Austin-area housing market poised for another stable year, experts say

Yahoo

24-02-2025

Steady as she goes.
That about sums up the 2025 outlook by real estate experts for the housing market in the Austin metro area, a five-county region stretching from Georgetown to San Marcos.
Peering into their crystal balls, several leading experts who have tracked the ups and downs of the Central Texas real estate market for years, even decades, foresee stable conditions this year. They predict the 2025 housing landscape could mirror last year's, as more normal trends continue in the wake of the COVID-19 pandemic era buying frenzy, when multiple offers, often well above asking price, were common.
More: Will 2025 Central Texas housing market be a repeat of 2024?
Those expected trends include home prices remaining relatively flat; a steady supply of housing; predictable mortgage interest rates; and consistent sales, all factors that should help better inform decisions for both buyers and sellers.
In short, barring unforeseen local, national or global events, experts say this year's local housing market could look like a repeat of 2024's.
'2025 market activity will likely look similar to trends observed in 2024 with the median sales price and closed sales hovering between a range of 5% up or down year-over-year," Clare Knapp, housing economist for the Austin Board of Realtors, said recently. "This stability will give homebuyers and sellers clear expectations to plan their next steps with greater confidence."
More: Austin-area housing market stable as 2024 ends; real estate agents optimistic about 2025
For house hunters, the anticipated continued growing supply of homes means more choices, and — in some cases — lower prices. That's because some sellers, given higher interest rates and slower sales, might have to consider lowering their asking prices to attract buyers as inventory swells and mortgage rates hover in the 6% range.
Mortgage rates are projected to stay in that range during the first half of this year, but they could dip into the 5% range later in the year, according to the Austin Board of Realtors.
"The predictability in mortgage rates should provide both buyers and sellers with a stable framework for planning, reducing uncertainty and allowing for more confident decision-making," the Austin Board of Realtors said in a recent news release.
Rob Kellogg, a real estate agent with Realty Austin, said he expects 2025 to be "more of the same," with buyers taking their time to select a home.
"They will look for a seller that has their home in tip-top condition, looking like a cream puff with a reasonably compelling price point. Closing costs will likely need to be on the table and assist in buying down those elevated interest rates," Kellogg said.
Historically, the health of the local economy, along with mortgage interest rates, have been the biggest factors affecting demand for housing, said Eldon Rude, a longtime housing market expert.
"Unfortunately, with job growth in the region slowing over the last year, and interest rates remaining stubbornly high, both these important variables will continue to represent headwinds for our housing market in 2025," said Rude, who is principal of 360° Real Estate Analytics, an Austin-based real estate consulting firm. Rude delivered his 22nd annual housing forecast this week, an event that draws hundreds of industry professionals every year.
More: Austin-area housing outlook positive; job growth, slower home prices pluses, expert says
Looking ahead into 2025, we asked Rude and other experts what they think is in store for the Austin-area housing market. Along with Rude, Knapp and Kellogg, here's who else we checked in with, followed by their predictions:
Longtime developer Terry Mitchell, formerly with volume homebuilder D. R. Horton in Austin and now president of Austin-based Momark Development LLC.
Mark Sprague, a longtime housing market analyst currently with Independence Title.
Josh Santos, vice president of corporate homebuilding operations for Landsea Homes. Landsea is building in a Kyle community called Freedom at Anthem, where it purchased 221 acres and ultimately will build 880 homes in coming years.
Ed Wendler Jr., longtime developer who has worked for a real estate investment trust that has built hundreds of apartments in Austin.
Bryan Havel, division president for Tri Pointe Homes Austin.
Bryan Glasshagel, senior vice president with Zonda, which tracks the housing market locally and nationally.
Kellogg: "2024 was a roller coaster of a year. The first three months were very active, and several of my listings received multiple offers. Not the type of multiple offers that we had in '20-'22 when the buyers bid up the prices by +10% to 15%, but there were many serious buyers, and in many cases cash was the winner — even if the offer was a little under list price."
"All in all, while the year was full of ups and downs, it ended up being my most productive year (in my 20 years in real estate). I helped 13 sellers and 13 buyers so was able to experience both sides of the transaction. While many of the sellers took in less proceeds than expected, if they bought prior to 2019, they had significant equity to take with them to their next move."
Knapp: 'The median sales price will likely remain essentially flat — i.e., up or down to the tune of 5% year-over-year. Still, elevated mortgage rates continue to constrain buyers' affordability, while an uptick in active listings has provided buyers with more negotiating power. Home prices will need to adjust to accommodate for the lower level of buyer demand within our current market."
Sprague: "Home prices are likely to grow at a slower, more sustainable pace compared to the rapid increases seen in recent years. Yes, median prices have dropped due to mortgage interest rates increasing payments. But this slowdown was caused by rates increasing, not a financial meltdown. In Texas, and the majority of the nation, there is not a decrease in residential values; the tax appraisals show that."
