What if you could go back in time to 2015 and buy a home at the bottom of the market? Would you do it?
Indulge me. Check out this chart showing the median price of Austin homes over the last three years. Notice anything? Today’s Austin home prices are about $2,000 higher at our current bottom than they were back in 2015. You’ll also see the seasonality of Austin’s market where home prices tend to hit their lowest point in November and December, and they hit their highest point in June.
The stats are clear: people get a better deal buying a home in the late Fall when prices are at their lowest.
But… That’s not how folks behave.
Most buyers react to market pressure and want to buy when homes are flying off the market (at higher prices) than when home sales are moving more slowly (at lower prices). When the slower season hits, questions and doubt creep in. Will the market go down further? Is this really the end of the hot Austin real estate market? And so on…
These doubts are understandable. Even with 24+ years of Central Austin experience, I still have these same questions myself each year at this time. After all, I’m a self-employed guy that is responsible for putting food on the table for my family based on the behavior of Austin’s real estate market.
To keep my head on straight, I do research. The stats (like the chart above) tend to reassure me that the lull in the market are really just Austin’s seasonality at play. Whew.
I also look at Austin’s job data from the Austin Chamber of Commerce. Jobs drive real estate demand. As long as we have good jobs being created in and around Austin, it’s hard to argue that our real estate market is tanking.
But… We are experiencing something new in Austin’s real estate market – higher interest rates. In September 2018, the Federal Reserve raised rates for the third time in 2018. If you want the full scoop check out my October 2018 report (link). The short of it is rising interest rates make homes more expensive for buyers. To illustrate, a 1% increase in interest rate means someone buying a home with a mortgage will have higher borrowing costs and a mortgage that’s about 10% more expensive.
As I visit with my Realtor friends across the country, the increasing interest rates are having a depressive effect across the nation. In contrast, here in Austin we are still doing relatively well. Most Austin sellers, however, have yet to adjust their thinking to take into account the interest rate impact. They are still thinking (and hoping) that we have a white-hot market.
So where does that leave the Austin real estate market?
We are experiencing a normal seasonal slow down, but with continued job growth the Austin market should be fine, especially in comparison to some other parts of the country. However, we can’t ignore that rising interest rates are and will continue to have an impact on Austin home sales. Here’s what that can mean for you personally.
If you are thinking about selling: As of this writing 51% of Austin homesellers had to lower their prices to get their home sold. To really win in this market, it is important to get your price right the first time. (Read more about my proven pricing strategies.) True, this is still a seller's market BUT it’s getting more competitive. Make sure your home’s price is compelling enough to attract smart buyers. Take off the rose-colored glasses and ask yourself: “Would I buy my house at that price?”
If you are thinking about buying: Yes, rates are higher than they were, and they are probably going to stay that way for awhile. But you still have the seasonality of the market in your favor. Now is a great time to get out there and take advantage of the lower home prices; you probably won’t have another opportunity like this until a year from now when next Fall rolls around. Just as the chart at the beginning of this post shows, hindsight is 20/20.
Either way, get ready to negotiate. Whether you are buying or selling, it’s helpful to have realistic expectations about the market. Here’s a quick summary showing how much the final sales price was adjusted compared to original sales price in Central Austin over the last three months:
NEGOTIATED SALES PRICE FOR AUSTIN HOMES FALL 2018
$300,000 - $400,000
Decrease by 3.15%
$400,000 - $500,000
Decrease by 4.7%
$500,000 - $600,000
Decrease by 5.8%
$600,000 - $700,000
Decrease by 4.3%
$700,000 - $800,000
Decrease by 4.6%
$800,000 - $900,000
Decrease by 2.1%
$900,000 - $1,000,000
Decrease by 5%
Decrease by 6.9%
As always, my line is open if you have any questions or want to talk real estate. And feel free to share this info with anyone else that you think may be interested.
Until we visit next, I hope you have a wonderful winter holiday season filled with joy and peace.
Cheers to all!