Where is the light at the end of the tunnel?
We want to help illuminate the shifting real estate market and cut through a lot of the fear out there so you can understand what is going on from someone in the trenches. Rates have been going up for some time now in an effort to quell inflation which is making it even harder for buyers to finance their purchases. As a result prices are dropping to meet the new reality of more expensive money.
The problem is that many buyers have really just given up for likely the rest of the year. As of this writing in all of Austin, there are 132 contracts being written per week, that's 520 per month with an inventory of around 2500 single family homes. That is 5 months of inventory, a far cry from when we had 250 homes available in the entire market. The big distinction here is that it isn't a supply problem. It's almost all demand, or the lack thereof. The number of homes coming on the market this year is matching nearly the same as last year, but people simply aren't buying like they used to.
Austin Board of Realtors MLS
Now technically home prices are still up year over year. The median sales price in October 2022 was $622,500. In October of 2021 it was $585,000. However we are down from a peak of $730,000 in May of 2022. Lies and statistics right? So yes prices have come down in the short term, but in the long term we are still trending up.
Rates have gone up so quickly in the past 6 months that is has scared more buyers out of the market. Most are uncertain about what will happen in the future because things are changing so fast. The CPI numbers in November came out at 7.7% inflation, down from 8.2% inflation the month before. The markets celebrated, but at that speed it will take a year to get inflation into the targeted 2% zone. We don't know if current rates will do the job or if the Fed will keep hiking until we hit the target.
What we do know is there is a lag between rate hikes and inflation numbers, so the Fed will likely overshoot just to be safe. In the short term mortgage rates have retreated from 7% to about 6.3% for those with good credit as of this writing.
As with all markets, they work in cycles. What goes up comes down and vice versa. So prices will eventually climb again. Austin remains a high growth market and ranks #2 in terms of GDP growth in the nation, second only to San Francisco. If you think the Austin metro will continue to grow in the long run, housing is likely to do the same.
It's the time of year where we don our baker hats and make pies for all of our friend here in Austin. We will be turning the above into about 150 pies this year. If you want a pie to pick up at one of our agent's homes this year, please email us at agents@HeartOfAustinHomesTeam.com to let us know if you want a pumpkin or sweet potato pie. - John and Alyse