Despite outbreak, Austin home prices hit record highs
As the summer home-selling season came to a close, median sale prices — both across Central Texas and within the Austin city limits — reached all-time highs in August, the Austin Board of Realtors said.
In its latest report, the board said the Austin-area housing market continued to show strength, despite economic setbacks amid the ongoing coronavirus pandemic.
Across the Austin area, home sales rose 12.9% in August compared to the prior August, with 4,019 homes changing hands. The median price increased 11.3% to its highest level on record, with half of the homes selling for more than $355,000 and half sold for less, the board said.
Inside Austin's city limits, home sales were up 2.4%. The median price of those sales jumped 14.9% to an all-time high, with half the homes selling for more than $435,000 and half for less, the board said.
Across the region, pending sales skyrocketed 40.1% with 4,533 homes in the pipeline to close. Active listings, meanwhile, plunged 44.9%.
Homes across the region spent 42 days on the market on average — 10 fewer days than in August 2019.
The pandemic has put the Austin market "in a unique situation," said Romeo Manzanilla, president of the Austin Board of Realtors.
"As more people are working from home and have the opportunity to relocate, Austin-area homes are selling faster now than ever before," Manzanilla said. "Austin's popularity has left the market with critically low levels of housing supply, which continues to drive home prices up. While home prices are rising, historically low interest rates are giving buyers increased power to meet the increases."
The Austin Board of Realtors' monthly figures are for the five-county area stretching from Georgetown to San Marcos. The board's report covers single-family homes, townhomes and condominiums, and includes both pre-owned homes and some newly built homes.
Although home sales in the Austin area declined in early spring, "it's safe to say that August's numbers solidify that Austin's housing market has fully rebounded," said Mark Sprague, a local housing market expert.
"As long as we continue to see more job creation, we'll likely see strong home sales throughout the remainder of the year," said Sprague, state director of information capital with Independence Title in Austin. "However, we started this year with a lack of inventory, and we're going to end this year with a lack of inventory. Inadequate housing stock is going to be the main issue that holds the market back."
The current supply of housing in the Austin area is well below the six month benchmark that experts say is a balanced market, not tipped in favor of buyers, or sellers.
Treh Manhertz, an economist with online real estate database Zillow.com, said Austin was hit as hard as anywhere during the early days of the pandemic. Home sales plunged far below last year's levels in April and May.
But over the summer, the market bounced back "in one of the nation's most decisive recoveries," Manhertz said.
"New inventory has been persistently low, but buyers have come back to the market in force, spurred on by record low mortgage rates," Manhertz said. "The fierce competition meant home value growth never dropped below pre-pandemic levels in Austin."
Eldon Rude, a Central Texas housing market consultant, said that "most every realtor and builder will tell you that the big drop in interest rates over the last four months has had a huge positive impact on sales volumes, especially for homes priced below $500,000 or so."
Rose Castro, an associate broker with Austin Options Realty, said she listed a house for sale at 6:30 a.m. one day this week. By noon, she had six showings lined up for the house, which is east of the Texas 130 tollroad and not far from Tesla's planned electric vehicle manufacturing plant. The 2,209-square-foot house, in a D.R. Horton subdivision called Tiermo, is priced at $289,000.
"We've got an overload of buyers and a low inventory of homes. Therefore, a lot of my listings are going into multiple offers or selling within four to seven days," Castro said.
Heather Brown, a real estate agent with Remax Austin Skyline, also cited the short supply of housing and low mortgage rates as being among the factors that are fueling the market.
"It's like we entered our spring housing market in June, and it just keeps getting busier," Brown said. "We are seeing people relocate from other more densely populated cities, not necessarily because they will be employed locally but because they can work remotely. Austin offers reasonable real estate prices compared to our counterparts in New York, California, and Washington. Everyone wants to live here, and it's driving prices up and depleting available homes."
Tiffany and Robert Steffens are indicative of the trend of people who can work remotely and are relocating. The couple will be moving to Austin from Brooklyn, N.Y., at the end of September. They'll be bringing their rescue dogs, Jessica Jones, and Ramona, a black Labrador hound mix.
Robert Steffens, 51, is a chief financial officer in the entertainment industry. Tiffany Steffens, 47, works in marketing in the health care sector.
"The quality of life, cost of living and the dynamic economy were all things that really attracted us to Austin," Tiffany Steffens said. .
Working with Mary Anne McMahon, broker/owner of Remax Posh Properties in Austin, the couple came to Austin in early July and viewed 20 properties in one weekend.
"We just fell in love with the place," Tiffany Steffens said of Austin. They decided on a house that is under construction in the Bouldin Creek neighborhood, just south of Lady Bird Lake. The house is priced at more than $2 million, about half the price of their current home in New York. The Steffens plan to move into their Austin home in October.
Across Central Texas, Rude said, the desire for more space "continues to drive home sales in our region to unprecedented levels."
"Much of the demand is coming from apartment renters looking to escape density as they seek more living and outdoor space," said Rude, principal of 360 Real Estate Analytics, an Austin-based consulting firm.
Demand is also coming from people working from home, many of them couples, who need more room for themselves as well as their children who might be attending school online, Rude said.
"When you combine these demand factors with interest rates that are now below 3%, the result is more people able to purchase their first home, as well as many current home owners who can now afford to purchase a larger home," Rude said.
With resale inventory lower than it has been in the past 30 years, many prospective home buyers are choosing to purchase a new home, which has propelled new home sales to record highs, Rude said.
"Our survey of builders indicate year-to-date sales through July are up over 20% from last year, which was already a record year for new home sales," Rude said.
Rude said builders "are now running very low on their inventory of homes as well as developed lots, resulting in longer wait times for buyers. All of these factors combined are resulting in the biggest spikes in home prices we have seen in the Austin market in some time."
While history suggests home sales will begin to moderate in the fall and winter, "as the last few months have proved, in these strange times historical trends can prove meaningless," Rude said. "To me, the biggest question remains how long can this recent surge in home sales last in a period when our economy is not producing nearly the level of high-paying jobs as it was during most of the last decade?"