This video is going to cover the reasons behind the red-hot real estate market the country experienced the past few years, what happened to it, and where we might be heading.
The most common question I get from clients is what I think is happening with the housing market. As we all know, the last couple of years has been a whirlwind characterized by a lack of housing inventory, sky-high prices, bidding wars, historically-low mortgage rates, and record-high consumer desire to purchase. The economy was running on all cylinders. As a business owner and investor, it was exhilarating, yet not sustainable, and everyone knew it.
In an attempt to push the brakes to cool the overheated economy and ultimately curb the demand, the Federal Reserve decided to raise the federal funds rate. To put it plainly, the Fed’s main goal is to get us out of the mood of buying and spending money.
In the real estate world, we all felt things started to shift drastically beginning in June of 2022. That’s when multiple offers disappeared, the days on the market became longer, the inventory of available homes in the Austin area tripled, and, most importantly, affordability became an issue. The experts calculated that the increase in mortgage rates in 2022 had the same impact on affordability as a 35% increase in the price of the property.
With homebuyers facing pressure from high prices and mortgage rates, something had to give, and based on the Fed’s messaging, it was not going to be mortgage rates. The logical conclusion that real estate prices have to drop should not come as a big surprise. Rising rates make homes more expensive for buyers, reducing the demand for home purchases. Reduced demand also affects sellers as they need to reduce the prices of their homes to attract buyers. Now we need to figure out where the housing market will find its new equilibrium—the balance between supply and demand.
Since we cover the entire greater Austin area, different parts of our city and suburbs have behaved differently. There are neighborhoods where real estate prices have come down as much as 15%, other areas are showing only a 3% to 4% decline while some areas the prices have not been impacted. If you have a question about your specific property, please contact us, and we are glad to share our thoughts with you.
