Is the Central Texas Housing Market Stabilizing in 2025?

I have told you throughout 2024 that our Central Texas real estate market is in search of balance after rising higher and faster in 2022 than many other U.S. metropolitan areas. The extremes in our region — highs and lows — have been exaggerated relative to others, but we seem poised for a positive transition in 2025.

I’ll finish this year with several articles that paint a useful picture. I think you’ll recognize some of the unpredictability that I have expressed in 2024:

Is The Worst of the Downturn in Home Sales Over? (REALTOR® Magazine, November 21, 2024)

Highlights:

• “The real estate market may be showing signs of a shift following two years of falling home sales. National Association of REALTORS® Chief Economist Lawrence Yun believes the latest housing indicators show “the worst of the downturn in home sales could be over.”
• “… possibly the most hopeful indicator that a turnaround is taking shape: Existing-home sales are now up nearly 3% year over year—the first annual gain since July 2021.”
•  “The ongoing price gains mean increasing wealth for homeowners nationwide,” Yun says. “Additional inventory and more home building activity will help price increases moderate next year.”
• “Builders anticipate an improved regulatory environment in 2025 that will allow the industry to increase housing supply,” says Carl Harris, chairman of the National Association of Home Builders.
• “Existing-home sales [in the South] in October climbed 2.9% from September, settling in at an annual rate of 1.77 million in October. That marks a 2.3% increase from one year before.”

2025 could bring some relief to one major housing challenge. Here’s what to expect in the new year (Austin Business Journal, December 4, 2024)

Highlights:

• “Sales of previously owned homes are projected by Realtor.com to increase to 4.07 million. That’s a 1.5% gain from this year but still below the 2013-19 average of 5.28 million homes.”
• “Realtor.com is predicting the supply of homes for sale will rise 11.7% next year. New construction will grow even more, increasing 13.8% from 2024 to 1.1 million new starts next year.”
• “More rate volatility, more affordability challenges — but slightly more inventory.”
• “Realtor.com is predicting mortgage rates will average 6.3% across 2025 and end the year at 6.2%.”
• “Beyond mortgage rates, which directly influence how much a prospective homebuyer can afford, home prices are expected to keep rising next year.”
• “For first-time buyers, it will continue to be challenging,” Hale said. “When we look nationwide, we see more households being added to the U.S. economy but a growing number of them will be renter households. The homeownership rate will actually decline.”

November’s Housing Market Crawled to Its Slowest Pace in 5 Years—Even as Prices Fell and Housing Stock Jumped (Realtor.com, December 5, 2024)

Highlights:

• “The residential real estate market came to a crawl last month—and it all comes down to persistently high mortgage rates.”
• “But while the market might seem to be at a standstill, it’s moving into a new phase with more housing stock—which could bring more stability after the highs and lows of the past few years.”
• “The median home price dropped by 0.7% year over year, settling at $416,880. But the full picture of how much a home costs nowadays is more nuanced.”
• “The median price per square foot grew by 1.6%, indicating that the inventory of smaller and more affordable homes continues to grow in share.”
• “Meanwhile, sellers are still holding firm to their list prices in many cases, with 16.7% of listings undergoing price cuts in November—a drop from last year’s 18%.”
• “In other words, while the overall price tag for a home might have decreased, it’s because less expensive homes are entering the market, helping to balance higher-priced homes. For buyers, that could mean an opportunity to snag a more budget-friendly property in a market with cooling prices.”

New economic stats out for Austin; What will 2025 yield? (Austin Business Journal, December 5, 2024)

Highlights:

• “It’s still good, and particularly for a developed economy … the U.S., Japan, the broader Eurozone … it’s a solid growth trajectory,” [Alan] McKnight [chief investment officer of Regions Bank] said during a Dec. 2 economic outlook event hosted by the Austin Chamber of Commerce. “We think that’s going to continue through next year.”
• Focusing on the Austin area, “McKnight declined to make a 2025 prediction, saying there’s too much to be decided regarding national economic policies that may be enacted by the incoming Trump Administration, particularly regarding immigration and tariffs on foreign imports.”
• “‘When we think about the economy, it all depends,” he said. ‘So much depends upon what happens with policy in D.C., what happens with our trading partners, how the markets respond to that, and the long-term ramifications of so many things that are going to occur over the next six to 12 months.’”
• “Uncertainty around future policies likely won’t last too long, McKnight noted, saying details of vague policy promises and international and market reaction to them should be known by late January or early February.”
• “Regardless, he said he expects Austin to continue to boast a stronger than average economy, as long as companies and people keep relocating to the area from other parts of the country and world. He cited affordability as one of the city’s biggest challenges, however, saying companies won’t relocate to the area if their employees can’t afford to live here.”