Rude: "With the number of available listings likely going up in the spring and summer of 2025, I expect overall home prices to moderate (ease) further in 2025 as sellers are forced to adjust prices to accommodate the affordability pressure prospective homebuyers must deal with as interest rates remain high."
Glasshagel: "Price appreciation will be limited in 2025, flat to potentially up 1%. Builders will continue to contribute sizable incentives to offset closing costs or buy down mortgage rates. ... On a case-by-case basis, builders will likely continue to be open to negotiating prices on inventory homes, particularly those that have been sitting for a while."
Santos: Like other experts, Santos expects home prices to remain "relatively flat" this year.
"In the Austin market, we've seen a decline in home prices over the last year from the high prices we experienced post-COVID, mainly attributed to rising interest rates, which in turn caused pressure on affordability," Santos said.
"With increasing inventory, we've had to adjust prices in order to sell those homes. That's been a wonderful thing though, for those who purchased a home in the last year. People can afford a new home again."
Knapp: "Home prices continue to outpace family incomes (in the Austin region). The median family income for the Austin metro in 2024 was $126,000, which, based on mortgage rates, roughly translated into a maximum affordable home price of between $360,000 and $410,000. Meanwhile, the median sales price measured well above those figures — $445,000. The disparity between home prices and family incomes proves more acute for lower-income families.'
Rude: In his 2024 forecast, Rude said that, among its peer cities, Austin had the biggest decline in the ratio of median family income to median home price in 2023, as home prices declined while mortgage interest rates rose.
As a general rule of thumb, for most individuals and families, a home's value should be no more than three to five times their total annual household income.
Austin saw a decline from the high end of that range — from a multiplier where the median home price was five times that of the median family income in 2022 — down to a multiplier of 3.9 in 2023, when the median home price was $481,200 and the median family income was $122,300.
Some easing in home prices could be a plus in helping Austin continue attracting people and businesses, Rude said in last year's forecast.
Santos: "It's going to be similar to what we experienced in 2024. New communities are coming online in 2025 and there will be a steady stream of supply throughout the year."
Knapp: "Active listings may decline slightly but will likely remain well above historic levels. Demand is likely to remain sluggish amid sustained high mortgage rates. However, (if) sellers more realistically price their homes for the current market, demand may pick up — slightly.'
Sprague: "Expect rates around 6+% to 7.5% through 2025."
Knapp: Mortgage rates likely will hover between 6% and 7% as the Federal Reserve takes a cautious approach to potential rate cuts.
"This consistency will allow both buyers and sellers to benefit from a predictable lending environment," Knapp said. "However, external factors, such as economic shifts or policy changes, could influence these trends, underscoring the importance of staying informed and adaptable to navigate the market successfully."
"Since most homeowners are still sitting on ultra-low mortgage rates, a substantial downward movement in rates really is the name of the game to persuade more buyers off the sidelines."
Rude: "Homebuilders over the last several years were able to compete effectively with the resale market as most production builders have the capacity to buy down mortgage rates, which makes their homes more affordable compared to similarly priced resale homes.
"Because many builders have been carrying a large number of inventory homes since interest rates began to surge in mid-2022, in some sub-markets they have been offering buyers large incentives to sell homes. While these competitive forces make this a great time to purchase a new home, in 2025 I expect builders will pull back on the number of inventory homes they carry, which will result in fewer homes for buyers to choose from."
Mitchell: "As is true across the country, our region has affordability concerns. We are facing those challenges better than the nation: Even though our region's median home price is higher ($450,000) than the nation's median home price ($406,100 as of December), our household income is higher (about $94,000 for 2024) than the nation's (about $80,600) meaning metro Austin can 'afford more home.'
"Interest rates have not declined as originally thought several months ago, contributing to the affordability issue. At most, interest rates might decline a small amount in 2025. With that in mind, builders will need to figure out ways to lower house prices — smaller units and/or more density — to lower prices to reach more of our homebuying public."
Dwyer: "You already see homebuilders reducing the size of their floorplans and limiting the luxury options in an effort to hold down pricing."
Knapp: 'Demand among first-time and low-income buyers continues to outpace supply. Affordability continues to be a major headwind for the Austin market reinforcing the need to increase our supply of affordable homes.
"Motivated sellers should carefully weigh buyers' affordability amid still-elevated mortgage rates and the significant uptick in supply."
More: Latest Austin-area home sales report delivers promising news for first-time buyers
"The median sales price increased nearly 40% from 2019 to 2024 in the (Austin metro area). In other words, sellers are sitting on large home equity gains and will be able to reap most of those gains even should they price their homes more appropriately for our current market. I think this indicates a 10% to 15% reduction in home prices to meaningfully induce more buyers off the sidelines," Knapp said.
For context: In recent years, sharply rising home prices have come as a shock to many Austinites. Real estate agents and industry experts continue to say that prices in the Austin region are a relative bargain for people moving in from the coasts and some other parts of the country, seeking lower taxes and home prices.
