September 19, 2021

MP Now News

Mortgage News

When Will the Red-Hot Austin Housing Market Cool Off?

Though we can’t say for sure if As the glowing housing market in Austin cools down, we can outline factors that will lead to less intense competition for housing and a stabilization in home prices.

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Increase in inventory

We’re going to get that out of the way first because honestly, it’s unlikely to happen anytime soon. One of the reasons Austin real estate is appreciating so quickly is because of an extreme Shortage in the inventory.

Active listings are down 71% year over year, according to the Austin Board of Realtors. With so few homes to choose from, buyers step in Offer wars to be the one who lands the contract.

While it is easy to believe that Austin homeowners would sell their properties for a high price, attracting current Austinites to the market may not make enough sense. Because if they don’t plan to leave the city, they would have to find another high-priced property to buy or rent.

Builders – who have faced myriad problems including supply and labor shortages – are unable to build the number of new units it would take to solve the inventory problem.

While it is impossible to predict when any of these situations will change, prices will likely drop when an influx of new inventory becomes available.

More time in the market

Homes are robbed in days, sometimes hours. If you notice homes staying in the market for weeks, it can be a good sign. This means that home buyers have options that can signal a micro-softening of the inventory problem – even if it only occurs in certain neighborhoods.

Rate hike

Due to the pandemic, the Federal Reserve lowered its Base rate close to zero. The base rate is not the rate you pay on a loan, but the rate at which banks borrow money from each other. This, in turn, is the basis on which they determine the price that they will charge you as a customer.

Let’s say yours Mortgage lender borrows money from another financial institution at 1.5%. Of course, they have to charge you more than 1.5% interest to make a profit. However, if they borrow at 1.5%, the interest rate you are paying is likely still low.

When the Federal Reserve increases its base rate and banks are forced to lend each other more money, that increase is passed on to customers. And when interest rates rise, the number of people jumping into the housing market tends to decrease.

Big, unexpected event

Suppose war breaks out, another pandemic strikes, or a series of hurricanes decimates much of the country. Such an event is likely to have a dramatic impact on the housing market. With consumers worrying about the immediate future, they are less likely to take out a mortgage or make significant changes in their lives.

While no one is hoping for a big, dramatic event, the arrival (or rumor) of one can start a sudden downturn in the property market.

If you’re waiting for your opportunity to get into the Austin market but aren’t sure if the time is right, you know you are not alone. Whether it is or not good time to buy a home is one of the most important financial decisions you are likely to make and requires careful thought and planning. When you make up your mind, the best thing you can do is make sure your credit score is strong save money, and take the time to find out how much you can spend without breaking your budget.