Austin's Housing Market Is in Trouble

Newsweek

24-04-2025

Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources.
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After having pulled through a dramatic home price correction over the past couple of years, the former pandemic boomtown of Austin, Texas, is now navigating even more troubled waters, as buyers scared off by brewing economic uncertainty are failing to show up for the city's growing housing supply.
"Our market here was showing signs of price stabilization after unprecedented declines, as buyers re-entered the market after the 3 percent interest rate 'hangover' finally wore off at the beginning of the year," Scott Turner, founder of Austin-based Riverside Homes, told Newsweek.
"But the economic uncertainty caused by tariffs and the risk of recession definitely affected their mentality, making them more cautious and leaving housing inventory levels at nearly an all-time high."
The downtown skyline on April 11, 2023, in Austin, Texas.
The downtown skyline on April 11, 2023, in Austin, Texas.Why It Matters
Between February 2020 and May 2022, the median sale price of a home in Austin jumped by more than 60 percent, according to Redfin data, reaching a peak of $659,500. The increase was mainly a result of the massive influx of out-of-state newcomers sparked by the rise of remote work, which allowed many Americans to relocate to more affordable, more livable cities and turn their back on expensive metropolises.
But the Austin housing market, which had become one of the most overheated in the country, experienced a significant slowdown after the pandemic, with return-to-office orders affecting the number of people relocating to the Texas capital. With a few notable exceptions, home prices have been consistently falling in the city, year-over-year, since late 2022.
The City's Boom And Bust
"The story of the Austin housing market is basically the same as the national story, just a bit more dramatic," Austin-based 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."
Eldon Rude, a longtime housing market analyst based in Austin, told Newsweek: "Texas was one of several Sun Belt states that experienced significant in-migration between 2020 and 2022, which resulted in an imbalance in demand over supply for homes.
"Such strong demand, coupled with extremely low mortgage interest rates, resulted in significant increases in home prices in all of the major metropolitan areas in the state."
The median listing price in the city jumped from $369,745 in April 2020 to $625,000 in April 2022, an uptick of 69 percent in just two years. At the same time, inventory plummeted, though it quickly recovered to pre-pandemic levels by 2023.
"Since then, inventory has continued to grow year-over-year, and March 2025 had more active for-sale listings in Austin than any March in our data history," which dates to March 2017, Berner said.
But buyers are not exactly jumping on the chance of buying a home, even with more options available on the market.
"Just because home prices are coming down and there are more listings, doesn't mean that prices are affordable. So there's still a supply problem in cities like Austin," Turner said. "I think only 25 percent of Austinites can afford to purchase a home at the median home price."
Rude said: "With interest rates now higher than they were prior to COVID, coupled with a slower economy and less in-migration into the state, there are now fewer buyers in the market, and what buyers there are face affordability challenges given elevated home prices as well as higher mortgage payments."
Berner said: "The supply growth has softened prices, and the median listing price in March 2025 was $510,000, down 7.2 percent from March 2024. It has been a slow year, with 12 consecutive months of prices falling year-over-year. The correction has come for Austin sooner and more significantly than the national housing market."
According to Turner, home prices are now stabilizing after "an unprecedented drop."
Despite a gloomy outlook for the city's housing market's short-term future, Turner said Austin's economy remains robust.
"Our real estate market is returning to a 'new normal' in terms of supply and demand," he said.
That is—as long as the Trump administration's tariffs do not massively disrupt the city's market even further.
"Austin's economy outside of real estate is fairly diversified and still strong, but neither Austin nor Texas are immune to the impacts of a recession or tariffs, in the case of home building," he said.
"It will take time for our market to work through this inventory, but despite Austin's growth, much of this inventory remains unattainable for most Austinites, particularly with rates where they are, making matters worse."
The Ripple Effect Of Trump's Tariffs
Turner said that existing homes currently for sale on the Austin market are not going to be impacted much by the tariffs, but these are still influencing buyer behavior, making them "more cautious."
For new home construction, on the other hand, "the impact of tariffs cannot be overstated," Turner said. "Significant cost increases, particularly in Texas, where we are more reliant on imported building supplies, combined with falling prices would be devastating, not just to Austin's market, but nationwide. If it gets worse, homebuilding could be the first major industry hit by 'stagflation,'"
It is not only tariffs that are causing concerns among homebuilders in the U.S. and Austin—but uncertainty over whether the president would stick to these tariffs or change his mind.
"As homebuilders, we can't easily adjust our business to such sudden changes," Turner said. "We are getting notices from suppliers every week regarding price increases."
Berner said that the direct effect of tariffs on the Austin housing market has not yet been felt, "but as an area with strong new construction activity, the tariffs on Canadian lumber especially will work to drive up the cost of newly built homes in the Austin metro."
In recent years, the economist explained, builders in Austin have excelled at delivering affordable new inventory to the city's market, and the median price of a new home in Austin is currently lower than the price of existing homes. That is due primarily to where the new inventory is being built, Berner specified, in outlying areas of the metropolitan area.
"This will be jeopardized by tariffs, as builders will be forced to pass on additional costs to new home buyers," Berner said. "What we will see even sooner is the indirect effect of the tariffs on consumer confidence, dampening demand for home purchases and leading to another slow year of home sales in Austin.
"Unless mortgage rates drop significantly, we anticipate that depressed homebuyer sentiment will lead to continued price depreciation and low volume of home sales in Austin."