The typical Austin home costs six figures less than it did during the pandemic homebuying frenzy, but 6%-plus mortgage rates mean housing remains unaffordable for many locals.
Austin’s median home sale price has dropped $135,000 from the apex it reached during the pandemic homebuying frenzy–but that doesn’t mean homes are affordable.
The median-priced home in the Austin metro sold for $535,000 in December, down 4% from a year earlier and down 20% from the June peak of $670,000. But the $138,000 annual income needed to afford that typical home is up 27% from a year earlier and down just 12% from its June peak. That’s much higher than Austin’s median household income of $86,530 as of 2021, the most recent year for which data is available.
People need more money to buy homes in Austin because despite prices dropping significantly from their peak, mortgage rates remain elevated. Mortgage rates more than doubled throughout 2022 to over 7%; though they have since declined to about 6.1%, they’re still much higher than the 3% rates common in late 2021.
Austin’s home prices started soaring in 2021 as people swarmed in from expensive coastal metros, often taking advantage of pandemic-driven remote-work policies. The Texas capital was the most popular U.S. destination for homebuyers looking to move out of their home metro in early 2021. Remote workers moving into Austin were attracted to its relative affordability, with much lower home prices than places like San Francisco and New York.
But the influx of out-of-town homebuyers with higher budgets also led to a historically competitive housing market and priced out many local residents. Migration into Austin and its overall housing market has since slowed significantly due to high prices, elevated rates and the frenzy of remote-work-driven relocation coming down from its highs.
Homebuyer demand is picking up again as mortgage rates and home prices come down from their peaks, but competition for homes in Austin is still far less common than it was during the pandemic homebuying boom.
“The upside is that local first-time homebuyers finally have an opportunity; they’re no longer facing fierce competition from out-of-towners and investors,” Austin Redfin agent Maggie Ruiz said. “The downside is that 6% mortgage rates are still making homes unaffordable for many people. I’m advising buyers to negotiate with sellers on price and terms, consider buying down their mortgage rate and get into the market now if possible. As soon as rates drop, competition will be back.”
“I’m not seeing many local move-up buyers. Most Austin locals who already own their home are staying put because they don’t want to take on a higher mortgage rate,” she continued. “Some are capitalizing on higher home values, selling and relocating out of Texas to somewhere that’s still more affordable.”
