Williamson County Real Estate Cools Off

The national and countywide real estate surge is cooling down due to the increase in mortgage rates in 2022. Many economists are predicting a significant housing price correction throughout 2023.

Looking back at Williamson County’s 2019-2022 real estate boom, it appears the unprecedented demand for home ownership was created by record low mortgage rates combined with many businesses implementing workfrom-home orders during the pandemic. That combination drove home prices to unseen-before levels and had many new home buyers paying tens of thousands of dollars above asking price rather than miss out on the opportunity to purchase.

Economists warn that first-time home buyers who took advantage of these low interest rates may face struggles similar to those who bought during the 20052007 home buying surge, which eventually stalled in a related way. Many buyers in that earlier period found themselves significantly under water on their home value after prices decreased.

Of course not all buyers during the pandemic were first-timers. Many used the opportunity to upgrade their living situation or make a move to a more desirable community. However, struggles in purchasing power emerged as demand continued to increase, driving prices higher and higher. While sellers

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reaped the rewards of high home prices, as buyers, they found their options limited by the high prices of other desirable homes.

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As mortgage rates continue to rise from around 3 percent in January 2022 to the current 7 percent many buyers are being priced out of the market as housing prices continue to increase in parallel. In just the past decade home prices have increased nationally by about 60 percent. Looking at a smaller sample size from 2019 to 2022 the median income required to buy a typical home has increased to nearly $90,000 a $40,000 increase from pre-pandemic requirements. The Austin Metro area that includes Williamson County saw a slight decrease in median home price from August to October this year but looking at the Texas Triangle, which includes the markets in Dallas-Ft. Worth, Houston, and San Antonio, median home prices throughout Texas are still on the rise.

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Retirement communities throughout Williamson County are also facing a corollary decrease in the real estate surge that occurred at the end of 2022. With fewer buyers in a position to afford the increasing home prices, potential sellers are left with the difficult decision to hold onto to their homes and wait until the market is more balanced for buyers and sellers or take the risk of entering an unstable, unpredictable market that is emerging nationwide.

Many seniors view their homes as a pseudo-savings account to be used to offset unexpected medical expenses or changing lifestyle needs as home equity represents the majority of net worth for many who are 75 years and older. With the volatility of the current market, many are choosing not to take the risk of entering into the real estate market entirely. This has led to an increase in supply in retirement communities that is not being met with an equal demand.

Overall, many economists predict home sales will continue to decrease next year as more and more people are priced out of the market. The price correction may be delayed though due to low inventory of homes for sale as a result of the pandemic, and the buyer/ investor rush to purchase available properties at low interest rates.

Williamson County Realtors are likely to be walking a very fine line in 2023 in order to maintain the county’s high growth rate and new challenges may lie ahead.

Key Takeaway

Williamson County real estate is experiencing a cooling off period from the pandemic-era surge and may face a sharp house price correction in the coming year, enabling buyers who have lately been priced out to become players in the market again.

by Thomas Graham