Forecasts for the Austin, Texas real estate market in 2021 suggest home prices in the capital city will continue rising for the foreseeable future.
And that’s not surprising, when you consider that (A) inventory remains very low and (B) the population keeps growing. Within the Austin housing market, both sides of the supply-and-demand picture are putting upward pressure on prices.
Here are the latest trends, conditions and predictions for the real estate market in Austin, Texas, extending into 2021.
Austin Home Prices and Sales Rose During 2020
The current year, 2020, has been a big one for the Austin real estate scene. If you were to look at home-sales activity and price growth in this metro area — and nothing else — you wouldn’t even know there was a public health crisis dragging on.
According to the latest data from the Austin Board of REALTORS© (ABoR), the median sale price for homes within the Austin-Round Rock metropolitan statistical area rose by double digits over the past year or so.
To quote ABoR’s October 2020 housing market report:
“In addition to a third-consecutive month of double-digit home sales growth, median sales price increased 13.2% to $365,000, an all-time record … Homes spent an average of 35 days on market, 19 fewer days than in October 2019, and inventory fell 1.2 months to 1.1 months across the five-county area.”
There are several important points in the above quote:
- Home prices within the Austin metro area real estate market continue to climb, despite the economic downturn caused by the coronavirus pandemic.
- Home values in the area are higher now than they’ve ever been before. Affordability, on the other hand, continues to decline in the area.
- Inventory continues to hover at historically low levels, making things tougher on local home buyers.
All of these trends are noteworthy, especially when you consider the fact that we are still enduring a global pandemic and economic slowdown. The Austin housing market has showed surprising strength over the past 10 months or so, as have many cities across the U.S.
A Positive Forecast for the Austin Housing Market
A recent prediction from the research team at Zillow suggests that home prices in Austin will continue to climb throughout 2021, but possibly at a slower pace.
According to the real estate data company, the median home value in the Texas capital rose by 11% over the past year or so, hitting an all-time high of $427,116 (as of November 2020). That’s based on their proprietary home price index, shown in the chart below.
A recent forecast on the company’s website said: “Austin home values have gone up 11.0% over the past year and Zillow predicts they will rise 8.8% in the next year.”
Given the current supply-and-demand situation in the area, that seems like a reasonable prediction for the Austin real estate market in 2021. It’s hard to imagine a scenario where home prices level off or drop anytime soon.
The general-consensus forecast for the Austin housing market is that houses will get more and more expensive, as we move into 2021. That’s almost a given at this point, based on current conditions.
And while that might sound like a positive trend, the local real estate scene does have its share of problems. Declining affordability and a shortage of homes top the list.
Laura Huffman, president of the Austin Chamber of Commerce, recently said that “in 2021 the region needs to address housing affordability to help people from being priced out of the market, even as salary and job growth continues.”
And with home values expected to continue moving north in the coming months, it seems likely that more and more residents will be priced out of the market in 2021.
Inventory Remains Low, Going Into 2021
A lack of housing inventory across the Austin-Round Rock metro area is arguably the number-one factor driving home price gains, as we approach the end of 2020. There just aren’t enough properties on the market to meet the demand from buyers. Not even close.
According to a recent report, the city of Austin had about a 1.7-month supply of homes for sale during October of 2020. (Note the all-important decimal point in that figure.) That’s well below what would be considered a “balanced” housing market.
Other cities in the area had even lower inventory levels in October. Cedar Park, which is located about 20 miles north of Austin, had less than a one-month supply of homes on the market in October.
And all of this comes at a time when demand is soaring among home buyers. The ABoR housing market report mentioned earlier showed a 29% increase in closed sales from October 2019 to October 2020.
Strong demand, low supply. That’s the Austin housing market in a nutshell.
Population Growth Well Above Average
Forecasts for the Austin, Texas metro area real estate market predict steady home-price gains in 2021. That is largely due to the stark imbalance between supply and demand, across Central Texas.
Population growth has also played a key role here.
The U.S. Census Bureau reported that Austin’s population grew by a whopping 22% from 2010 to 2019. That was more than triple the national average for that same nine-year period.
Other cities in the area have also seen above-average rates of growth, in recent years. According to a March 2020 report from the Census Bureau:
“Three of top ten metro areas with the largest gains in population between 2010 and 2019 were in Texas. Dallas-Fort Worth-Arlington, TX, had the largest numeric growth, with its population increasing by 1,206,599 (19.0%), followed by Houston-The Woodlands-Sugar Land, TX, increasing by 1,145,654 (19.4%), and Austin-Round Rock-Georgetown, TX, up by 510,760 (29.8%)…”
In many ways, the Austin-area housing market is a story of extremes. It has experienced one of the highest levels of population growth, at a time when it has one of the lowest levels of housing inventory. This is putting upward pressure on home prices and will likely continue to do so throughout 2021.
The message to home buyers is loud and clear:
If you plan to buy a home in the Austin, Texas metro area in 2021, you should be prepared for stiff competition. Start early and give yourself plenty of time. Remain open-minded when it comes to features and location. And make a strong offer backed up by recent sales data.
Disclaimer: This article includes real estate market predictions for the Austin-Round Rock metro area into 2021. Some forecasts were provided by third-party sources not associated with the Home Buying Institute. Economic and housing forecasts are the equivalent of an educated guess.