Will the Austin, Texas housing market crash in 2020? Or will it continue to rise, as it has over the past few years? These are common questions among those planning to buy a home in and around the Texas capital. Here’s what you need to know as we move into the fall of 2019.
A Housing Crash in Austin Is Highly Unlikely
Given the current housing and economic situation in Austin, a real estate crash seems highly unlikely at this point. In fact, it would take a major economic calamity (like a recession) to cause a significant downturn in this housing market.
With that being said, home prices in the Austin area do appear to be rising more slowly, as of September 2019. And at least one forecast has predicted smaller gains for 2020, compared to what we saw over the past few years. But that’s not necessarily a bad thing.
Home Prices Are Rising More Slowly
As of September 2019, the median home price for Austin, Texas was around $372,000. According to the real estate information company Zillow, the median value rose 6% over the past 12 months.
Looking forward, the company’s research team predicts that home values in Austin will rise by around 3% over the next year. This forecast was issued in September 2019 and extends into late summer of 2020.
We do not expect to see a housing market crash in Austin anytime soon. And based on the forecast above, the real estate analysts at Zillow would seem to agree. But they do anticipate a slowdown in annual home-price appreciation, through the end of 2019 and into 2020.
At this stage, slower price growth might actually be a good thing for the Austin housing market. Home prices nationwide have risen much faster than wages over the past decade. That kind of trend can create housing affordability problems for local residents.
So, from a broader economic standpoint, Austin could actually benefit from slower and more sustainable price growth. It could actually “shield” the city from a home-price crash down the road.
Significant Population Growth Boosting Home Values
The Austin real estate market is also getting a boost from new residents moving into the area. The city has experienced greater population growth than most other cities across the country. This is another factor that could help prevent a real estate market crash in the Austin area.
According to the U.S. Census Bureau, the city’s population grew by more than 20% from 2010 to 2018. That was more than triple the national growth rate for that same period of time.
Population growth tends to increase demand for housing, on both the rental and purchase side. It also puts upward pressure on home prices, which could help prevent a future real estate market downturn or crash.
Real Estate Inventory Remains Tight
Housing supply remains tight across the Austin metro area. There just aren’t enough homes listed for sale to meet the demand from buyers and investors. This supply-and-demand imbalance puts additional upward pressure on home prices.
According to the national real estate brokerage Redfin, Austin had about a 2.2-month supply of homes for sale as of July 2019. (Note the decimal there.) That is well below the 5- to 6-month supply level that’s considered to be a balanced market. This means local real estate conditions tend to favor sellers over buyers.
Granted, Austin is not a strong seller’s market like it was a few years ago. And it does appear to be shifting to favor buyers more so than in the past. But tight inventory conditions, combined with strong demand, tends to give sellers more negotiating leverage.
This lopsided supply-and-demand situation has led to quick home sales in the area. As of August 2019, properties listed for sale in Austin spent a median of 18 days on the market before going under contract. During that same month, the median number of “days on market” for the nation as a whole was 38. So we are talking about an active real estate scene with strong demand from buyers.
And that’s not the kind of housing market that experiences a crash.
Austin’s Strong Economy Could Help Prevent a Crash
Central Texas as a whole – and the Austin area in particular – has long benefited from having a strong economy and job market. The unemployment rate for Austin, Texas has hovered below 3% for most of 2019. That’s lower than the nation’s unemployment rate for the same period.
A strong local economy can help prevent a housing market crash in several ways:
- It gives local residents the confidence and financial means needed to purchase a home.
- It helps homeowners keep up with their mortgage payments and avoid foreclosure.
- It helps to attract new residents from elsewhere in the country, thus boosting demand for housing.
The city’s business-friendly tax structure contributes to its strong local economy. Many companies set up shop in Austin in order to take advantage of incentives they can’t find elsewhere. As a result, the Texas capital is often ranked as being one of the best cities to start a business.
5 Key Takeaways from This Report
We’ve covered a lot of information in this article. Here’s a quick recap of the key points.
- At this point, it appears unlikely that the Austin housing market will experience a “crash” anytime in the near future.
- But home prices will likely rise more slowly in 2020 than they did during this year and last.
- A slowdown in price growth could actually help prevent a real estate market crash in Austin, by reducing affordability problems and preventing a housing bubble from developing.
- Strong population growth is putting upward pressure on home prices in the area, and that will likely continue for the foreseeable future.
- Housing inventory, meanwhile, remains tight across the Austin area. This increases competition among buyers and puts even more upward pressure on prices.
Disclaimer: This article contains forecasts, outlooks and other forward-looking statements relating to the real estate market in Austin, Texas. Such statements are the equivalent of an educated guess and should be treated as such. The publishers of this website make no assertions about future housing conditions.