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What's been happening in the Austin Real Estate Market? Well.... let's start with interest rates.
As inflation remains at multi-decade highs, the Federal Reserve has been aggressive with its interest rate hikes. In fact, rates have risen more than two percentage points in just six months. Rates are rising faster than any other time in recent history.
The above graph shows the effective federal funds rate, which measures the weighted average of the rates that banks use to lend to each other overnight. It is determined by the market, but influenced by the Fed's target range.
When the federal funds rate increases, it becomes more expensive for banks to borrow from other banks. Those higher costs may be passed on to consumers in the form of higher interest rates on lines of credit, auto loans, and to some extent mortgages.
This year, mortgage rates have risen ahead of each Fed rate hike. The Fed's rate increases ended what had been a long run of historically low mortgage rates, in part due to the federal funds rate being so close to zero for roughly two years. Unfortunately, the higher rates combined with rising home prices has taken a lot of buyers out of the market because of lack of affordability.
Let's take a look!
Nationally, the average mortgage rate for someone with a credit score of 750 or better is nearly 7.5%.
The median home price in the Austin area is about $500,000.
With 20% down payment, the mortgage amount would be $400,000.
At 7.5%, the monthly payment (not including taxes and fees) would be $2,797.... just 6 months ago the rate was 3.5% bringing that monthly payment to $1,796. A difference of $1,001/mo.
Contrastly, to keep the monthly payment at $1,796 at today's rates, that same buyer could afford a home priced at $322,000 with 20% down payment. That's a 35% decrease in buying power!
As a result, we are seeing a decrease in home prices. Median home prices have dropped 3.8% from July to August and just over 6% since the height of the market Apr/May this year. While most of the appreciation gains from the past two years are still intact, at this rate, it looks like we may see prices drop below 2021 before the end of this year.
Check out the annual appreciation in your area here >> HEAT MAP <<
We did see a slight uptick in the number of home sales from July to August, however, sales are down 30% from the same time last year and preliminary numbers for September and October are showing a slow down in demand.
We continue to see a large influx of homes coming on the market - a 169% increase over this time last year! And, at the end of September we hit 11,000 homes for sale.
What does all of this mean for you?
Fewer buyers and more homes to choose from is great for buyers especially after 2 years of a highly competitive market and competing (or not being able to compete) for the few homes that were for sale. Additionally, a lot of mortgage lenders are offering interest rate programs that allow you to get in at a lower rate the first year or two and later, when rates start to go back down, you can refinance.
If you are seller, you can still benefit from the appreciate we've have these past two years. Just know that there are a lot of homes competing for the same few buyers which means the the homes that are selling are staged, in great condition and priced well.
Call me, if you or someone you know is looking to buy or sell real estate in the Austin area, I'd love to help!
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Months Inventory
