So Many Sellers...So Few Buyers

The Austin metro area is currently experiencing a housing market correction, as evidenced by increased supply, decreased demand and overall lower absorption rates throughout our market. We track data for 30 cities (sub-markets) across the region and naturally the data is different for each.

However, while the correction is felt at different levels based on the sub-market, one pricing trend has emerged. The top 25 percentile is faring better than that of the lower 25 percentile. As the chart below indicates, there have been price gains within this tier in some markets while others are holding steady relative to YoY prices. Buyers in this group tend to be wealthier, often cash buyers, or at least not sensitive to interest rate fluctuations. In addition, the supply of luxury properties tends to be tighter than in the other price tiers.

It's the bottom 25 percentile where pricing pressure is increasing. More affordably priced homes are losing pricing power due to oversupply of inventory and fierce competition among sellers. The bottom 25 percentile is often one where first time, entry-level buyers are seeking to purchase property. Unfortunately, current prices (although softened), coupled with high interest rate levels, and increased home insurance costs, have forced many in this group out of the market. Thus sustaining elevated levels of inventory and increasing competition within this pricing tier.

The chart below illustrates the gap between the upper and lower pricing tiers, and reinforces the fact that we are in a bifurcated market. Buyers in the upper 25 percentile are better able to weather the correction and in some instances these sub markets are even gaining ground. Yet the bottom 25 percentile with the lower priced inventory is still softening and may have further to go.

Questions:

1. Will the market correction continue?
2. If so, for how much longer?
3. Will we see some evidence of a recovery?

The answers to these questions will depend upon a variety of factors...largely economic conditions both national and local. At this point it remains to be seen what will happen in the second half of the year.

​