Housing Prices in Austin have Peaked. Where do they go from here?
After an unprecedented 33% increase in prices in 2021 and then another 21% surge in the first months of 2022 as buyers were scrambling to lock in historically low interest rates, the increasing interest rates and higher house prices have brought rising values to a halt.
The increase in interest rates over the past six months has effectively decreased buying power by almost 30%. For example, the payment on a $500,000 loan at the end of 2021 would only cover the cost of a $360,000 loan in June for the same monthly loan payment.
Does that mean home prices will need to drop 30% to get back to equilibrium? Will they drop even further? Probably not. If employment stays strong which it typically does in Austin, and adding in the wage inflation that’s taking place, house prices will need to come down but I’m expecting they’ll return closer to what prices were at the beginning of this year (about a 10-15% decrease from their peak).
Of course, anything can happen, and my assumptions are based on what most experts think will be a mild recession this year and no new major geopolitical events.
Interest rates seem to be stabilizing and there has been a return to a couple of months of housing inventory. Sellers who price closer to what houses were selling for six months ago have been able to get their homes under contract and buyers are now finding a lot more of what they’re looking for in both the resale and new home market.