Austin Real Estate Housing Market Forecast
It’s no secret that the Austin housing market has been experiencing a boom like never before, especially for sellers. Similar to past years, 2018 is shaping up to be another record-breaking year thanks to strong demand for homes due to a job and population growth, continual rise in home prices, and a short supply of labor and lots. In fact, according to Dr. James Gaines, Real Estate Center at Texas A&M University’s chief economist, Austin’s growth will be “phenomenal, more than doubling in the next 40 years.” A lot of this comes from the daily influx of people into the city—150 per day—who all need a place to live. But with only a 2.1-month inventory of homes in the Austin area, competition for homes is driving prices up or keeping them high with no end in sight.
What specifically is driving this increase in the number jobs, population (currently 31st largest in the country), and the demand for housing? One reason is the increasing number of technology-related companies moving to Austin over the past decade. The Central Texas area has added on average 27,300 jobs annually over the last decade, and a significant amount of those jobs have been with tech companies like Google, Facebook, Indeed, and HomeAway. And as more people move to Austin to fill these jobs, the demand for housing continues. Housing market expert Eldon Rude spoke at an event sponsored by the Home Builders Associations of Greater Austin at the end of 2017 and said the demand for housing has sent the area’s median home price up 45 percent over the past five years and “despite the significant price increases people are continuing to buy.”
Like clockwork, the Austin housing market sets new records every single year and 2017 was no different. The Austin Board of Realtors reported that the number of pre-owned homes sold and the median sale price of around $300,000 was an all-time high—the seventh year in a row the numbers surpassed the previous year’s. Along with pre-owned homes, builders started construction on 16,000 new homes in 2017, the highest in over ten years.
“They know that fuel for the market is in the $200,000 to $300,000 price range. As a result, lots and homes are getting smaller, and attached housing is gaining a foothold in the market,” Vaike O’Grady, Austin regional director for Metrostudy told the Austin American-Statesman.
These trends don’t appear to be changing anytime soon, and despite a shortage in supply and increase in demand and prices, 2018 is looking to be more of the same for the Austin and Central Texas area. And while it’s impossible to predict with certainty how the market will behave for the second half of the year, here are a few predictions based on real estate and housing experts.
Home Prices Will Slow but Still Increase
Experts predict Austin will remain a seller’s market which means home prices will continue to rise through the rest of the year. Fortunately, inventory levels are also expected to increase meaning home prices may slow compared with the past five years. This means a four to six percent increase in home prices instead of the eight percent Austinites are used to seeing. And while some experts believe affordability will continue to be a challenge for many potential home buyers whose wages remain stagnant, affordability is still more favorable in Austin than compared with big cities in the rest of the country. For home buyers, this means you’ll have a few more options when shopping compared to years in the past.
Rising Interest Rates
Despite rising home prices and increased competition, one reprieve for many first-time home buyers over the past few years has been lower mortgage interest rates. Experts predict that interest rates may rise moderately (.5 to 1 percent) toward the end of the year, sending first-time home buyers outside the city and into the suburbs. One percent may not sound like a lot, but for every one percent interest rate increase on a 30-year fixed mortgage, you lose 10 percent buying power. This means you’d have to buy a home that is 10 percent less to have the same mortgage payment. Rising interest rates will make it harder for many buyers to qualify for a mortgage, discouraging renters from taking the plunge and also preventing some home buyers interested in purchasing larger, more expensive homes.
Millennials Will Be Primary Buyers
Usually the subject of negative headlines, millennials (born between 1981 and 1996) now make up the largest group of home buyers across the nation, including Austin. With the median resident age currently 32.7 years in Austin, this younger population is a huge driver of the market moving through 2018 and into the future. From house style to proximity to restaurants, parks, nightlife, and other amenities to fit the millennial lifestyle, homes in East Austin, Central Austin and other popular areas of town will continue to be in demand.
Overall, 2018 is still an excellent time for buyers looking to enter the market for the first time. Yes, home prices are rising, and it’s currently a seller’s market, but the prices are rising at a much slower pace than past years meaning the market may start to stabilize. And with the threat of interest rates increasing throughout the year, it may be the right time to take advantage of current rates by purchasing your first home or upgrading to a larger space.
Whatever your goals, you need the help of an experienced and qualified real estate professional to find the perfect home and guide you through the home buying process. At Domain Realty, we go to work every day because we’re passionate about helping Austinites find a house they can call their own. To start your home buying process today, contact the Austin real estate professionals of Domain Realty by calling (512) 872-4211.