It’s hard to live in Austin these days without noting the city’s booming housing market — a market that’s booming a little too hard, depending on who you ask.
Amid myth-like tales of homes flying off the market within a matter of hours or buyers paying tens of thousands of dollars above asking price, we wanted to get some clarity on the situation.
So, we spoke with local realtor John McCarthy about his predictions for the future of Austin’s housing market + how he suggests potential homebuyers move forward.
First, the situation.
In three years, Austin home values have increased by more than 50%, and in some locations much more McCarthy said.
This year alone, median listing prices in the city have been breaking records month after month, culminating in a current estimate of $676,000, according to real estate brokerage firm Redfin.
All in all, it’s not surprising Austinites are starting to get a little panicked.
“People are getting worried. Inflation is up, gas prices are up, food prices are up, so their paychecks aren’t going as far,” McCarthy said. “And housing costs have far surpassed wage rates. So now, for most people, Austin is not a very affordable town.”
What happens now?
Now, for the good news: McCarthy thinks the market is calming down.
For one, interest rates are rising, and that means the number of qualified buyers at each price point is going to constrict.
“That’s going to lessen demand and put a little downward pressure on prices,” he said
At the same time, Austin’s housing shortage is starting to loosen up.
For a while there, there simply weren’t enough Austin homes to satisfy demand, which was also driving up prices. But now, more listings are starting to hit the market.
“I think that’s some of that is people thinking, ‘Oh my gosh, we’re at the top right now, we need to sell our house and cash out while we can,’” McCarthy said. ‘But part of it too, is a lot of new homes were delayed because of COVID-19. And now things are starting to loosen up and catch up with the supply chain.”
So, is there going to be a bubble burst?
Although he emphasizes he doesn’t have a crystal ball, McCarthy thinks it’s unlikely Austin’s housing market will crash.
“I don’t see, over the next couple of years, any kind of bubble bursting in Austin,” he said, in part because people are drawn to the lifestyle in Austin and businesses want to relocate to the city.
What advice do you have for Austin homebuyers right now?
The first step in preparing to buy a home in any market is getting your credit in shape, McCarthy said. Depending on your situation, it’s ideal to get your debt-to-income ratio below 28%.
In the long-term, he also suggests prioritizing buying real estate in a place that’s likely to lead to greater value appreciation over time, to help you build your wealth in the long run.
His final piece of advice? If you can, act now, before interest rates get too high.
That said, he said investing in Austin will still look like a smart move in 3, 5, or 10 years from now.
