Downtown Austin Real Estate Market Prices, Trends, and Forecast 2023

Downtown Austin Real Estate Market Prices, Trends, and Forecast 2023

  • Lyon Gegenheimer
  • 10/3/23

In May of this year, Austin officially became the country's 10th-largest city. Passing both San Jose, California, and Jacksonville, Florida, Austin joins fellow Lone Star State cities Houston, San Antonio, and Dallas in the top 10. And while some years have been slower than others, Austin has seen consistent, uninterrupted growth regardless of market conditions for the past two-plus decades. Let’s explore what the current market looks like!

A booming city center

Over that same time frame, the broader metro area joined the city in welcoming new residents to Central Texas. Austin and several area suburbs stood atop countless lists of the fastest-growing areas in the country. But few places in the region were transformed by the rapid growth as much as Austin's downtown neighborhood.

Austin’s boom has been fueled by a near-constant demand and build-up for housing, primarily in the form of condos. Never fully satisfying the need for new units in the downtown core, any lulls in the market over the past several years were buoyed by inventory lagging behind the volume of buyers seeking a home or investment in the heart of the city.

While Austin’s real estate market has been great for developers and resellers, it has been a tough few years for buyers. But in the face of rising mortgage rates, lingering inflation concerns, and an overall Austin-area market that's shown signs of cooling, there may be no better time to invest in downtown Austin real estate.

Return to a balanced market

Before making that leap, buyers have many concerns to wade through. Based on the most data from January 2023, the market is in unfamiliar territory compared to the prior three years. Even looking beyond the pandemic-era seller's market, a profound change is underway that is slowing the downtown core's recent growth. To get a better understanding of the current market, let’s look at some fast facts.

During normal times, the sluggish performance would be cause for concern. However, unlike previous shifts in the marketplace, the current conditions had been predicted toward the end of last year and into early 2023. While it's not altogether welcome news, the fact that homes continue to trade hands does suggest a market correction and not the abrupt end to a 20-year winning streak.

The shift is a welcome relief for condo buyers, a group swimming upstream for the entirety of this decade and patiently waiting to break into the market — if they can navigate a few other market conditions that threaten to maintain the status quo a bit longer.

Mortgage rates and inventory remain concerns

At the end of July 2023, the Federal Reserve increased interest rates for the 4th time this year and the 9th time in the prior 12 months. Unsurprisingly, the ongoing rate hikes continue to add barriers to home buying and are proving frustrating for buyers on two fronts.

First, as the market continues to cool, buyers are proving more methodical in buying a home than in the past. With sellers forced to lower their asking price to attract tepid buyers, the market has tipped toward a more balanced standing. But those price advantages are negated with each subsequent rate hike.

Consider that for the second week of August 2023, the national weekly average for a 30-year fixed-rate loan is 6.96%. A 15-year fixed-rate loan is just as robust at 6.34%. For the first time in nearly two decades, the 30-year fixed rate is nearing a 52-week average above 6.5%.

The second dilemma homebuyers face, even with market prices turning in their favor, is a drying up of inventory towards the year's end. The primary culprit is sellers unwilling to part ways with the aforementioned pandemic-era mortgage rates. However, the real estate market often fluctuates, and it’s impossible to accurately predict what the future will look like.

Looking ahead to 2024

We're late in the year to expect any significant changes that would drastically upset the marketplace. Stranger things have occurred, but look for downtown to maintain its steady but sluggish pace between now and the end of December. If values drop, it won't be by much, highly motivated sellers notwithstanding.

For 2024, how the market functions will come down to the sellers and the Fed. If rates remain steady or inch even higher, a larger portion of downtown owners will continue to observe the market while withholding a potential listing from the market. The unintended consequence is a stagnant market where sellers continue to hold an advantage even as they choose not to take advantage of it.

That said, there are still plenty of bright spots for downtown heading into the new year. The job market remains solid, and people continue to relocate to the city and downtown. After all, everything that makes downtown a popular relocation destination remains. And buyers are in a far better position to negotiate with sellers than at any point over the previous five years.

Don't be surprised to see downtown's newly minted balanced market status shift in favor of buyers within the next six months.

Ready to get started?

From Downtown Austin condos for sale to luxury homes in East Austin, allow Lyon Gegenheimer's knowledge and expertise to support you as you navigate Austin's luxury real estate market. Ready to learn more about buying or selling a home in downtown Austin? Contact Lyon Gegenheimer today to start your buying or selling journey.

*Header photo courtesy of Unsplash

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Lyon is the lead broker of the Lyon Real Estate Group at Compass based in Austin, Texas. Lyon Real Estate Group’s goals are to provide the highest level of real estate services available. Honesty, Experience, and Integrity are principles and qualities the brokers and agents demonstrate daily with enthusiasm and solid market knowledge.

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