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While prices continue to rise, Austin's home sales have slowed. Is the market cooling?

Shonda Novak
Austin American-Statesman
Construction crews work on a new home in the Whisper Valley neighborhood.  Although the number of home sales were down in the Austin metro area in July, the median price of the homes sold continued to climb last month.

In a sign the Central Texas housing market could be cooling, home sales across the region and within the city of Austin declined last month — the first time that's happened since May 2020. 

However, the prices of the homes that did sell kept climbing, hitting record levels for July, according to the Austin Board of Realtors, which on Thursday released its latest monthly home sales report for the five-county Austin region.

Austin-area real estate agents say that while the housing market remains hot  — and is expected to continue to remain so —  it has simmered down a bit. They point to an increase in the supply of housing, homes staying on the market a little longer and some houses receiving fewer multiple offers.

“As we have moved away from the post-COVID boom, the market has begun to stabilize," Susan Horton, the board's president, said in a written statement. "There are fewer instances of dozens of offers over list price even as home prices continue to rise, albeit at a slower rate month-to-month than the surge experienced in the first half of the year.”

Although the number of home sales were down in the Austin metro area in July, the median price of the homes sold continued to climb last month.

More:Austin homebuilding still on record pace, but market may be cooling slightly

In the Austin-Round Rock metro area, sales were down 9.9% compared with July 2020, the board said. Just over 4,000 sales were recorded, with half of those homes selling for more than $480,000 and half for less, for a 37.1% jump in the median sales price, which was a July record.

Within Austin's city limits, 1,304 homes changed hands, a 10.2% decline over sales in July 2020.

Half of those homes went for more than $574,975 and half for less, for a 37.6% rise in the median sales price, which was also a July record, the board said.

Vaike O’Grady, regional director of Zonda, which tracks the housing market, said that while the frenzy to buy a home in Austin has slowed from this time last year, it’s unlikely that home prices will go down any time soon.

More:COVID surge puts brakes on Austin's return-to-office plans

“Austin is always considered one of the top places to live in the U.S., but we’re losing ground due to shrinking housing inventory and affordability," O'Grady said. "With construction delays and regulatory barriers, builders and developers are having increasing difficulty getting new homes on the ground. Because of that, there’s not enough supply coming to the market to significantly impact available inventory, which further pushes prices up."

Rising prices causing buyer fatigue?

Austin-area housing market experts say a number of factors could be behind July's drop in sales. (Note: July's sales numbers are a lagging market indicator, reflecting homes that went under contract in roughly the previous 30 to 45 days).

The first is the "extraordinary increase" in average home prices, said Charles Heimsath, an Austin-based real estate consultant.

Although the number of home sales were down in the Austin metro area in July, the median price of the homes sold continued to climb last month.

More:Central Texas housing market remains on track for record-setting year

"As prices increase, fewer buyers are able to afford the elevated prices and they may be completely priced out of the market," said Heimsath, president of Capitol Market Research.

Another factor, Heimsath said, is the "pursuit fatigue" some potential buyers experience when they lose multiple bidding wars and decide to rent instead.

Another possible reason for the sales decline could be that there are fewer out-of-state buyers trying to move to Austin who are willing to make cash offers for homes that they have only seen online, Heimsath said.

"In the long term, the key to stabilizing price increases in the market is the construction of new homes, which has been a problem due to the shortage of lots and higher construction prices, which should begin to come down later this year," Heimsath said.

Several housing experts have said that, while home prices are projected to keep rising, the market could see the pace of both sales and price increases slow a bit in the second half of the year.

"The level of appreciation we've been seeing could taper off a little bit," Eldon Rude, a longtime Austin-area housing market consultant, said earlier this month. 

'Still a hot market'

While the Ausitn housing market might not quite as frenzied as it was earlier this year, it remains one of the hottest in the nation.  

This week, real estate website RealtyHop released a report looking at monthly price changes in homes across the country to identify the fastest growing, and fastest cooling, markets.

Austin ranked first among the top five cities where the median asking price of homes went up in July, rising 6.01% from the previous month to $529,000.

"Austin has experienced a meteoric rise in home prices over the past year, due to strong population growth supported by the tech sector (Tesla, Apple, Google), as well as pandemic related migration from larger cities," the report said. "In fact, it’s not uncommon for homes in Austin to see 30 offers, and bidding wars that drive up closing prices dramatically."

Of the 100 cities in the report, 70 saw price growth in July over the previous month, including 21 cities with an appreciation of 3% or more.

Brad Folk, an agent with Keller Williams Realty, said that while he thinks the market "has leveled off" a bit, it's still very much a sellers' market.

Although the number of home sales were down in the Austin metro area in July, the median price of the homes sold continued to climb last month.

"It's still very competitive for buyers to find good quality homes with no major issues in Austin," Folk said.

Buyers 'from coast to coast'

As Austin-area builders try to keep up with the region's explosive growth, Austin's suburbs continue to see rooftops rise.

In Manor east of Austin,  Ashton Woods Homes is opening the second phase of its Lagos community with 118 home sites. The homes range from three to five  bedrooms in one- and two-story options, with base prices ranging from the mid-$300,000s to low-$400,000s.

"Austin and the surrounding areas continue to be a very attractive place for those relocating due to business," said Lindsay Motley, Austin division president for Ashton Woods Homes. "We are particularly seeing buyers from California, but also spanning from coast to coast and we anticipate this to continue into 2022.

Geof Sloan, an agent with Black Label Real Estate Advisors, said he's seeing buyers move in from California, Indianapolis, Minnesota and the Chicago and Seattle areas. Some are coming with jobs, others without, he said.

"Some just want to move to Austin," Sloan said. "They like the vibe, they like the city, they like the amenities."

Sloan said jobs are "a big driver" fueling the Austin-area housing market, as well as low mortgage interest rates.

And although the market has slowed a bit  — he's seeing more open houses and more price reductions than earlier in the year — inventory remains in short supply and it's still "an extrememly strong sellers' market."

"It's kind of like going 85 (mph) down the toll road but you slowed down to 70," Sloan said. "You're still moving pretty quick."