What a difference a year makes in the Austin and Hill Country housing market. In January 2021, a conforming 30-year mortgage was running just under 3% and inflation was at approximately 1.5%. Today, mortgage rates are over 5% and inflation is running at 8.5%+/-. I bring this up because it is being reflected in our Austin and Dripping Springs, TX housing market. It seems everyone I talk to is asking "when will we see the correction?" Sorry to tell you but in my humble opinion, we won't.
Austin is the darling of the country at the moment. Basically, every major tech company is either expanding within or moving to the area. This translates to more jobs and in turn, people moving here to take those jobs. Austin is grossly behind in housing availability and will be so for the foreseeable future.
What I do think and what we are beginning to see is a leveling off of the market. Austin is all over the news with its lack of affordability in the housing sector. The current 40-year high inflation and a reversion to the prior norm in interest rates are further eroding this affordability. Yes, I said a normalization of mortgage rates. Sub 3% mortgage rates are not normal. The historical average is more like 7.5%. So in context, rates are still low. That said, buying a home today and everyday living expenses take about 25% more of your income than just a year ago.
So what's the moral of the story? These increased costs will slow the rate of appreciation but I do not see us reducing pricing or shifting to a buyer's market in Austin and Dripping Springs, TX.
What I am seeing is Austin will continue to enjoy double-digit appreciation for at least the next 2 years and inflation is not going away anytime soon. So for those of you sitting on the fence waiting for a correction to jump into the market, get comfortable because it looks like you'll be there for a while.
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