Is it a good time to sell a home in Austin?

The Austin real estate market went from red hot in 2021 to pretty close to ice cold in a matter of months in 2022.  Given the recent ups and downs we've seen, there's a lot to think about as you decide whether to sell your home in Austin this coming year.

• Are homes still selling?
• Is it better to lease my home now and sell later?
• Or should I sell now because prices are going to keep going down?

There's no one-size-fits-all answer for everyone.  It's highly dependent on your personal finances, what's driving your decision to sell, and your risk tolerance.  Here's our take as you work through these questions and more.   

ARE AUSTIN HOMES STILL SELLING?

Yes, houses in Austin are still selling, but it's been sluggish, especially compared to the frenzied pandemic years.  Remember though, that 2021 was an aberrant year; it should not be a yard stick we use to judge all future housing markets.  A "normal" or balanced real estate market is one that has six months of home inventory.  We haven't had a balanced real estate market in Austin in over eleven years (back during the Great Recession).  We're a little spoiled and are used to low housing inventory and homes selling at a relatively brisk pace, with three months of home inventory feeling like the norm locally.  

And while 2021 was an outlier, the high gains we experienced last year made the shift in 2022 feel more abrupt.  What exactly happened?  The Austin market peaked in April 2022, and then home prices began to decline and eat into the appreciation gained in 2021, with some areas experiencing a $15,000 drop each month.   That's a hard shift to swallow coming off such a seller-centric 2021.

Now as we approach the end of the year, home prices have begun to level out.  The October 2022 statistics from the Austin Board of Realtors report shows that we have 3.2 months of housing inventory, new listings declined by 13.1%, homes under contract dropped by 40%, and homes are spending more time on the market before selling (note: Austin Board of Realtors numbers lag 30 days behind).  Technically that's still a seller's market, though it sure didn't feel that way to most sellers and Realtors.

What do those stats really mean?  We saw more homes sitting on the market, way fewer multiple offers, the return of negotiations, the return of standard real estate contract terms, and downward price pressure.  Buyers had more choices, they weren't as rushed to make a purchase decision, and they could be pickier.  Not everything sold.  While buyers would take almost any home during the pandemic, during 2022 old buyer preferences resurfaced.  Today's buyers want a home that is updated and move-in ready; in 2022 outdated homes had a particularly difficult time selling. And then there were interest rates... Many buyers were spooked by rising interest rates and paused their Austin home search entirely so there were fewer buyers out there looking at homes.  

This left many sellers frustrated that their homes weren't selling for the high prices that seemed normal just a month ago.  It took awhile to mentally adjust to the shift in the market.  Some sellers pulled out all together, while others chose to lease their home in hopes of selling it later when market conditions improve.  By July 2022 our Austin area real estate statistics show a dramatic uptick in the number of single family homes for lease.  Leasing inventory is now at levels that we haven't seen in some time.  

So yes, homes are still selling.  If, however, you are considering selling your home in 2023, you will want to think about your options and have a realistic understanding of the current Austin market conditions.  

SIGNS SUGGEST WE MAY BE NEARING THE BOTTOM OF THE MARKET

I don't know when the Austin real estate market will hit bottom; no one does.  There are, however, enough positive signs that make me cautiously optimistic about 2023.

For starters the home price declines we've seen for the last seven months began to slow between October and November, dropping from a decline of around $6 per square foot each month, to a decline of $1 per square foot.  Additionally, interest rates began to fall in early November 2022.  We also saw a slight increase in buyers applying for mortgages, with the index average inching up from 199.9 to 204.2.  And if you use the stock market as a barometer of consumer confidence, it has been on a rally since the end of September.

We're also seeing signs of renewed interest in the Austin real estate market.  Between the typical holiday slow down and the chilling effect of rising interest rates and the uncertain economy, the market should feel quiet this time of year.  Yet, we feel movement. There’s an undercurrent of activity building.  

Yet, we must temper our optimism.  There are a lot of unknown variables at play that may deter or delay Austin's real estate rebound, namely the Federal Reserve and unemployment rates. 

The most recent job report was strong, and it may encourage the Fed to continue with their interest rate hikes in order to get us to a 4 – 5% unemployment rate.  We are currently at 2.7% unemployment in Austin, which means around 25,000 Austinites will have to lose their jobs to get us where the Fed wants us to be.  Anytime there are job loses we tend to see displaced homeowners and a corresponding increase in the number of homes for sale.  If we combine this potential increase in home inventory with downward pricing pressure from rising interest rates, we may end up seeing an even stronger buyer's market in 2023 than we saw in 2022.  

IS IT A GOOD TIME TO SELL A HOME IN AUSTIN?  

Frankly, the next few months are not the ideal time to sell.  Much depends on if you have to sell or just want to sell, as well as how long you've owned your home.  Let's look at it from all perspectives.

IF YOU DON'T HAVE TO SELL: 

If you don't have to sell, we suggest you hold on to your property if you can.   In an ideal situation you would hold your home until the market stabilizes, interest rates come down, and buyers are active again.  This would increase the chance of you selling quickly and for top dollar.  Since that's an unknown timeline, we know that that may not be do-able for everyone.

If selling is in your future, you can use this slower time period to prepare your home to go on the market.  Gradual and steady improvements may be easier to absorb over time and put you in a position to be ready to go on the market quickly when things begin to pick back up.  We've outlined some simple preparations later on in this post.

