I’ll start this look at last year with a look forward:
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As you saw in Market Dashboard and will see below, we have had some hurdles in the Austin metro real estate market and may have some still ahead, but those articles remind us of the underlying strength of our region. For a closer look than my previous post, let’s compare 2022 to the previous five years. We have absolutely felt the market slow to a crawl since 1Q 2022, but on a percentage basis, the change in unit sales is not especially unusual:
Unlike other years in this market cycle, 2022 saw mortgage interest rates double from a year before. In addition, it took many home sellers time to recognize that the days of bidding wars and one-weekend sales were winding down. Fewer qualified buyers, price resistance that we didn’t experience for many years, and constant concern about general economic and market health, impacted sale prices since the last peak in May 2022. But only one month — December 2022 — shows a median price decline from a year before:
We did see month-to-month price decreases in the last half of the year, and will likely see some in 2023 as well as the market adjusts toward equilibrium.
Those statistics above — percentage changes in key metrics — make the changes we have seen visible, and there is no doubt that our regional real estate market remains in transition. A broader view of the same data puts this into perspective:
On an annualized basis the recent decline in sale prices does not look so dramatic, but it is real and may continue into the first several months of 2023. As I have pointed out, though, the real limiting factor remains inventory — listings of existing homes and badly needed new construction. We need more quality inventory to sell. Mortgage interest rates — although down over the past few weeks — remain much higher than we grew used to over the past several years, and that limits the buying power of some prospective purchasers, but listing inventories remain at half of what we long considered “normal.” It’s not easy to see right now, but technically we remain in a seller’s market.
Certainly, home owners who purchased during 2021 and 2022 may have gained little or equity (and might have lost some) since then:
Those who bought their homes before 2021, though, should still have meaningful equity. Despite one recent conflicting forecast, most analysts remain optimistic about the future of our economy and real estate market in Central Texas, and most home owners in our region have substantial equity in their properties. That is an extremely important difference between this market “pause” and the downturn in 2008-9 that too many folks want to compare to now.
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