Spring In Full Swing

Roughly 40% of all real estate transactions happen between May and August. The sun is shining, kids are out of school, and transaction volume peaks. Both sides of the coin are affected: listings jump while more buyers enter the market. Over the past few years, the confluence of the pandemic and bottomed-out interest rates pushed volume to record highs, but even as we recover from a substantial market correction, the seasonality of the market holds true. So as we roll into peak season, let’s take stock of where we’re at.

After 9 consecutive months of decreases, median home price is on the rise

At the peak of the market in May of last year, the median home price across the Austin MSA was $550k. It then slid downwards all the way through February of this year – the bulk of the decline occurred between May–September as interest rates almost tripled – and bottomed out at $440k. That’s a 20% decrease in price over a 9 month period. Since then, however, demand has picked up and the median home price has increased $26k, or 6%, over the past few months to $466k. 

Source: Independence Title

In some cases, we’ve even seen the return of multiple offers. That, however, only seems to be the case for properly priced homes in good condition. Whereas during the pandemic, sellers were barely running a broom through their homes before listing them and getting 20+ offers. From what my team and I have seen, the most competition seems to be coming from the sub-$700k market in centrally-located areas. The suburbs and luxury markets are rebounding more slowly. 

Inventory levels are healthy but worth monitoring

Part of what’s spurring the market activity is the increase in inventory. We currently sit at 3.2 months of inventory – up from 2.6 at the beginning of the year and on par with the high we saw last October. 

Source: Independence Title

A lot of the inventory is coming from sellers who either withdrew listings last year when the market turned or held off altogether in anticipation of late spring. The increase in inventory is giving buyers more options while forcing sellers to price their listings in line with current market values. Supply isn’t ballooning, however. Some would-be sellers are clinging to their 2.5% interest rates and holding off on listing until more palatable rates return. As a reminder, a balanced market between buyers and sellers is when there’s 5-6 months of inventory on hand. Although not skyrocketing, inventory is creeping up and it will be a metric worth keeping an eye on over the next few months.

The 6.85-ton elephant in the room 

As of writing this, the average 30-year fixed mortgage rate is 6.85%, down from 7.12% last week. Worries over the debt ceiling sent rates soaring last week, but after news broke that a deal looks likely, rates have made their way back down. Since late last year, rates have been hovering around the mid-6s.

Source: Mortgage News Daily

By far the best mortgage product I’ve come across this year is via Tyler Hughes with CMG Financial. As long as rates are in the mid-6s, he’s been able to offer well-qualified buyers a 5.25% 10/6 ARM at 1 point. This means that at closing, you’d pay an additional 1% of the sales price of the home upfront. For a $500k home, for example, that would be $5,000 – oftentimes, when we have leverage, we’re asking the seller to pay this. You’re then able to lock in a rate of 5.25% for the next 10 years, after which it would start changing every 6 months. The idea is, however, that you would refinance out of the loan and into a 30-year fixed-rate mortgage once the rates come down into the 4s sometime in the next few years. 

It’s possible that the Fed will raise rates again in June, but most are predicting that they are done with hikes for a while. It all depends on what happens with inflation. The next Consumer Price Index report is due out June 13 and then the Fed will put out a statement the next day. 

Austin’s future is bright

All that said, buying and selling real estate isn’t daytrading. You can sit back and try to time the perfect balance of prices and rates, but the reality is that in the long-run, Austin real estate is a good investment. Austin was ranked as the #1 city in the country for best housing markets for growth and stability. That’s primarily fueled by the city’s in-migration, which continues to boom as evidenced by the city recently jumping to the 10th most populous city in the nation. 

Each person’s situation is unique. If you’d like to schedule a time to talk about yours, please shoot me a text at (512) 808-8161.