Y’all proved me wrong.  Well, sort of.

In our last blog post, I suggested that our slow market would continue until the presidential election passed. But in a move that ran afoul of historical trends, we saw an uptick in buyer activity beginning in July 2024.  This shows us the power of the Fed and the impact of interest rates.  Once the Fed signaled that it would begin to lower interest rates, rates began to fall, and buyers came off the sidelines -- for a while at least.  These days the market is behaving as I previously predicted.

Here's how the Austin real estate market is shaping up for the 4th quarter of the year.

Today’s market snapshot

We saw some relatively good market activity from July through September.  Our listings that had been sitting for awhile finally sold, and we had buyers get intentional with their home search and make purchases.  No, we aren’t at the 2021 levels of activity when we were at the height of the inflationary market. We aren’t even at the 2013 levels when we came out of the Great Recession. Today’s market is behaving more like 2012, meaning we are starting to see early indicators of market recovery.  It doesn’t do much for us now, but it bodes well for next year. 

Here are the take-aways for the city of Austin (not metro):

On the positive side:

• If you owned a home from at least January 2020 to the present, you are up 52% or more.
• If you owned a rental property during this same period, rents are up 25%.
• In August, 14.8% of homes sold over the asking price.

On the downside:

• Homes in the city of Austin are taking longer to sell, with an average 48 days on market as of mid-October.
• Only 1 out of 5 homes listed for sale in the city of Austin are actually selling (a meager 20%).
• The rental market has more rental homes available than renters, so that poses a real problem for the 4 out of 5 sellers that are not able to sell and want to rent out their homes instead.  
• Only 4.4 homes out of 10 (44%) were successfully rented this year. 
• The homes that don’t get sold or rented often end up parked in private markets waiting to go back on the MLS when conditions improve.  This may lead to an inventory glut in the spring of 2025.
  

But let’s look at the bigger picture for a moment.  I like to think of real estate as a long-term game, and I encourage you to do the same. If we evaluate our market’s history, Austin still looks healthy.  Just check out the median price appreciation for single family homes in the city: 

• In 2019, we went from a median price of $360,000 up to $415,000 = + 15.28%
• In 2020, we went from a median price of $407,000 up to $510,000 = + 25.31%
• In 2021, we went from a median price of $515,000 up to $599,000 = + 16.31%
• In 2022, we went from a median price of $600,000 down to $563,401 = (- 6.1%)
• In 2023, we went from a median price of $595,000 down to $565,000 = (- 5.04%)
• In 2024, we went from a median price of $557,000 up to $621,750 so far = + 11.62%
• This year’s median price peaked at $650k in May and then started dropping again.  

I expect the appreciation numbers will climb through the late Fall and into the Spring.  

But wait… If only one out of every five homes sells, how are we getting so much appreciation? 

The “pretty” homes are moving; the rest of the homes are sitting and not selling. As we have more nice and move-in ready homes come to market, the number of sales will increase.  This suggests one critical strategy if you are considering selling soon:  make some updates and limit the amount of work your home needs before putting it on the market. 

So what happens next?

Halloween tends to be the bottom of our seasonal Austin real estate cycle, and things have definitely slowed down in October.  With the presidential election in sight, I believe real estate activity will take a pause between now and November 5th.  While the Fed has signaled more easing on rates, they are in no rush. The hope of better rates in the future will also slow some people down from making a move now.  

Post-election, however, I expect there will be a slingshot effect.  Delayed demand over the last few years will be released and more buyers will push forward and make the move to Austin, Texas.  Assuming that inflation doesn’t come roaring back like it did in the 1970s, the Fed lowers rates, and the stock market continues to be strong, I expect our market will strengthen from November to March or maybe even through May when school lets out for summer.     

Advice for Austin home buyers and sellers

So here we stand at the beginning of the next bull run on real estate.  This promises to serve sellers well, but buyers not so much.  If a move is in your future, here is my advice.

  If you are thinking of buying or investing in an Austin home:    This is your Goldilocks moment where the market is just right.  Inventory is higher so you have more choices, homes are sitting longer so you don’t have to be pressured to make a quick decision, and sellers are negotiable.  But don’t expect those conditions to last.  Just over the last month, I’ve had to recalibrate how far off the list price we should start with our negotiations.  Originally, we were making offers 8% below the list price, then that shifted to 3 - 5% below list price, and now the new normal seems to be 2% off the list price. 

Also, be aware of the see-saw effect between interest rates and home prices.  As mortgage rates come down, home prices will go up.  I suggest that you run the numbers and see if buying at a lower price and higher interest rate makes financial sense for your situation.  If you go that route, plan to refinance your interest rate at a future date.

  If you are thinking of selling your Austin home:    If you are a potential seller, I’d rather not see you sell before the election.  If you must sell now it pays to make some updates to your home to ensure it is appealing to today’s buyer.  Remember, today’s buyers are focused on finished homes that need zero work done. Homes that are outdated probably won’t sell.  If you haven’t updated your home in the last ten years, plan on making some improvements.

Instead of selling now, I think you’ll be better off waiting for one of two periods of opportunity between now and the summer of 2025.  Maximize your profit by selling during one of these boosted periods:   

Boost 1: In a traditional election cycle, sales tend to take off about a week after the election concludes.  Regardless of who has been elected, people tend to feel more certain about the future. Demand can get delayed in real estate, but it doesn’t go away. So if you need to sell soon, I’d target listing your home in mid-November. 

Boost 2:  The second boost will be when folks see homes pending and selling in mass. This will bring confidence, fear of loss, and buyers to the table.  Timing is crucial here.  The last two years we got swamped with inventory in the Spring.  For that reason, we think there is a benefit to getting ahead of the competition.  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. Give me a call if you’d like to know more details.

This ain’t my first rodeo.

The market is always shifting, and I’ve been fortunate enough to ride the wave up and down a time or two.  I can’t predict the future, but my experience usually steers me right.  I’d like to put that experience to work for you.  Reach out for a personal market update that is customized to your unique situation.  

And send your friends our way.  We welcome the chance to explain what’s going on so that you can maximize the market to meet your needs.

P.S. Wondering what I base my advice on?  In making these recommendations, I rely on my research, data from the Austin Board of Realtors, real-world experience, and my intuition.  For those of you that like data, I’ve included the charts below.  Just remember that closings often occur 30 days after the contract date, so the data is all 30 days old.