Gray Clouds: Spring Showers or The Sky Is Falling?
Rain. Gray clouds hovered over Central Texas this last week and delivered delicious, much needed rain. I’m constantly surprised how fast the landscape turns green when water falls from heaven.
I wish I could say the same about Austin’s spring real estate market. We have pocket properties selling here and there but no broad-based consistency. Yet. Why is that?
In part because we are hearing many mixed messages. Some look at the sky and expect spring showers. Others look at the same clouds and see the sky is falling. Who is right? We won’t know until the storm passes, right? However, no one knows how long the storm clouds will persist.
Meanwhile, allow me to summarize the contrast. Ready? First, we’ll examine the sky is falling forecasters, then we will consider the spring showers prognosticators.
The Sky is Falling Forecast
The housing market recession will spread to other sectors via what is commonly called, “A Growth Recession.” Buyers and sellers may not agree on price but they both agree – it has been rugged to buy/sell a house in the last ten months. The results are what the Federal Reserve wanted when they started raising interest rates in early 2022. And now what does the Fed hope to accomplish? A “Growth Recession.”
What is it? It occurs when an economy enters a prolonged period of low growth – say 0.5% to 1.5% accompanied by an uptick in unemployment and lower consumer spending. Why? To gradually reign in runaway inflation.
Why could the sky be falling with such a forecast? For this reason: the Federal Reserve has a history of overshooting its mark. Skeptics point to the recent failure of Silicon Valley Bank and Signature Bank. Not only was this an unintended consequence of recent Fed policy but quiet repercussions continued. Many regional bank depositors transferred their savings to larger national banks. The result? Small bank deposits are below the 2008 crisis lows.
Spring Showers Forecast
Existing home sales rose 14.5% in February compared to January.
In January, U.S. home prices saw their seventh-straight monthly decline according to S&P CoreLogic-Case-Shiller U.S. National Home Price index.
Price growth in the Pacific time zone and Austin, Texas will continue to soften but will, in turn, attract buyers once prices have reset.
This week saw 30-year interest rates fall below 6% for buyers able to place 20% down, the lowest rate in six months.
And, according to Fortune, the housing correction may be abating. Why? “At the height of the housing correction, 79% of the nation’s 200 largest housing markets saw a month-over-month home price decline in September of 2022. In March, the typical U.S. home value actually climbed 0,9% from February.
Wall Street anticipates a housing rebound by pushing builders like D.R. Horton and Lennar back to their all-time highs.
On April 2, SmartAsset reported the results of a study from the Federal Housing Administration. They compared data for 400 metropolitan areas between 1998 and 2022 and determined “The Austin-Round Rock-Georgetown metro area ranks No.1 overall for cities ranked as being the best housing market for growth and stability.”
Conclusion
On Friday, the Austin Business Journal updated the list for the “fastest-growing neighborhoods” in the Austin Metro area.
Sonterra neighborhood in Jarrell
Santa Rita Ranch in Liberty Hill
The Colony in Bastrop
MorningStar in Georgetown
Bar W Ranch in Leander
The latest numbers from the Austin Board of Realtors indicate the region’s housing inventory still stands at about two-and-a-half months, which is still far off from the “six months of stock housing experts like to see.” Additionally, “Homes are taking much longer to sell than in previous months. Those sold in February – the last month to have numbers crunched – spent an average of 84 days on the market, the longest in 11 years.” And finally, “Median home prices dropped by 12% year-over-year to metro average of $436,419 in February.”
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