Are you looking for a good place to buy your next rental property? One of the markets that may have come to mind is Knoxville, Tennessee. If you were to reach out to an Austin real estate agent, you would certainly be told to buy, but that may not be for objective reasons.

As you know, in the investment world, you need to take the time to do your due diligence before you commit to any purchase. The idea of the information below is to help you with that. Central Texas could be exactly what you're looking for, but you can't just assume that's the case.

From trends, to statistics, to information that's specifically meant to help in the investment landscape, everything you need will be covered below. That way, while there's still a risk, you won't take an unnecessary one.

Austin Housing Market Trends Should You Know

Trends are always a good place to start since they can give you a general idea of the direction that the market is moving in.

Starting with inventory, at the end of Q3 2023, the figure was 3.0, which is not only higher than the national average, but also higher than the numbers for many other states. Of course, 6.0 would be needed for the market to be considered balanced.

New developments were something that potential buyers had to look forward to since there was a 200% increase over the previous year, based on information provided by the Austin Board of Realtors.

New listings increased by 6.6%, standing at 4,385. It's the active listings that saw a huge jump. The number was 8,059, which indicated an increase of 377.7%.

On the sales side of things, pending sales fell to 3,046 transactions, which represents a drop of 7.4%. The average time to sale also increased to 80, which is up from 58.

Year over year, there was a decline in overall sales by 14% with 2,804 being closed. Median home prices fell to $450,000, which was a 13.5% drop. This is a testament to the strength of the economy in Texas, considering most other cities are seeing the median home price figures going upward.

Factors That Contribute to the Housing Market

Whether it's median price, home sales, or any other metric, these things aren't moving randomly. There are different factors influencing the directions that you see playing out. Here's a look at four of the major players.

First, there are mortgage rates. With housing prices falling on the Austin real estate market, you would think that this would mean that buyers would immediately become more comfortable buying since acquiring property would be cheaper.

Unfortunately, this is not the case, considering mortgage rates have been appreciating to a place not seen in over two decades. So, while the base price may be on the affordable side of the spectrum, the actual cost of acquiring the space is prohibitive to prospective buyers, since monthly mortgage payment requirements would be very steep.

The economy is the next point of focus. There is a lot that depends on the state of the economy, and Austin's real estate market falls firmly within that categorization. Remember that this is where considerations such as GDP, income brackets, cost of goods, etc., come into play.

Economic moves could mean that real estate investments are incredibly favorable or that the purchasing power that would be needed is simply not available.

Government policies are next on the list. From subsidies, to deductions, to tax credits, and more, the demand for real estate can be affected. It's essential to understand how the current state of policies can help you in forecasting where demand will go.

Demographics are another key area in the equation. You can look at this as sub-groupings of different people in the population based on shared characteristics. Income is a good example. Typically, people within a specific demographic will display similar behaviors. This means that you get an indicator of what activity in the real estate market may look like.

Will the Austin Real Estate Market Crash?

Experts believe that Austin's housing market will slow down over time. However, a crash isn't expected to happen. Remember that one of the key elements for a crash would need to be seriously low demand compared to the overwhelming supply available.

Inventory is a great place to start, and the reality is that it is low. Sure, a 3.0-month supply is better than a lot of other cities in the United States. Nevertheless, that's still considered low, with 6 months needed, just to get back to a balanced place.

Next, there are new buyers consistently entering the market. Think about millennials, for example, who are now in the prime real estate purchase years. This is going to contribute to a high demand being maintained.

Foreclosures aren't going up. In fact, it's just the opposite. You're living in a time when the people who are buying homes tend to have significant equity in them. Therefore, the likelihood of a foreclosure crisis playing a part in creating an overwhelming supply is very low.

Lending standards also feed into things. Almost two decades ago, you'd be surprised by how accessible mortgages are. Down payment and credit checks were not necessarily requirements. Now, potential borrowers must meet a much higher standard.

Austin Real Estate Market Statistics

Austin saw the same kind of downward movement as nearby cities in a few areas. These included median home prices and sales. The number of closed sales fell to 774 in March 2023, which represents a decline of 24.6%.

Median home prices fell to $529,495, representing a decline of 15.1%.

There was an increase in active listings to 1,448, representing a 9.9% increase. This was complemented by an increase of 307.9% in active listings to 2,166.

Williamson County saw a fall to 973 sales, which is an 11.9% drop. This was accompanied by a median home price drop to $425,000, which was a 13% fall. New listings also trended downwards, to 1,242, which is a 7.2% drop. However, there was an increase of 462% in new listings, taking the number up to 2,366.

Bastrop County actually saw a small increase in sales to 129, which is an increase of 0.8%. The median price fell to $329,990, which was a drop of 17.5%, as active listings rose to 506, which was a 301.6% increase. New listings also went up to 213, representing an increase of 9.8%.

Travis County saw sales fall to 1,262, which was a decrease of 21.1%. Year over year, the median price of housing fell to $514,900, which was a drop of 14.2%. New and active listings saw an uptick, however. On the new side of things, there was a 9.9% increase, taking things up to 2,250. Active listings, on the other hand, went up to 3,775, which was an impressive 336.9% increase.