More: Market forces keep squeezing Austin-area apartment renters
Wendler: In a different take on affordability, Wendler said this back in 2021: "When folks talk about Austin being unaffordable, they really don't understand the market. Unaffordable units do not sell or rent. Austin is affordable. It's just not affordable for the folks that have lived here a long time or affordable for someone who works in the service industry."
More: Austin housing boom has homebuilders struggling to keep pace, prices soaring
Havel: 'While several unknowns still exist in terms of the national economy, political changes and mortgage rates in 2025, we believe Austin's population and economy will continue to grow, and that growth will fuel the demand for homeownership. As such, Tri Pointe is looking forward to building about 400 homes in the Austin area in 2025 and continuing the growth we have seen over the past five years.'
Those homes will be across 10 communities in the region, including Lariat, Park Central, Heritage and Retreat at San Gabriel. In the Austin market, Tri Pointe Home's base prices range between $349,000 and $700,000, depending on the community.
Mitchell: "The most important factor affecting home sales is whether a region's economy is strong. Austin metro's economy is still one of the strongest in the country, and billions of dollars of investment is presently occurring that will continue to strengthen Austin's economy. The housing market should improve as a result."
Glasshagel: "Keep an eye on job growth. Not just overall numbers, but the quality of job growth. Are we adding enough high-paying jobs to keep up with where home prices have gone in the market?"
Santos: "We're watching (job growth) very closely. While job growth has certainly slowed, Texas and Austin continue to offer an attractive lifestyle and overall affordability that appeals to many people."
Glasshagel: "For buyers, the new home market has fantastic opportunities. With builders buying down rates and negotiating on inventory homes, there are really good opportunities out there. Waiting three months or six months for rates to move might cause you to miss out on opportunities in the market today."
Knapp: 'Despite sustained high mortgage rates, buyers benefit from more negotiating power with the higher level of active listings on the market. Meanwhile, even after pricing homes more realistically, sellers can still reap the substantial portion of home equity gains accrued during the pandemic.'
Santos: "Sellers of resale homes will 100% need to be more realistic about pricing in order to sell their homes and stay competitive with new construction homes" (for which builders can offer financial incentives and mortgage rate buydowns). These offers really are unmatched right now, making new construction homes even more appealing and affordable.
"I would encourage anyone looking to sell their home right now to consider the competitiveness of the market and why they want or need to sell at this very moment. It might be worth holding off for the time being to see what happens with interest rates."
Here is a breakdown of housing statistics from the Austin Board of Realtors for 2024:
Austin-Round Rock-San Marcos MSA
29,872 – Residential homes sold, 0.5% less than 2023
$445,000 – Median price for residential homes, 1.7% less than 2023
45,449 – New home listings on the market, 8.7% more than 2023
132,993 – Active home listings on the market, 14.7% more than 2023
30,369 – Pending sales, 2.2% more than 2023
$17,094,934,330 – Total dollar volume of homes sold, 1.5% less than 2023
Travis County
13,203 – Residential homes sold, 3.2% less than 2023
$515,000 – Median price for residential homes, 0.4% less than 2023
21,741 – New home listings on the market, 4.5% more than 2023
65,636 – Active home listings on the market, 17.1% more than 2023
13,393 – Pending sales, 0.8% less than 2023
$9,172,819,720 – Total dollar volume of homes sold, 2.9% less than 2023
Williamson County
10,360 – Residential homes sold, 2.0% less than 2023
$429,000 – Median price for residential homes, 1.4% less than 2023
14,110 – New home listings on the market, 9.2% more than 2023
38,015 – Active home listings on the market, 9.9% more than 2023
10,545 – Pending sales, 0.8% more than 2023
$5,031,902,867 – Total dollar volume of homes sold, 3.4% less than 2023
Hays County
4,526 – Residential homes sold, 7.3% more than 2023
$380,000 – Median price for residential homes, 4.8% less than 2023
6,772 – New home listings on the market, 19.1% more than 2023
20,330 – Active home listings on the market, 14.4% more than 2023
4,622 – Pending sales, 10.8% more than 2023
$2,200,405,726 – Total dollar volume of homes sold, 6.3% more than 2023
Bastrop County
1,310 – Residential homes sold, 7.2% more than 2023
$360,000 – Median price for residential homes, 2.7% less than 2023
2,170 – New home listings on the market, 18.8% more than 2023
7,259 – Active home listings on the market, 19.1% more than 2023
1,323 – Pending sales, 7.9% more than 2023
$532,811,486 – Total dollar volume of homes sold, 5.5% more than 2023
Caldwell County
473 – Residential homes sold, 26.1% more than 2023
$294,990 – Median price for residential homes, 1.7% less than 2023
656 – New home listings on the market, 16.9% more than 2023
1,753 – Active home listings on the market, 17.7% more than 2023
486 – Pending sales, 31.4% more than 2023
$124,067,144 – Total dollar volume of homes sold, flat compared to 2023
This article originally appeared on Austin American-Statesman: Austin-area housing market trends are expected to mirror last year's