Austin homes were selling in a week. Now sales take months, if they happen at all.

This continued decline is partly due to prices rising too quickly, Wolf says. Far fewer buyers can afford this new market. According to Zillow estimates, a person would need to earn just over $150,000 per year to buy a median-priced home in Austin. This is much higher than the average worker’s salary.

“Austin has faced a severe housing affordability crisis (compared to other cities),” Wolf said. “Although (the numbers) suggest that Austin’s housing market should be much stronger than it is now, buyers have limits.”

Even as Austin home prices decline, experts are reluctant to use the word “collapse.” This is not this. Most describe it as a compromise.

“Everyone forgets that the average yearly home price appreciation is 5 to 8 percent. That’s it,” Chatmon-Thomas said. “Buying a condo for $250,000 and being able to sell it the next year for $375,000. This is not normal. (We have) a market that is resetting itself after the wild and crazy days of 2020 and 2021.

But while landlords like Chatmon Thomas describe this as a return to “normal,” it comes as a shock to many. For nearly a decade, Austin has been what’s called a “seller’s market,” a housing market where sellers have power over buyers. Anyone selling their home can expect to set a high price and receive bids within two weeks.

Now, realtors say, they have to sit down with sellers and tell them things have changed. They likely won’t get the same rate as their neighbor in 2021 or early 2022. Additionally, they are now entering a market where a new mortgage comes at a much higher rate. Nearly 92% of homeowners have mortgage rates below current rates, according to a Redfin report released this summer.

But that didn’t stop Marissa Nielsen and her husband from putting their North Austin home up for sale in September. After living in Austin for more than a decade, they decided to move with their two children to Charlottesville, Virginia, where they would be closer to family and could afford a larger backyard.

“We can get more chickens,” Nielsen said, pointing to the family’s small coop in the backyard of their Austin home. “And maybe get a goat.”

Marissa Nelson prepares lunch in her kitchen on October 23, 2023. She recently got an offer on her house in North Austin.
Rene Dominguez/COT

But the family needed money from the sale of their three-bedroom home in Austin before they could buy a home in Virginia. They listed their home for $549,000. Initially, two people came to tour the house, Nelson said. One of them said they planned to put on an offer, but it never materialized. Then silence.

“We haven’t heard anything,” said Nielsen, who works as a program manager at a technology company. “No shows for about three weeks, and now it’s been going on for a month.”

She began to feel nervous, worried that they would have to back out of their move and possibly lose the house they had made a conditional offer on in Charlottesville. So Nielsen and her realtor decided to do what has become common in Austin: lower the listing price. They dropped it by $10,000.

They had another open house in early October and many people streamed through. But still, nothing. Then finally, two weeks into the month, they got an offer. The price was $14,000 less than the new list price, but the buyer agreed to raise the amount slightly. The documents are scheduled to be completed by the end of this month.

Nielsen said she was very relieved.

Home prices have fallen, but buying has become more expensive

While home prices in Austin have fallen, they have not fallen enough to offset the cost of higher mortgage rates, which makes purchasing a home more expensive.

“The cost of borrowing money to pay for a more expensive home has gone up,” said Daniel Oney, research director at the Texas Center for Real Estate Research.

Imagine someone who bought a home for $550,000 in early 2022. Let’s say they got an interest rate of 3%, which was typical at the time. If they made a 10% down payment, that means their monthly mortgage rate, not including property taxes and insurance, would be about $2,500 per month.

Now let’s say this person bought the same house today. The price is now lower at $525,000. But mortgage rates are more than double what they used to be. Assuming the same down payment percentage and excluding property taxes and insurance, this buyer’s new monthly mortgage payment would come to approximately $3,900 per month. That’s an increase of $1,400.

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