We are well into another very busy year in Austin-area residential real estate. The pace of the market in March has returned to the kind of frantic activity that we experienced this time in 2021, with very unpredictable bidding wars and appraisal waivers in the resale segment, and with homebuilders devising a variety of ways to navigate their part in this environment, from inviting bidding wars to requiring extra earnest money for over-list price purchases to keeping the right to raise prices during construction. Each builder’s approach may include versions of some or all of those elements.
These charts show an important part of the answer to the question posed at the head of this post:
In total, the number of homes sold (MLS data only) has been flat throughout the pandemic — and there is a relationship between the number of sales and the pandemic.
In 2020 and 2021 the number of reported new homes sales declined. The same is true of year-to-date sales in 2022 compared to the same period in each of the past five years. Before 2020 builders were already behind demand and working to get enough land and permits ready to keep up, but more extreme challenges began with Covid-related work stoppages, with workers furloughed in the early months of the pandemic. Over the past two years, many builders have intentionally rationed sales because of unpredictable availability of labor and materials and the cost of both.
(Note that homebuilders don’t advertise or report all of their sales in our MLS system, but I talk to builders regularly and they are working in a difficult environment to keep up with strong demand. They are likely helping more than shown in those charts, but housing supplies of all kinds remain stressed in Central Texas.)
Despite severe supply shortages in the resale home market, demand has continued to grow, and our 5-county metropolitan area resale inventory has been at or below 1 month’s supply since late 2020. That has had a predictable effect on pricing:
Not only has extremely strong demand increased prices, but the median price per square foot for resale homes has actually been higher than in new construction for all of the past two years.
In early 2022 the market was relatively calm compared to the peak of activity in 2021, but sales continued at a very fast pace:
When final data for March is available it will almost certainly show that inventory is even lower than the same time last year and that Days on Market is again lower than shown in the chart above.
Of course, the number of building permits (dwelling units) issued should be an indicator of future supply:
The line showing Total permits above is rising, but that’s almost all in the multifamily category. Single family home permits show very little growth over the past couple of years, and the same is true comparing 2022 to the same time last year. And as noted earlier, if the supply and cost of labor and materials remain uncertain homebuilders may continue to ration releases of new homes, so permits may not equal new home starts quite yet.
In sum, growth in regional population and employment continue to stress our very limited supply of homes, and for now we are struggling to keep up with that demand. 2022 will be another challenging year for homebuyers. I will keep you updated here.