Reversal: Austin Housing Market Goes Through Major Changes in 2023

The real estate market in and around Austin, Texas is currently one of the most rapidly changing housing markets in the country. Inventory levels have increased substantially over the past 18 months, while home prices have declined.

This is good news for local home buyers, not so much for sellers. In fact, if the Austin real estate market continues along its current trajectory, we could see something resembling a buyer’s market by the end of 2023 — or sooner.

During the early stages of the pandemic, the Austin-Round Rock metro area became one of the nation’s “pandemic boomtowns.” Home buyers from all across the country flooded into this market, gobbling up inventory and pushing home prices north at an unprecedented pace.

Now, as we head into the spring of 2023, we are seeing a complete reversal of these trends. Homes are taking a lot longer to sell. Fewer buyers are in the market. And prices are actually declining when measured month over month.

There’s a lot to unpack here, so let’s take it one thing at a time.

Major Inventory Growth in Austin Housing Market

Earlier this month, the research team from Realtor.com published an updated housing market report with data for the nation’s 50 largest metropolitan areas. The Austin-Round Rock-Georgetown metro area was also included in this report, being one of the largest metros in the country.

Among other things, this latest report showed changes in the total number of active real estate listings, for each of the featured metros. In the Austin area, total active real estate listings increased by a whopping 335% over the past year or so.

That’s an important data point, so let’s pause here for a moment. To put it differently, the total number of active property listings within the Austin metro area has more than quadrupled over the past 12 months. (This is when measured from February 2022 to February 2023.)

Of the 50 largest metro areas included in the report, Austin had the biggest increase in the number of active real estate listings. Aside from Nashville and Raleigh — which also experienced major supply gains — all of the other metro areas paled in comparison to Austin, in terms of year-over-year inventory growth.

According to the March 2023 Realtor.com report:

“In February, active inventory rose 68% above a year ago; Austin, Las Vegas and San Antonio are first markets to recover pandemic inventory shortages and surpass pre-pandemic levels…”

Granted, the Central Texas real estate market experienced record-low inventory levels last year. So it had plenty of room to grow. But even so, this is a significant change that will ripple effects going forward.

Buyers in a Much Better Position Today

This is mostly good news for those who are planning to buy a home in the Austin area later in 2023. This inventory growth trend will give buyers a lot more properties to choose from.

It also takes some of the pressure off house hunters, since there won’t be such fierce competition for limited inventory. The days of overheated bidding wars and overinflated offers have faded in the rearview mirror.

Lastly, buyers will be able to enjoy more negotiating leverage when it comes to the sale price and other terms. This is something Austin-area buyers have lacked over the past couple of years, due to the accelerated market conditions mentioned earlier.

Related: Housing outlook extending into 2024

Surprise: Home Prices on the Decline

Here’s another Austin real estate market trend that might surprise you. After 18 months of unprecedented price growth, this metro area is now experiencing a decline in prices.

But if you look at the year-over-year pricing data, you might miss it. You have to drill down to the monthly metrics to see what’s currently happening.

According to data compiled by Zillow, the median home price for the Austin-Round Rock metro area peaked at around $526,000 back in July 2022. Since then, prices have declined from one month to the next. As of February 2023, the median price had fallen to just over $479,000. That’s a fairly significant drop, considering it happened in less than a year’s time.

Looking forward, Zillow expects Austin metro home prices to continue falling. As of February 2023, they predicted that the median value would dip by another 1.5% over the next 12 months.

These data points might make Austin-area home buyers more hesitant to enter the market — and rightfully so. After all, no one wants to buy a house only to see its value decline over the coming months. And that’s a very real possibility within the Austin, Texas real estate market, as of spring 2023.

At the same time, this recent downturn in prices could give buyers a chance to come in at the “bottom” of the market. But we’re getting into the weeds of speculation here, which is probably best avoided.

An Overall Slower Pace to the Market

There’s one more important data point we need to cover, to paint a full picture of what’s happening to the Austin real estate market in 2023. And it has to do with how quickly homes are selling.

According to the Realtor.com report mentioned above, homes listed for sale in the Austin metro area are currently spending about 72 days on the market. That’s an increase of 52 days from a year ago. Based on this metric, Austin is currently one of the slowest real estate markets in the country, when compared to the other major metros.

And once again, the report’s authors singled out Austin:

“Compared to last year, 47 out of 50 metros saw an increase in time on market with larger metros in the West seeing the greatest increase (+26 days). Austin, Texas (+52 days), Raleigh, N.C. (+51 days), and Las Vegas and Denver (+38 days) saw the greatest increases in time on market.”

All of these things are connected. During all of 2021 and the first half of 2022, home prices in the Austin area rose so quickly and by so much that many would-be buyers found themselves priced out of the market. This reduced the demand for homes, at a time when the cost of everything seemed to be on the rise.

With fewer buyers in the market, homes are now taking longer to sell. Sellers are also realizing that they need to do more to attract offers, and that includes slashing their sale prices. So it’s no surprise to see an increase in the number of price reductions, which is another finding revealed in this report.

No one can predict future real estate trends with complete accuracy. But at this stage, it seems likely that the Austin housing market could continue to tilt in favor of home buyers throughout 2023.