Why Austin home prices remain stubbornly high

In 2021, HousingWire published an article spotlighting Austin as one of the hottest housing markets in the country. The Texas capital was a COVID-era darling, but the city had been attracting employers and homebuyers well before the pandemic.

As noted in that article, Austin had ranked No. 1 in population growth for eight straight years and The Wall Street Journal named it the hottest job market in 2019 and 2020.

During COVID, remote tech workers drawn to the Lone Star State’s lower cost of living relocated to Austin in droves and their deep pockets drove up home prices. But today, some of the bloom is off the rose.

Looking at Altos Research data on home prices, inventory and days on market over the past five years, Austin’s meteoric rise during the pandemic era — and its abrupt cooldown after mortgage rates started to rise in May 2022 — are evident. But while rising inventory and days on market are proof of lower demand, Austin home prices remain stubbornly elevated above their 2019 levels.

Austin inventory

Low mortgage rates tied to COVID-era policies spurred a nationwide homebuying spree that stripped inventory levels to a record low in 2022 of only 240,194 homes nationwide. It was hard to find a house anywhere — and Austin was no exception.

Today, Austin inventory has rebounded to more than double the low points of 2022 and is 47% higher than 2019 levels.

  • June 21, 2019: 6,887
  • June 17, 2022: 4,859
  • June 14, 2024: 10,128

Days on market

Austin is back to pre-COVID levels for days on market, with an average of 88 days today versus 89 days in 2019. Contrast that with June 2022, when the average was a mere 29 days.

  • June 21, 2019: 89 days
  • June 17, 2022: 29 days
  • June 14, 2024: 88 days

Prices prove sticky

Austin home prices started to rise in 2020, with the median price skyrocketing from $374,000 in June 2019 to a whopping $635,000 in June 2022 — a 69.7% increase. That number has since dropped 15% to land at $569,000 today, but that’s still 52.1% higher than 2019 prices. (The absolute peak for Austin homes prices happened in April 2022, when the median reached $675,000.)

Austin-Round-Rock-San-Marcos-TX-Market-Profile-2024-06-18-1

“Austin is one of the few housing markets that have had a price correction since the peak of pricing in 2022,” HousingWire Lead Analyst Logan Mohtashami said. “House prices are usually sticky coming back down. Nationally, since 1942, it’s rare to have nominal home price declines, but Austin’s home prices inflated aggressively and have come down noticeably from the peak. Now we are seeing the price declines level off.”

Austin median home prices:

  • June 21, 2019: $374,000
  • June 17, 2022: $635,000
  • June 14, 2024: $569,000

Austin is an outlier even among other Texas metro areas that have had impressive population and job growth in the past few years. The Dallas-Fort Worth-Arlington metroplex experienced the largest population growth of any U.S. metro in 2023 and had the second-highest rate of job creation. Even so, the median home price in DFW is almost 20% lower than in Austin.

Current median home prices in other Texas metros:

  • San Antonio-New Braunfels: $347,999
  • Houston-Sugarland-Baytown: $387,866
  • Dallas-Fort Worth-Arlington: $474,990
  • Austin-Round Rock-San Marcos: $569,000

What’s keeping Austin home prices so stubbornly high?

During a panel discussion at the National Association of Real Estate Editors (NAREE) conference in Austin this week, real estate experts noted that Austin’s high concentration of technology companies ties the city into the tech industry’s boom-and-bust cycles.

This impacts every real estate sector, from industrial and office to retail and residential. Global tech giants like Google, Tesla, Apple, Samsung and Oracle have invested in sprawling office buildings and manufacturing facilities in Austin, but they have also laid off thousands in the past 18 months.

MJ McFarland, a luxury real estate agent at The Agency in Austin, said during the panel that the run-up in home prices creates a difficult scenario for his clients, despite today’s slower market conditions.

“In the luxury space, with a property worth $3.5 million, they’re not in a rush to sell. The problem is, buyers and sellers are in a staring contest to see who is going to drop the price or get into a space where the buyer feels comfortable,” McFarland said. ”With prices at such a high and then seeing them drop over 30% pretty quickly over the past two years, they don’t know what a property is worth now.”

Is there a big correction ahead for Austin home prices? Mohtashami doesn’t think so, but like the rest of the country, affordability is about more than price.

“There were several factors that allowed Austin home prices to rise so fast, including migration from more expensive markets like California,“ he said. “If Austin doesn’t have an influx of hot money migration, its housing market will be more dependent on people making local wages, so they need lower mortgage rates to afford those prices.

“The housing market has clearly found a level it can work with on prices, but if you have weakness in the Austin labor market and don’t have an influx of migration, you will need lower rates to sustain that level.”

Lower mortgage rates could spark another epic round of homebuying in Austin, which could cause prices to reaccelerate. Scott Michaels, an Austin-based Compass agent, explained the appeal of the city to HousingWire’s Brooklee Han in March:

“There is great job growth. It is a vibrant city, there are beautiful rolling hills, the lakes, but also people are just sick of sitting on the sidelines and waiting for a market shift,“ Michaels said. “They’ve been waiting for almost two years now, so they are just ready to pull the trigger and make the jump, and we are here for them.”

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