In early June I began commenting to clients and colleagues that I was seeing hints of a change in market activity in the Austin-area residential business. Those hints were subtle, but I started seeing price reductions that were almost non-existent over the previous four or five months, and there were under-contract listings that returned to Active status during the buyers’ termination option periods. That was also virtually unheard-of in the first several months of 2021 and indicated to me that at least some buyers were concerned about paying too much, and that they were reacting to inspection results (or just buyer’s remorse) differently than that had been earlier in the year. More recently, I wrote about those market signals in Great time to sell? and Housing bubble? I still think not ….
I continue to see those signs, and there has been broader acknowledgement of the shift in recent days. Just yesterday these articles were posted:
Bidding War Winners Are Getting Cold Feet
Fewer Contract Signings Could Signal Market Turn
Pending Home Sales Fall 1.9% in June
It remains to be seen whether this is a lasting trend. I expect a gradual start-and-stop adjustment, with continuing upward pressure on home prices, but any sign of a move toward balance and of less frantic bidding wars is a healthy development in my opinion.
Keep in mind, that many market areas are counting listing inventory in months. In the Austin metro area we’re still counting it in weeks (just over 2 weeks now). Moreover, there is still huge job growth in the pipeline for our area, with thousands of employees and their families that will need places to live. There is no doubt that some would-be buyers in Central Texas have given up, at least for now, and some are now priced out of the market and unable to qualify for the financing needed to compete here. More buyers are coming, though, and although home builders are gaining some ground on demand they remain behind the needed pace. In addition, the gridlock that has constrained resale supply will continue as potential sellers stay out of the market for fear that they can’t find or afford the next home they have in mind.
Market cycles do happen, and this one will eventually return to “normal” too. Probably not this year or next, but I believe we will see progress. Hang in there!
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