Hays County managed to see an increase in sales as Bastrop County did. The increase was slightly larger, standing at 2.8%, which translates to 400 sales. Median home prices followed the trend elsewhere and fell. The drop was 15.5% to a figure of $388,950. New listings went up to 621, which was a 35.6% increase, with the active side of things going up to 1,293, which was an increase of 429.9%.

The Austin Housing Market Forecast

At the peak of things, the Austin housing market was undoubtedly a seller's market. While it's not at the extreme state it was before with its cooling, don't expect things to end up in buyer's market territory anytime soon. It's still on the seller's side of the fence.

The Census Bureau's population assessment of 2021 will tell you that there is a daily population jump of about 146 people in Austin daily. This kind of population growth will undoubtedly mean that the demand for housing will simply continue to increase.

There's a lot of economic growth to speak of in the city, which is just one of the reasons it tends to attract so many people. Both employment growth and population growth are not expected to slow down anytime soon, which is why sellers will be in an advantageous position for some time to come.

Oracle's headquarters, alongside bases of operations for Tesla and Google, are all in Austin. That speaks to the expected level of employment, investment, and homes needed. The reality is that the kind of demand that this creates simply cannot be matched by the supply.

There has been an annual appreciation of 11.47% in Austin, making for a real estate aggregate appreciation of 196.13% over the last decade. This statistic is expected to continue to be very modest, but this depends on what changes mortgage rates will go through.

This is one of the reasons why investing in a property would make sense long-term.

Note that Zillow's market forecast for Austin sees prices falling between now and March 2024. Home values in the Round Rock Metro area are expected to decline by 1.4%.

While 6 months of inventory would be needed to balance things out, Austin can get to the buyer's market stage with inventory hitting the 5 months supply barrier.

However, that is unlikely to happen. Demand is not going anywhere, and considering pricing is expected to become more favorable, the expectation is that demand will simply continue to go higher.

Nevertheless, there is a steady increase overall, which means that if you have been debating the idea of closing the deal on a home in Austin, this is certainly the time to do it.

Are Things Overpriced in Austin?

This is a question that tends to come up quite a bit. Sure, median home prices are falling. However, if something was overpriced in the first place and falls, that doesn't necessarily mean that the price has fallen to a fair place. Who is to say things were overpriced, though?

Realistically, it's going to be difficult to call this one objectively. Not only will different parties have a different say, but there are also external factors that need to go into thinking about it. For example, the demand in Austin has stood at very high levels for the past several years, and there are several reasons for this, which were described above.

Sure, research will tell you that Austin homes are some of the most overvalued. Florida International University and Florida Atlantic University research will tell you that the prices being paid for houses in the city are just over 50% of what you'd expect.

As high as this is, there's still much better affordability than in some other cities such as Los Angeles, New York, or San Franciso.

Remember too that the economy is pretty strong and expected to improve, meaning that the city represents a pretty lucrative opportunity for potential investors.

Some buyers will undoubtedly see the prices as prohibitive or unfair, while others will relish the chance to get into the market. This is not something you want to conclude based on what others are saying. Think about your situation and what it lends itself to.

Is the Austin Housing Market In a Bubble Right Now?

As indicated above, there's the consideration of properties being overvalued in Austin. Homes are often being sold at high premiums. This is one indication that there could be a bubble. Even so, when you look at the demand side of things, you see economic growth and population growth, both of which are genuine factors.

Remember also that median home prices have fallen in a lot of places. Compared to many other major cities such as Los Angeles or New York, Austin is on the lower side of things.

While there are several things to consider before concluding that a real estate market is in a bubble, they would all need to indicate that. In Austin's case, there are indications for and against, making it pretty difficult to say that a bubble is present.

Is Austin's Housing Market Good for Investment?

There are a few good reasons to consider investing in Austin as a landlord. For one, you're taking advantage of a great economy, which means that your housing solutions would be needed by potential renters.

Regarding the legal side of things, Texas is known for being a pretty landlord-friendly state. Tenants can't withhold rent because they feel like they aren't getting essentials. Additionally, after 3 days, you're free to go the eviction route if the rent hasn't been paid.

Taxation is another good one. Sure, you may have a high property tax to deal with. However, there's no state income tax.

The Bottom Line

The Austin housing market has been improving steadily and is expected to continue to do so. It represents a big potential investment for those looking to rent, especially considering the state of tax laws and landlord-tenant laws.

Frequently Asked Questions

Are Austin Home Prices Falling?

The prices in Austin have been falling across several counties. However, rising interest rates may mean the cost of acquiring property is still high.

Is This a Good Time to Buy a Rental Property in Austin?

Yes. If you're a landlord, it's an excellent time to buy, especially since the economic state is conducive to returns on your investments.

Will Housing Inventory Improve?

Considering demand is expected to continue to increase, this is unlikely to be the case.

Frequently Asked Quesitons

David is the co-founder & CMO of DoorLoop, a best-selling author, legal CLE speaker, and real estate investor. When he's not hanging with his three children, he's writing articles here!

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The information on this website is from public sources, for informational purposes only and not intended for legal or accounting advice. DoorLoop does not guarantee its accuracy and is not liable for any damages or inaccuracies.