Austin-area housing outlook is positive
Slowdown in home prices could be a plus
Longtime Central Texas housing market analyst Eldon Rude recently gave his 21st annual forecast at an event sponsored by the Home Builders Association of Greater Austin.
“This year is going to be better than last year, for many reasons,” said Rude, principal of 360° Real Estate Analytics, an Austin-based real estate consulting firm.
Rude said that, among its peer cities, Austin had the biggest decline in its ratio of median family income to median home price last year, as home prices dropped amid rising mortgage interest rates.
According to financial services company Fidelity, for most individuals and families, a home’s value, generally speaking, should be no more than three to five times their total annual household income.
Austin saw a decline from the high end of that range – from a multiplier where the median home price was five times that of the median family income in 2022 – down to a multiplier last year of 3.9 (that is, the median home price last year was $481,200, while the median family income was $122,300).
Some slowdown in home prices could be a plus in helping Austin continue to attract people and businesses.
“In the span of a year, we got more attractive, and I think that’s a good thing,” Rude said.
In another positive, Rude said, his homebuilder clients report that sales have started off well in the first six weeks of the year.
“All industry eyes are on the direction of interest rates,” Rude said.
While some other metro areas are losing population and jobs, Rude said, he and other analysts expect Texas and the Austin area to outperform
many places around the country.
“There is reason for all of us to feel good about where we are,” Rude said.
He said the Austin region gained 32,800 jobs from December 2022 to December 2023, a 2.5% job growth rate. The local jobless rate was 3% in December.
“So many talented people and companies have decided over time this is a place they want to live and grow their businesses,” Rude said. “We are so lucky we are in this industry in Austin, Texas.”
In advance of his presentation, attended by nearly 700 industry professionals last week, Rude shared these takeaways of his 2024 forecast with the American-Statesman:
• “Looking at the market for previously owned homes, I see available inventory remaining tight this year as many existing homeowners remain reluctant to sell their homes if they have an existing mortgage with an interest rate well below what they can get with a new loan.”
• “New homebuilders are starting the year with enough inventory to give prospective buyers options as they look for a new home. Also, many builders are offering interest rate buydowns to purchasers to help them qualify for a mortgage.”
• “As we move deeper into 2024, I expect the number of available new homes will drop as builders work to reduce their inventory to levels more consistent with pre-COVID norms for the industry.”
• “With fewer new homes in inventory expected later this year, homebuyers will see more competition for available homes, with builders likely offering fewer price concessions than buyers have seen over the last year or so.”
• “The biggest challenge I see emerging in the new home market in the coming years is the dwindling supply of lots and land available to build homes. The most significant issues are related to the challenges in securing adequate water supplies to build enough homes to accommodate the region’s future needs. Builders, developers and investors continue to look further out for land.”