Austin Real Estate Market Update: Price Drops and Mortgage Rates Boost Activity

Austin Real Estate Market Sees Rising Activity as Prices Drop and Mortgage Rates Improve

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September 10, 2024 : The Austin real estate market is showing significant signs of increased activity as both home prices and mortgage rates continue to become more favorable for buyers. Currently, the market is seeing an Activity Index of 21.9%, marking the highest level since August 1, 2024, when it was 22.1%. The Activity Index, which measures the ratio of pending to total listings (both active and pending), is a key indicator of buyer engagement in the market. With 4,069 pending listings out of 14,516 total listings, there is a clear uptick in market participation, as buyers take advantage of changing conditions.

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One of the most compelling factors driving this increase in activity is the significant drop in home prices across the Austin area. As of this month, the median sold price is $426,375, which is a notable decrease of 22.48% from the market’s peak in May 2022, when the median price reached $550,000. This decline in prices is making homes more affordable for buyers who were previously priced out of the market. In fact, of the 14,516 active listings currently available, 57.1% have experienced price drops, while 53.6% of the 4,069 pending listings have also seen price reductions. These price adjustments are substantial and are helping to re-engage buyers who had been holding back due to high prices.

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Focusing on specific areas within Austin, the City of Austin itself has seen considerable price drops. Out of the 2,539 active listings in the city, 58.6% have had price reductions averaging $97,000 or 7.6%. In some of Austin’s higher-end neighborhoods, price cuts are even more dramatic. For example, in the 78746 zip code, which covers parts of West Austin, 46.6% of the 176 active listings have seen price drops averaging $415,000, or 9.9%. These price adjustments in more affluent areas are contributing to increased buyer interest and activity as they see greater value in the market.

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In addition to price reductions, another major factor driving the market’s improvement is the recent decline in mortgage rates. As of now, FHA mortgage rates are sitting at 5.75%, and conventional 30-year fixed rates are at 6.125%, the lowest levels seen in the last 18 months. A year ago, mortgage rates were approaching 8%, which had significantly slowed buyer activity. The recent steady drop in rates over the past 10 days has had a positive effect, encouraging more buyers to enter the market as they can now afford to take advantage of lower financing costs. This is especially important in a market like Austin, where affordability has been a growing concern for buyers.

The market’s inventory has also shifted in a way that benefits buyers. The Months of Inventory (MOI), which measures how long it would take to sell all active listings if no new listings were added, is now at 5.16. This is the lowest MOI reading since June 12, 2024, when it was at 5.14. The MOI had risen to 5.51 in late July but has since steadily decreased. This reduction is largely due to a decrease in the number of new listings, as well as a rise in expired and withdrawn listings. These conditions, along with improving mortgage rates, are helping balance the market as buyers regain confidence.

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While pending transactions are still down 3.9% year-over-year, this marks a significant improvement from earlier in the year when pending transactions were down 13.1% compared to the previous year. On September 2, 2024, there were 3,974 pending listings, and that number has now increased to 4,069. Though still behind year-over-year, this steady increase shows that the market is gradually gaining momentum, particularly as more buyers find value in the combination of reduced prices and lower mortgage rates.

In conclusion, the Austin real estate market is seeing a resurgence in activity due to a combination of factors, including falling home prices, lower mortgage rates, and a tightening of inventory. As prices continue to drop and rates remain low, more buyers are stepping into the market, helping drive the Activity Index higher. If these trends continue, the Austin real estate market may experience further stabilization and growth in the coming months.