Market pause?

The boom in Austin-area residential real estate continues, but as I suggested in Market Transition?, working real estate professionals noticed a change over the past few months. As happened about the same time last year, frantic market activity cooled a bit — by no means a downturn but evidence of buyers in some market segments being more selective.

Using MLS data, this chart shows the number of homes sold each month since 2017 and the monthly median sales prices:

Seasonal changes are clear, and you can see that Unit Sales each January on that chart was higher than a year earlier, and annual peaks generally grew as well. Likewise, price appreciation over the 5-plus years is obvious, including the acceleration in 2021 and 2022 that I have commented on previously.

Viewed in terms of year-over-year percentage changes, the same data shows a different picture:

The dramatic increase Unit Sales in early 2021 is obvious, but the change from December 2020 to December 2021 was just 0.3%. More importantly for this discussion is the downward change in the number of homes sold between February and May of 2022 — to “negative growth” in March and ending May down 18% from a year earlier. The pace of Median Price growth slowed after the April-May-June 2021 frenzy and continued to decline gradually through April 2022.

Monthly data also show that change:

March 2022 unit sales were up 20.8% from February. April sales increased just 3.6% over March. At the same time that shift happened, the pace of median price growth went from 8.9% to 2.9%.

In previous years, you can see that month-to-month changes in unit sales and prices were frequently negative and as recently as 2021 we saw a few months in which monthly price changes were downward, so this year’s changes shouldn’t be shocking. They do show a market in search of stability after the disruptions from the pandemic and the broader economy, coupled with home buyers’ responses to limited inventory, increasing prices, and rising mortgage interest rates.

This market resistance may last for a while, but as I have told you a number of times, unless an unforeseen change causes housing demand to downshift dramatically we will remain under-supplied for a long time to come. Booms don’t last forever, but in my opinion this one still has legs. An occasional “pause” should be expected, though, and will be healthy.