Downward angle icon Downward angle icon. “For sale” signs keep turning into “Sold,” even though some experts predicted Austin's housing market would crash. Brandon Bell/Getty Images Austin's housing market is booming again, despite recent predictions that it would crash. National forecasts predict rising home prices despite still-high interest rates. That's good news for homeowners and bad news for those hoping to get into the market.
The Austin, Texas housing market, which some thought might collapse, is starting to boom again.
While this may be a sign of relief for homeowners across the country, it's bad news for would-be buyers.
Austin's sharp rise in home sales is a bit surprising: A few months ago, some experts were predicting a decline in the city's housing market, as well as interest rates rising again in 2024, reaching their highest levels since December. But Austin isn't alone in defying predictions: Prices continue to rise in 85% of U.S. cities, even as 91% of all homes are “overvalued.”
Austin's inventory of homes for sale and the number of homes sold increased significantly in January. Additionally, national home price forecasts for 2024 were revised upwards, and the housing market is beginning to boom.
According to data provided to Business Insider by Realty Austin, a major real estate firm in the area, new home listings in the Austin-Round Rock area were up 56% in January compared to December and 5.1% compared to the same period in 2023. Demand for homes also appears to be surging, with sales up 19% from the previous month and 4.3% compared to January 2023.
In another sign of growing demand from buyers, Austin's total number of active listings fell 3.6% in January despite an increase in new listings.
Homebuyers remain determined despite rising prices and interest rates
Nicholas Gerli, CEO of real estate data analytics firm Reventure Consulting, named Austin the city most likely to experience a housing bubble burst and a drop in home prices in 2022.
In December, Realtor.com predicted Austin home prices would experience the steepest decline in the U.S., with prices expected to fall 12.2% in 2024.
Mural in downtown Austin, Texas. George Rose/Getty Images
To be sure, not everyone was expecting the crash: In January, the National Association of Realtors (NAR) named the Austin-Round Rock area the market with the highest “potential demand” for homes, indicating that there are still plenty of people wanting to buy in the local market.
Despite the increase in the number of homes for sale, prices should continue to rise due to increased demand from buyers and reduced supply, and that is exactly what NAR is predicting for the U.S. housing market.
At the end of January, the NAR projected that existing home prices would rise 4.3% in the first quarter of 2024. That's a big increase from its August forecast of a 1.2% increase.
Moreover, in a February survey of 117 economists conducted by mortgage lender Fannie Mae, respondents on average expected home prices to rise 3.8% in 2024. That was up from 2.3% in the previous survey, conducted in the fourth quarter of 2023.
It's too early to tell whether the sudden increase in demand means buyers are adjusting their expectations and accepting that high mortgage rates aren't going to improve dramatically anytime soon.
Another possibility is that the market has been largely stagnant since the Federal Reserve began raising interest rates to combat inflation, and buyers and sellers are starting to lose patience. Demand across the country has fallen sharply over the past two years as potential buyers were scared off by high interest rates, leading many homeowners to hesitate to sell and forgo low-interest loans that were often below 4 percent.
The Federal Reserve said in December it expects to cut interest rates three times in 2024, raising hopes that mortgage rates will also fall, saving buyers hundreds of dollars on their monthly payments.
But the Fed said in January it would keep rates at their current levels “until it has greater confidence that inflation is moving sustainably toward 2 percent,” according to the minutes, leading to speculation that the first rate cuts could be delayed until later this year.
Either way, if demand keeps growing and Austin avoids the home price crash that many predicted, it will bode well for other markets where prices have skyrocketed over the past decade and were deemed too expensive. While home price growth may still be slowing, it's beginning to look like prices are set to keep climbing.