When interest rates began rising earlier this year, some hoped the change would dampen Central Texas’ ever-rising home prices. In reality, the market did cool — ever so slightly — in terms of sales, but prices continue their upward climb.
Paul Reddam, a local agent for Homesville Realty Group with Compass Austin, said there are much more powerful factors driving the Austin housing market than interest rates, which he said will more acutely affect the lower price points. These factors are a lack of inventory and unabating demand.
“We've seen that there are fewer participants and bidding. But the price hasn't come down because of the supply-demand curve,” Reddam said. “When you have 10 homes on market, they're going to be pretty valuable, especially when you have 100 people trying to buy.”
Homes in the area are certainly gaining value. The Austin metro and the city of Austin have reached brand new heights in terms of home prices, according to new data from the Austin Board of Realtors.
In March, inventory in the metro ticked up slightly from February, from 0.4 to 0.5 months, while the median home price reached a historic high of $521,100. The city of Austin shattered its previous median price record, reaching $624,000 in March, up 22% from the prior year. Citywide inventory also sat at 0.5 months, a fraction of a healthy market’s six months.
Experts caution that while nationwide inflation and the recent interest rate hikes can lead to uncertainty about the market’s direction, as well as the role investor speculation might play, the housing market in Austin is still being driven by “true demand.”
“More homes are being listed and sold in Austin than ever before, and people are buying those homes because they need to live in them,” said 2022 ABOR President Cord Shiflet in a statement. “The Austin area has a dire need for more housing stock across all housing types and price points, so last month’s increase in housing inventory and the number of homes on the market was a welcome sign.”
One huge contributing factor to this demand is Austin’s population growth — about 116 people are moving to Austin each day, according to the Census Bureau.
“This type of growth places immediate and significant demand on infrastructure, particularly housing,” said City of Austin demographer Lila Valencia in a statement. “When a person or family moves into Austin, finding a place to live is at the top of their agenda.”
While demand stayed hot, home sales actually decreased slightly in the city of Austin and all counties but Caldwell. The median price in every county and the city of Austin rose by more than 20% year over year. Bastrop County posted the highest year-over-year increase of 46.9%, reaching a median of $405,500. Williamson County had the smallest increase, up 22.5% to $490,000.
As prices rise, Reddam said the gap between renters and homeowners in Austin will only grow. In Austin, about 55% of residents rent rather than own, according to census data.
“That gap is going to get bigger: the spread between people who own homes and those who don't,” Reddam said. “That's a scary thing to me.”