By Shonda Novak
Austin American-Statesman
Published 3:31 pm CT Sept. 16, 2021
Though cooling a bit, the Central Texas housing market remains on a hot streak, as median home-sales prices hit August records in both the region and within Austin’s city limits.
However, in good news for house hunters, the pace of price growth could be slowing a smidge.
That’s according to the latest monthly report that the Austin Board of Realtors released Thursday.
Some local housing experts also agree that the five-county Austin region is seeing the rate of home prices slow some from its frenzied pace — although what that tapering looks like remains to be seen.
“The region’s housing market is calming compared to the hectic pace experienced at the beginning of the year,” Susan Horton, president of the Austin Board of Realtors, said in a written statement. “While it wouldn’t be appropriate to say market conditions are normalizing – inventory is still at an all-time low and homes are still selling as soon as they hit the market – August’s housing activity is closer to what we would typically experience in the fall.”
The board said the tapering comes “as typical seasonality has returned in terms of number of closings, even as median sales prices maintained the gains made over the course of 2021.”
“Despite setting a record for the month of August with a median sales price of $470,000 across the (region), prices are no longer increasing at a significant rate month to month,” the board said.
In August, 3,849 sales closed in the five-county Austin region, down 4.6% from the previous August, according to the board.
The median price of those sales jumped 34.7% from a year ago to $470,000, which was an August record, the board said. The median, or midpoint, means half of the homes sold for more than that amount and half for less.
Inside Austin’s city limits, 1,244 homes changed hands, a 0.2% increase in sales volume over August 2020. The median price rose 27.1% year-over-year to $540,000, which was also an August record.
The figures cover sales of single-family homes, townhomes and condominiums — mostly pre-owned, but some new homes also are included in the board’s numbers.
“I would say that Austin is absolutely the strongest new home market in the United States,” said Glenn Gehan, founder and principal of privately owned GFO Home. Gehan founded the homebuilding company in Austin in 2018, two years after selling his 23-year-old firm, Dallas-based Gehan Homes, the nation’s 11th largest private builder.
The Central Texas market has been struggling for some time with a gap between strong demand for housing and low inventory — an imbalance that has been driving prices higher for years, experts say.
Gehan said Austin has had “a limited supply of new homes for 10 years, due to high demand and a relatively small housing stock … and demand seems to ramp back up very quickly from any slowdown. We all have to work more efficiently on producing housing in Austin across all housing types.”
Last year in particular, Gehan said, the market saw “a very significant and quick increase in demand, attributable to the interruption of COVID-19, low interest rates, and the fact that Austin is bouncing back more quickly than any economy in the country.”
‘Deceleration’ in price growth?
Gehan has a take on the market that likely will be seen as welcome news to prospective buyers.
“I personally think we’re going to see a pause on new home price increases, definitely a deceleration from the increases we’ve seen over the last 12 months,” Gehan said. “That’s pretty obvious when 30% to 40% price increases are being reported. There’s no way those increases are sustainable.”
If prices keep rising at an “unsustainable rate,” he said, “at some point the risk is that we’ll do permanent damage to the demand for housing in Central Texas and the real estate market in general. If you let this thing get out of hand, prices will become out of reach. …The risk could be long-term damage like we’ve seen in California.”
Mark Sprague, a longtime Austin-area housing market expert, said he doesn’t think the Austin market is overvalued, as some reports have suggested.
“From an economist’s perspective, my question is, ‘overvalued compared to what?’” Sprague, state director of information capital for Independence Title in Austin, said in a statement through the Austin Board of Realtors. “When there is this much demand, it is difficult for an entire market to be considered overvalued.”
Sprague said Austin’s market “is exactly where it should be based on demand.
“The Austin market is robust, and sales activity and pricing have been driven by true demand,” Sprague said. “A combination of events, including increased job creation in the market, low interest rates, shifting priorities for perspective buyers, and in many cases, increased personal savings following stay-at-home orders during COVID, are why the Austin (region) is a top market in the country.”
Sprague pointed to Austin’s economy outperforming most of the nation with job creation and single-family permit applications as key indicators. He said the national average for permit applications is down 31% compared with peak applications during 2002-08, but the Austin area is up 28%.
Justin Boyd, vice president of JB Mortgage Group, an Austin-based mortgage company he started, also said fears of a housing bubble are unwarranted.
Today’s price appreciation, Boyd said, “is due to record low home inventory levels and strong demographic demand, which wasn’t the case in 2006,” in the years leading up to the 2007-09 recession.
Rianna Alberty, director of sales and marketing for JB Mortgage Group, said that, despite a significant drop in mortgage applications year-over-year, there have been more cash buyers than ever before, and those buyers aren’t represented in the mortgage applications.
“I’ve also heard there are even more large corporations announcing moves to Austin later this year and into the spring,” Alberty said. “There is no shortage of demand and as long as we have demand, we do not have a bubble.”
Austin real estate prices not dropping ‘in a material way’
Mary Anne McMahon, a real estate broker who owns RE/MAX Posh Properties in Austin, said consumer confidence “continues to be bullish in the hot Austin real estate market.”
In the firm’s monthly meeting this week, McMahon said, with more than 40 real estate agents and five loan officers in attendance, “the sentiment was that there is a very slight slowdown but the market will come right back. After all, we don’t have a crystal ball showing just how many companies will be moving here in the months and years to come, and we are still experiencing multi-decade low interest rates.”
She said many listings continue to sell above the asking price, “but that is starting to soften a bit.”
In a few instances, McMahon said, “we have had to go back to some ‘old school’ activity, actually dropping the list price if a property is not moving. In some cases, finding the pricing sweet spot can be tricky, especially in the luxury market. We also see buyers, especially from other areas that experienced this type of healthy market, purchasing homes to fill a need even if it’s short-term.”
Although agents “may not be seeing dozens of offers per listing, prices continue to tick up,” McMahon said.
Despite the rising prices, Gehan said, the Austin region “is still producing a lot of $350,000 to $450,000 houses. And when you figure out your monthly payment at today’s record low interest rates combined with the salaries and household income in Austin,” homeownership could be within reach of some prospective buyers who may not think it possible, he said.
Housing prices “are not going to come down materially.” Gehan said. “Things are as affordable as they’re ever going to get.”
Media contact, Brenda Thompson, brenda@brendathompson.com