Austin's long, painful real estate hangover
Homeowners who bought at the peak of Austin's real estate frenzy are eating huge losses or crossing their fingers for a comeback.
Austin's real estate market, once booming, has undergone a long and painful downturn since 2022. Homebuyers like Ryan McPherson, who bid $20,000 above the asking price for a four-bedroom home in a new East Austin development, found themselves paying steep prices that have since plummeted. In the four years since McPherson purchased his home, asking prices in the Austin metro area have dropped by nearly 25%, the steepest decline of any major city according to Realtor.com.
The descent began with developers constructing a surge of new homes, coupled with fewer cross-country moves and rising mortgage rates. California expats moved to Austin during the work-from-home era, but by the following year, more people were leaving Austin for San Francisco than vice versa. New home construction in East Austin continues to rise, but the market remains soft, with landlords offering discounts to attract tenants.
Meanwhile, other pandemic-era hotspots like Boise, Denver, and Phoenix have also experienced declining prices.
Austin's situation is unique among these cities, with Austin's market "getting super out of whack, super quickly." Local economist Joel Berner attributes the rapid decline to the Federal Reserve's interest rate hikes in response to inflation, causing mortgage rates to surge in 2022. As a result, potential buyers found themselves paying significantly more in monthly interest, causing demand to drop.
The rapid construction of new homes also meant that builders were unable to keep up with the reduced demand, leading to a market that was "just going gangbusters" and prices "getting totally out of control."
While Austin's population grew by 5.3% between 2020 and 2022, the city's real estate market has struggled to maintain the rapid growth. Today, agents report that coveted neighborhood listings still attract multiple offers, but homebuyers can be more selective due to the market's decline. McPherson, who moved back to Phoenix, is preparing to sell his Austin home at a loss, estimating it could fetch between $420,000 and $450,000, a roughly 30% decrease from its peak price.
He acknowledges that the market conditions are currently unfavorable and decides to cut his losses, unwilling to continue losing sleep over the situation.
Written by urgent.news from Business Insider's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
