March 2022

Expectations For 2022 From Industry Experts

by RIKI MARKOWITZ Contributing Writer

On March 3, 2020, brokers, agents, lenders, and others in the residential real estate industry from Austin-Round Rock metro gathered for the annual Home Builders Association (HBA)

Housing Forecast Summit. While the conference is in its 19th year, for the past seven consecutive years the effects of skyrocketing home sales and housing costs year-over-year, along with decreasing inventory, may finally be coming home to roost.

Realty Austin has been attending the Summit almost every year (including the 2021 Zoom event most of us watched from home). The past half dozen-plus years, at least, consisted of sunny predictions across most homebuilding sectors (that mostly came true). This year had a slightly less positive tone. That’s

because after years’ of Austin scrambling up “most popular” and “fastest growing” cities to move to charts and articles, a population that’s bursting at the seems, low housing inventory, and, more recently, logjams in the supply chain, a construction-worker shortage, and rising mortgage and interest rates, folks left this year’s meeting with a slight pit in their stomach.

When we asked Eldon Rude his thoughts on the more sobering mood, the long-time industry leader in real estate research and consulting, and principal at 360° Real Estate Analytics, had a slightly different take. “I don’t think it’s a tailwind,” he said. “I think it’s a headwind. Maybe not significant, but it’s something that we’re going to have to address over time.” No matter how you slice it, tailwinds are much more preferable to headwinds.

The past is the past. So, in terms of sales, supply, and construction, let’s look at what industry professionals are dealing with today and what they can expect in the near future. Here are some data points from the HBA Summit, as well as Austin Board of Realtors (ABoR), Texas Realtors and other Central Texas real estate associations.

• In 2021, Austin-Round Rock metro was responsible for one out of 10 home sales in the state.

• Last year, home sales in Austin increased 2.7%, averaging nearly 115 daily (sales increased 6.2% throughout the state), according to Texas Realtors

• In December, ABoR reported that Austin metro had 0.6 months of housing inventory.

• Median prices in Central Texas rose to $450,000 for the year. To put that into perspective, according to the Austin Business Journal (ABJ), statewide, prices rose 16%, which comes out to about $300,000

• In Austin, the housing price category that saw the most activity was $500k to $749k. These buyers made up about a quarter of all residential sales.

• Experts insist demand will continue to be high. And that’s not just Central Texas or Austin—it’s a statewide prediction.

In Austin metro, days on the market are decreasing year-over-year. In 2021, a typical home spent 20 days on the market, according to ABJ, that’s “less than half of 2020’s average.” Less than three weeks doesn’t give even the most eager buyers a lot of time to get pre-approved for a loan, look at properties, get an inspection (more and more buyers are forgoing inspections or basically just getting a quick-and-dirty version to expose potential urgent, bigticket problems), and then, after all that, make an offer in time.

Some of the most significant downsides when it comes to immediate projections in home sales — here in Austin, but all over Texas, too — are rising interest and mortgage rates. And the supply chain certainly has been no friend to the real estate industry.

Builders are waiting months for supplies that used to be available in abundance. “As we move through lumber price increases and the supply chain issue that came up in the middle of 2021,” said Rude, “we finished the year with a record number of under-construction homes.” However, he adds, this is an issue that experts anticipate will rectify sooner rather than later.

The pandemic is definitely to blame for shaking up things like inventory and markets. So there’s no reason to believe they won’t recalibrate after some time. Though, what won’t easily recalibrate is who is buying real estate in Austin.

Soon, we’ll likely be seeing an even larger influx of high earners who are being drawn here by companies like Apple, Tesla, Google and Meta. Some of these corporations already have an enormous amount of real estate downtown, at the Domain and areas on the way to being Austin’s newest, next-best neighborhoods. And while many of their workers are still coding, engineering, building and designing new technologies from home, thanks to the pandemic, the companies are gobbling up even more office space, anyway. These changes are not good news for young families and those earning an average —respectable— income (i.e. $70k per year for a single-income household or $140k for a dual income household). There are no bones about it: these potential buyers are being priced out of even the outskirts of Austin. They’re either forced to rent, which isn’t that much less expensive, depending on the neighborhood, or live in a bedroom community like Bastrop or Kyle — both about 20 to 30 miles from downtown Austin.

While we don’t usually interview ourselves here at RealtyLine, we do follow residential real estate as close as any professional organization out there. And we go to every industry event we can. Doren Carver, RealtyLine co-owner, said that on the one hand, “there’s less opportunity for new homebuyers in Austin. However, it’s a great time for builders since housing is in such high demand.” On the other hand, Carver said, “Price points have unfortunately put first time homebuyers out of the market.”

Overall, we’re in one of the top markets in the US to move to, whether buyers are coming here for the weather, the music or the jobs. “But,” he adds, “as far as the people who are going to take care of this city, it’s going to be kind of tough for them to live here.”

So if you felt a little pessimistic when you left the summit last week and had trouble articulating why, here’s the truth: Austin is a great place to purchase a home if you already have the means. For everyone else, it will be a struggle for years to come.