Pricing, Rates and FACTS!
The Austin real estate market in 2023 presents unique opportunities, particularly for buyers who can benefit from low down payments and seller paid closing costs.
Given that down payments can be as low as 3% for 1st time buyers (and 5% for repeat buyers), it is conceivable now, with seller concessions, to close on a home in Austin with only $20k - $35k out of pocket (down payment and closing costs).
The best rates today are hovering around 5.5% for conforming loan amounts. The conforming loan amount (non jumbo loans) in Austin has increased to $726,200 which makes homes even as high as the $750k eligible for these loans
2022 started with record high prices and record low interest rates. January-April in both 2021 and 2022 were marked by steep ascents in prices which held and grew in 2021 but stalled in May of 2022.
In June of 2022, prices began to drop as interest rates increased. Mortgage rates more than doubled in January from under 3% to over 6% by the end of 2022. As high interest rates triggered a rapid fall in market prices, I received an overwhelming number of calls from clients, old and new, trying to figure out where the market is going and separate fact from fiction.
This Graph shows the reduction in sale price from 2021 and 2022.
From 2020 through early 2022 the market was incredibly competitive. Most listings received multiple offers far above asking price. Buyers were making over-list offers often in excess of $100,000, and even then feeling lucky to win bidding wars that included waiving appraisals, paying typical seller costs like the owner’s title policy, and many times, even providing free extended lease-backs to sellers.
As a result, many first-time buyers had been priced out of the market for the last several years.
Home prices have now lost much of their 2022 gains (approx $100k on average in Austin) and there are currently more listings that are sitting on the market longer, giving buyers inventory to choose from and allowing more time to secure a contract at or below list price and with seller or builder concessions.
Given that the sub $300k sale price range has virtually disappeared in Austin, it seems likely that median prices in the $450k range may hold.
As you can see by the large uptick in sales in December, rates dipping back into the 5’s from the near 7’s is bringing out buyers again. There was a large percentage uptick in sales in December.
With median prices starting the year $100k below the 2022 peak, the year-over-year comparisons for the first half of 2023 will be a wake up call for sellers compared to years past. However, the double digit % declines that will be making the headlines are really yesterday's news - they already happened!
If inflation has taught us anything in recent years, it is that when rates are too low, prices can get out of hand. Today’s best rate is around 5.5%. These are historically excellent rates and it is not clear that waiting for lower rates or lower prices represents a safe strategy given that buyers appear to be recognizing the favorable conditions and are beginning to house hunt more actively.
So how does this mix of interest rates being higher by about 2.5% to 3%, but sales prices lower by about $100k affect your monthly payment today?
Below is one more table from Iron Harbor As you can see in the table below, taking the median home price in May of 2022 of $550K and comparing it to the median home price today of $450K and assuming $25k down (loan amounts of $525k in May 2022 and $425k in Feb 2023) the cost is higher, but not as dramatic as you may think, particularly when one considers that tax valuations should also be forced down. With tax rates at approximately 2%, a $100k lower tax valuation translates into another $165 a month of savings in 2023 vs peak 2022. As a result the monthly payment difference before tax is $200 per month, but after tax should only be about $35 per month!
This leads us to one of the best times to purchase in the Austin area that I have seen in several years! Even before the pandemic, multiple offers, and over list bids were common. I am still seeing multiple offers on the best houses and the best deals, but the price points are far more reasonable. While the cost of borrowing is higher, the ability to actually purchase a home you will love has increased dramatically. If you have extra cash, you can use that towards a higher down payment to lower the monthly payment rather than for paying over-list. If you don’t have extra cash, you can safely buy a home and qualify for maximum financing without the risk of losing your earnest money because of a low appraisal (appraisal addendums waiving the right to terminate based on appraisal have gone by the way side for now). If you are looking to buy the “dip” the dip has arrived!
If you want to learn more about home prices in your area, the best deals on and off the market, or to discuss the best way to sell your home in this market, please don’t hesitate to reach out to me.
Clayton Reagan
Central Metro Realty
512-627-0048
claytonreagan@gmail.com
Iron Harbor Mortgage Austin-Round Rock MSA Market Charts
Iron Harbor is currently testing a new exploration system and is actively seeking Buyers who may be even 1-2 years out. If you’re interested, don’t hesitate to reach out to Matthew Breston at 512-784-5201 or mbreston@IronHarbor.com .
The graphs below show the increase in number of listings, decrease in sales volume, and decrease in price between 2018 and 2022.
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