January 2025.  A time to reflect on the lackluster market of 2024 and make plans for 2025. . .  

The Presidential election has come and gone, and as expected the 2025 real estate market is finally showing more signs of life. We are optimistic, but cautious.  As it stands now, the Austin market has some ground to make up before we can call it "normal."  

Here’s a quick look back at how 2024's market turned out, our predictions on what you can expect in 2025, and some candid advice if you are considering buying or selling an Austin home this year.

Looking back at 2024

In the city of Austin the inventory of single-family homes for sale dropped from a high in June of 3,667 to a low in December of 2,134 – a 41% decline in active listings.  

Unfortunately, it wasn’t because those homes sold.  To the contrary, out of every five listings that went on the market in 2024, only one sold… Ouch.  (That makes us feel pretty good that all of our listings sold in 2024.)

So what happened to all those listings?  

First, we saw a significant uptick in the number of homes being marketed for sale in the private portals, so it seems like many people opted to park their homes in the private market until conditions improve.  A quick review of the major off market portals showed over 1,000 homes being marketed privately right now.   That’s a lot. 

Other sellers opted to rent their homes out (or try to).  When I checked in mid-January there were over 1,000 homes, condos, and townhouses for rent right now.  

Finally, some folks just decided to pull their homes off the market altogether.  I think some of these sellers will try again in the spring and others will just stay put.

The decline in inventory had a positive effect on the market

With an artificially smaller inventory of available homes, more homes started to sell (less competition usually means a greater likelihood of success).  By December 2024 home sales increased by 10%.  

Home prices in the City of Austin also saw some modest escalation.  The median price of a single-family home in the city (not Metro) increased from $555,000 to $605,000 by year end.  Of course, price is highly dependent on neighborhood so make sure to have your agent run real numbers for you before you start dreaming big.

What should we expect in 2025?

Thankfully, we are seeing a nice level of activity these first few weeks of the new year.  The question is whether it will hold.  The level of recovery we experience will likely depend on whether our incoming President keeps some of his economic promises, more on that below.  

If real estate is in your plans for 2025, here’s your plan of action:

 If you are a home buyer: 

• If you've been disappointed in what you've seen on the market, you’re about to have a lot more choices as more homes hit the market this Spring.  And speaking of available homes, be sure to check out our new Hyde Park home with bonus ADU (5005 Eilers) and our Brentwood bungalow with detached garage (1517 W. St Johns).  Plus, we have more great Central Austin choices coming your way in February.
• Consider taking advantage of today’s interest rates.  Our incoming President has suggested implementing tariffs, cutting taxes, and deporting a large part of the workforce that builds new homes.  It’s hard to determine how much of this is puffery and how much will actually happen, but each of those things could cause inflation to rise – and that could get us to 8 – 10% interest rates.    
  
  

 If you are a home seller:  

• If selling a home is in your future, I suggest you get your home on the market sooner rather than later. There is a sweet spot that takes advantage of pent up demand but doesn’t get lost in the crowd of homes that typically come to market in the Spring.  You want to sell in that sweet spot.
• The last two years we got swamped with inventory in the Spring.  As we approach March, home inventory will rise sharply, giving buyers more choices and giving you more competition.  If 2024 activity is any indication, your odds of selling are only 20-30%.  The longer you wait, the more competition you will have and your chance of selling will go down.  
• If interest rates go up, buyers will have less spending power.  More buyers will defer their purchase, and there will be greater price compression. 
• Sweat equity is not in the vocabulary of today’s home buyer.  They do NOT want a home with outdated features, and they absolutely do NOT want a project, especially when there are ample new or recent construction homes to choose from.  If you want to be part of the 20-30% of homes that sell, you need to make updates to your home, especially if you haven't made any upgrades in the last ten years.  Paint, light fixtures, countertops, and staging can make a big difference.  Listen to your agent’s advice on this.

Plan for success 

We've worked through a lot of different real estate cycles during our career, and experience has taught us a thing or two. Over time we've developed strategies that work -- like how to source homes off market when inventory is low, how to get through a buyer inspection as painlessly as possible, how to prepare your home to grab buyer attention online, and how to ensure you are getting the best deal.

If you'd like us to put that experience to work for you, reach out for a personal market update that is customized to your unique situation.  We welcome the chance to explain what’s going on so that you can maximize the market to meet your needs.