IF YOU HAVE TO SELL:   

If you find yourself in a situation where you have to sell, try to hold off until February if you can.  There's a natural seasonality to the Austin real estate market.  As a result, homes typically sell for 6 - 8% more during the spring.  You will want to be slightly ahead of when most sellers will go on the market so that your home stands out from the crowd, but you also don't want to be too early.  To that end, we are counseling our sellers to aim to list their home around the last week of February.  Hopefully by the early spring we will see more buyer activity.  

Also, price and presentation are paramount. As mentioned above, today's buyers want a home that is updated and move-in ready.  We can talk you through what improvements will get the biggest bang for your buck, and our Compass Concierge program can help you fund those projects if cash is tight until you're able to re-pay the cost at closing.   

Be sure to work with an experienced Realtor that will give you realistic pricing information, and be willing to take their advice. You will do yourself more harm sitting on the market at too high of a price and becoming shop worn.  Have a plan to price your home just right, and be prepared to make quick adjustments if needed.

IF YOU PURCHASED YOUR HOME IN 2020 OR 2021:

If you bought your home when prices were at their peak during the pandemic, you may find yourself "upside down" and facing a loss if you try to sell in the early part of 2023.  Time will fix this.  Hold onto your property and let appreciation over time work its magic so that you come out ahead.  If you've got to make a move of some kind, then we should discuss leasing.  More on that below.

IF YOU'VE OWNED YOUR AUSTIN HOME FOR AWHILE:

The Austin market has appreciated in value 37.1% in the last five years and 45.45% in the last ten years.  If you've owned your home for some time, you are likely sitting on significant appreciation and a substantial amount of equity.  Congratulations! You've been the beneficiary of properties appreciating over time, and that appreciation will likely increase if you hold onto your home even longer.  

Then again, you may be comfortable with the gains you've already achieved.  Some sellers are sitting on enough of a value increase that they don't care if their home sells for $50,000 or even $100,000 less than it might in another year or two.  It's up to your comfort level.  Do keep in mind, however, that if you sell now you are unlikely to replace that sweet sub-five percent interest rate you may be currently enjoying.  

YOUR ODDS OF SELLING YOUR AUSTIN HOME  

To help you gauge your odds of selling your home right now, check out these two charts.  The first one shows home sales year to date, and the second one shows a historical review. Pay attention to the green active listings as compared to the blue listings that sold.  The odds of selling were strong in the first quarter of 2022.  As more homes come on the market and don’t sell, the odds of a successful sale decrease.

WOULD I BE BETTER OFF LEASING MY HOME AND SELLING LATER?

If you would lose money if you sell your home now or if you want to capitalize on your potential profit, another option is to go the rental route and wait to sell when the market rebounds.  This has the benefit of earning you rent that can help offset or even cover the cost of your mortgage. Be ready to offer good lease rates, because leasing inventory is at levels we haven't seen in some time.  In other words, more folks are now competing for good tenants. 

If you aren't sure if leasing makes sense for your personal situation, we will gladly do some analysis for you.  If you opt to lease, we can also connect you with a property management company that can help you find tenants and address tenant needs during the course of the lease.

USE THIS SLOW TIME TO START PREPARING YOUR HOME FOR SALE

Even if you aren’t ready to sell your home now, it is a good time to start preparing so you are ready when the time comes.  Not only will these steps help you prepare and get a jump on the market, but they may also serve to boost your sales price.  Here are five things you can do now to get a head start.

#1:  PURGE AND DE-CLUTTER.  It’s natural to accumulate a lot of stuff after living in your home for some time.  But jam-packed closets and over-stuffed drawers don’t show well.  The same goes for garages that are so full of boxes and equipment that you can’t even park in them or dark rooms hidden by heavy draperies.  Plan ahead and slowly go through your belongings one area or room at a time.   As you do so, neutralize your space and reduce the amount of personal photos and mementos on display.  Purge, pack, and clean so that your home makes a positive impression on potential buyers. 

#2:  DEEP CLEAN.  Few of us live in pristine conditions, and it’s easy to overlook the things that accumulate over time.  Before your home goes on the market, focus on cleaning the spaces that don’t get regular attention.  This is the time to wash the baseboards, remove the cobwebs from the ceiling, clean the appliances, empty the bugs from the light fixtures, replace burnt out bulbs, dust under your belongings, clean the gutters, and have the carpets professionally cleaned.  Professional house cleaners can be a life saver in this regard.  

#3:  CONSULT WITH A PROFESSIONAL STAGER.  A professional stager can help you figure out how to optimize the use, look and feel of every room in your home so that it is the most appealing to potential buyers. This goes beyond decorating and focuses on showcasing your home in its best light.  For example, stagers can help you determine if any furniture should be stored or re-arranged to showcase your home at its best.  

#4:  MAKE MINOR REPAIRS.  The leaky faucet, the wobbly toilet, the peeling wallpaper, the smudge on the wall, the peeling exterior paint -- these are things you can address now so that you are prepared when the market heats back up.  

#5:  MAKE ON-TREND UPDATES.  The days when buyers were looking for a fixer upper are gone.  Today's buyers prefer homes that are updated and ready to move in.  If you have formica or tile countertops, this is a good time to replace them.  Upgrading your dining and bathroom light fixtures to current styles can also go a long way.  A fresh front door can completely change the age and look of your home.  If you aren't sure where to start, check out some of our remodeling tips with the highest return on your investment or these curb appeal makeovers.

LET'S TALK THROUGH YOUR OPTIONS 

If selling a home in Austin is on your to do list for 2023, we can help you sort it out and establish a path forward. 

We will answer all of your questions and come up with a plan with actionable steps designed to get you where you want to be.  And then you decide what makes the most sense for you.  

Reach out to Blake Hood or I when you're ready to talk through your options.

December 8, 2022