Home prices are once again falling in the pandemic-era boomtown of Austin, as the Texas city continues experiencing one of the most dramatic corrections in the country.
The median sale price of a home in Austin was $560,000 in May, down 4.6 percent from a year earlier and from $575,000 in April, according to Redfin data. In May 2022, when home prices reached their peak in the city, a typical home in Austin would cost buyers an average of $667,050—more than $100,000 more.
Despite facing lower prices, buyers in the city are staying put. Home sales in Austin declined by a staggering 12.9 percent year-over-year in May. A total of 853 properties went under contract that month as mortgage rates still hovered around the 7 percent mark and economic uncertainty grew across the country.
Not only were fewer homes in the Texas capital sold that month, but those that managed to find buyers waited an average of 48 days on the market before the deal was closed, 6 days more than in May 2024. Nearly 40 percent of homes sold (37.1 percent) had price drops.
By comparison, home prices continued to rise at the national level last month (up 1 percent year-over-year), while home sales decreased by a more modest 5.9 percent compared to the same period a year earlier.
“What we’re seeing in Austin is a necessary and overdue normalization after an unprecedented period of price acceleration during the pandemic. It is a return to sustainability,” Emily Girard, chief executive officer of Unlock MLS and the Austin Board of REALTORS, told Newsweek.
“We’ve come off a period where double digit annual price increases weren’t a viable option for the long-term health of our market. This recalibration was expected and welcomed many buyers who were previously sidelined.”
How Did Austin Get Into This Mess?
In the years following the outbreak of the COVID-19 pandemic, the Austin metropolitan area, which includes Round Rock and San Marcos, experienced significant growth, dramatically reshaping its housing market.
Thanks to its relative affordability, high quality of life and thriving job market, the city has long been one of the fastest-growing in the country, adding nearly 1 million new residents every year between 2020 and 2023, according to data from the U.S. Census Bureau.
All these newcomers needed housing, and when historically low mortgage rates spurred a homebuying frenzy across the country in the pandemic years, Austin quickly found itself short on inventory.
“In 2021 during the pandemic, more homes were sold in the Austin-Round Rock MSA than ever before, and sales dollar volume yielded more than a $23 billion impact on the Austin-area economy,” Girard said.
“The pandemic led to increased demand as buyers in the market had more disposable income and reevaluated their needs in a living space after spending months at home,” she said.
“That, combined with record-low interest rates at the time and an Austin economy that continued to make major company relocation announcements regularly, led to more homes being sold and prices increasing to an unsustainable level.”
What Is Happening Now in Austin?
The story of the Austin housing market “is basically the same as the national story, just a bit more dramatic,” Joel Berner, senior economist at Realtor.com, told Newsweek.
“Following the peak of the pandemic, there was a major run-up in home prices amid record-low mortgage rates as buyers rushed to snatch up homes,” he said.
The median listing price of a home in the Texas city jumped from $369,745 in April 2020 to $625,000 in April 2022, marking a 69 percent growth over just two years. Inventory plummeted during this period, contributing to sending home prices through the roof, but recovered quickly to pre-pandemic levels by 2023.
“Since then, inventory has continued to grow year-over-year,” finally slowing down the vertiginous growth of home prices in the city, Berner said.
According to data from Realtor.com, the number of active listings in the Austin-Round Rock area reached 12,525 in May, the highest figure on record since the company began tracking data in 2016.
“The correction has come for Austin sooner and more significantly than the national housing market,” Berner said, alluding to the recent surge in inventory across the country.
In May, there were 2,027,277 homes for sale in the United States, according to Redfin, representing a 13 percent year-over-year increase. Sellers currently outnumber buyers by 500,000 in the U.S. housing market.
While Austin has gone from boom to bust in many ways, experts say that the city’s housing market is far from crashing. Dwindling sales and falling prices are just a sign that Austin is reverting to being “a normalized market,” Girard said.
“The demand for homes in Austin is still there. At the same time sellers are adapting to buyer affordability challenges in a higher interest rate environment,” she said.
“Just last month, pending home sales in the Austin-Round Rock-San Marcos MSA jumped 16.1 percent in May, showing that buyers are still very much engaged when prices meet the market,” she added.
“Sellers are still reaping significant returns, up to 30 percent more than they would have five years ago, even after adjusting their list prices by 7 to 10 percent to reflect today’s interest rates.”
What Does This Mean for Buyers in the City? And Sellers?
“For buyers, this is one of the most favorable environments we’ve seen in years,” Girard said, referring to the Austin market.
“Buyers have time to shop, compare and negotiate—luxuries that weren’t available during the pandemic boom. They’re in the market with more intention and more options, especially with increased affordability for first-time and moderate income homebuyers.”
Jeremy Knight, an Austin-based realtor at The Knight Group, told Newsweek that buyers in the Texas capital are finding very affordable homes at a time when many across the country are struggling. About 59 percent of the homes that sold last month were under $500,000, he said, and 45 percent were under the national average of $415,000, “which means more buyers are finding affordable homes.”
Knight said that many sellers are still hoping to get the prices they would have fetched in 2022 for their properties, but that is no longer possible.
“Some sellers are being smart about pricing and those homes are selling. Unfortunately most realtors are having a hard time both pricing homes to where the market is, and having that hard conversation with their sellers about price,” he said.
“So, is this the boom hangover? For sellers, it is,” he added. “For buyers that want to take advantage of the market and are not scared or understand that rates are high, but they can get a great deal on price and potentially get more closing costs from the seller, this is the time to get great deals.”
Where Does This Leave Austin?
The unfolding correction is “a positive shift” for Austin, Girard said, “and one that supports a healthier housing environment for the long term.”
According to Knight, home prices in Austin are expected to continue declining this year.
“That’s because in the last half of the year we always have more inventory. And if you ever look at the seasonal bell curve in Austin’s selling season, prices always come down in the last half of the year,” he said.
However, there are many buyers on the sidelines, which could alter the current market’s dynamics if given the chance. “If we do see rates come down in the last half of the year, you’ll see more closed numbers and buyers frantic in the market,” Knight said.
“I don’t think prices will shoot up. Prices will flatten out and buyers will still get good deals,” he added. “So, I’m projecting a strong last half of the year in sales. We could see positive year-over-year numbers closer to the end of the year if rates drop into the 6.5 percent or lower range.”
Next year, the city could potentially see home prices going back up, so buyers should take advantage of this moment, Knight said—even if double-digit hikes are likely a thing of the past for Austin.
“Buyers are going to say, ‘Oh, I should’ve bought last year.’ But positive year-over-year numbers aren’t going to be the same numbers as we saw in 2021-2022. Nothing like that,” he said. “But, most likely in the 3-5 percent range. Which is what Austin typically saw before the pandemic.”
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