Asking the Right Questions About the National Press on Austin

Per the Wall Street Journal: “Once America’s Hottest Housing Market, Austin is Running in Reverse” Rebuttal from Mark Sprague, Director of Information Capital, Independence Title

The proposition by the media: home prices and apartment rents in Austin, Texas, have fallen more than anywhere else in the country … I disagree. Over what period of time? Great headline-grabber for click-bait, but is it true?

Yes, there is a bit of truth in this article from the Wall Street Journal. The median and average values of sold homes have dropped due to higher mortgage rates. But it would be a challenge in any Austin neighborhood to find a resale home at a discounted price. Over the past five years, homes have sold within 103% to 97% of the list price. The Austin market has returned to some normalcy while still enjoying above-average appreciation (3.5%) compared to the historic norms of the past 50 years.

If you bought a home in the last five years and sold it today, you’d have a pretty good chance of making a profit. If you bought in the last three years and tried to sell today, closing costs would make it tough to profit. But outside of a job relocation scenario, selling an investment of any type in the first five years is questionable in any market.

Has appreciation slowed? Yes. Has it stopped or reversed? It’s a challenge to show that on any property in the Austin area.

Have rents dropped? Maybe a little because of an abundance of apartment buildings completed in the last two years. We are seeing rental concessions, but not the blanket rent discounts of the past (10% to 20%). Significant concessions have not been seen in the Austin market in the last 5+ years.

What was the reason for the notable growth over the last five years in Austin? Job growth.   Over 66 corporate/regional headquarters moved to Austin between 2018 and 2023. No other city or state has had that level of job growth. So yes, home values should/would/did increase because of the lack of inventory. Rather than relish the fact that values have decreased in a snapshot of the market, (there is a healthy amount of schadenfreude in the media and other real estate markets over Austin’s rise and supposed fall) look at the cause and effect. The slower numbers are part of the cycle and are not explosive news. The normalization of our market was predicted, including the fresh abundance of apartments, home builders gaining more market share because of the lack of resale listings in desired areas, etc.

Are values dropping? No. Appreciation is slowing, and prices are coming closer to median values because of rate increases, which signals a return to a healthier market. Are sellers having to offer huge discounts? No.

A famous investor, (Charlie Munger) once said, “Time in the market is better than trying to time the market.” Meaning that the market dictates to you when it’s a good time to sell and get a return on your investment. You, as an individual investor, don’t dictate the market based on when you need to sell. Does real estate historically always gain value over time? Yes, but it can be a roller coaster on the way.

Does this article describe what is happening in our Austin real estate market? Not really. It is stating a few facts without looking at and evaluating the whole market, sort of like trying to tell a whole story from one snapshot. There’s a good chance you are going to get the story wrong.

What should you tell clients? Tell them the truth: it has been a stronger-than-normal market with some slowing recently.

I see this as more publicity for the Austin market. If anything, it brings more interest from those who might see this as the time to buy!