The Decline in Buyer Interest Persists in this Housing Hotspot
The allure of Austin, Texas, among prospective homebuyers appears to be waning. Notably, during the third quarter, data from brokerage firm Redfin revealed a shift in preferences, with more individuals expressing a desire to depart from the Texas capital, which had once served as a pandemic hotspot and experienced an influx of out-of-town buyers. This marks a noteworthy departure from the trend seen since 2017 when Redfin commenced tracking this data, as it signifies the first instance of a net outflow of buyers from the area.
Over the past year, the number of Redfin users based in Austin who have initiated searches for new residences beyond the metro area has more than doubled. This marks a substantial reversal from the initial stages of the pandemic when the city witnessed an inflow of out-of-town buyers who capitalized on remote work policies and historically low mortgage rates. This allowed buyers to seek larger living spaces and more affordable homes with fewer constraints. Austin’s popularity, which was on the rise even before the pandemic, peaked to such an extent that it claimed the title of the top U.S. migration destination at the beginning of 2021, as reported by Redfin. However, the current trend shows that more buyers are now inclined to relocate, driven by the escalation in housing costs and shifts in remote work policies.
Midway through 2022, home prices in Austin had surged by over 75% when compared to pre-pandemic levels. Although prices have tapered since that peak, homes remain considerably more expensive. In fact, the price gap between Austin and pricier metropolitan areas such as Los Angeles and San Francisco has narrowed further. This issue is exacerbated by prevailing mortgage rates, with the key U.S. mortgage rate standing at 7.63%. Consequently, the monthly obligations associated with Austin’s median-priced homes, approximately $455,000, have nearly doubled.
For instance, current monthly payments on a median-priced home in the area have reached $3,890. In contrast, back in 2019, homeowners were making monthly payments of $2,136 for a median sale price of $320,000, coupled with an average mortgage rate of 3.94%. Mortgage rates surpassed the 6% threshold in September 2022 and have continued to remain above this level.
In addition to the financial considerations, Redfin agents have reported that some individuals who were previously engaged in remote work have returned to their home cities as remote work policies reverted. Simultaneously, others are likely departing in pursuit of proximity to major employment centers, according to insights from Redfin.