Mapping Out Austin’s Real Estate for 2025
At the end of December, I promised a post outlining my 2025 real estate thoughts for Austin/Georgetown/Round Rock. Truth be told, I’ve bounced all over the place like a kangaroo suffering vertigo. Why?
First, 2024 proved to be the toughest year for buyers and sellers in 30 years. Between the push and pull of higher mortgage rates and lower housing inventory, the sideline became the address of choice for many. The outcome? Home sales fell to 4.06 million, the lowest since 1995.
Second, sellers who locked in their mortgage rates near historical lows have no appetite for moving. “Why give up our 3.25% interest rate for a 6.75% rate? It makes more sense to remodel than to move.”
Third, home builders have ramped up construction to fill the inventory void only to find reluctant buyers. The culprit? Affordability. The result? The number of new homes on the market reached the highest number in December since 2009. In response, builders are adding discounts and multiplying perks such as rate buydowns and closing cost assistance.
Fourth, the way forward seems fraught with what-ifs.
What ifs and what is
What if? A year ago, many real estate forecasters predicted mortgage rates to fall back into the 5.5% to 5.75% range. The premise? “As soon as the Federal Reserve starts to lower short-term interest rates, mortgage rates will follow.” The FED cut rates three times in 2024 but by year’s end, mortgage rates failed to fall into the much hoped-for sub-6% range.
What is? With mortgage rates range-bound, buyers have incrementally adjusted their expectations. Now into the third year of a 6% to 7% rate spread, with each passing month, buyers are acclimating to the new realities.
For example, home sales in December were up 9.3% from the same month a year ago, the strongest annual gain in nearly four years. The report found that 16% of homes were sold above the listing price, which is down slightly from 18% a month ago. Homes received an average of 2.1 offers.
Listed homes remained on the market for 35 days on average, up from 32 days in the previous month. All cash buyers made up 28% of sales. The share of individual investors or second-home buyers was 16%. Meanwhile, 31% of homes were sold to first-time home buyers.
And locally? I’ve noticed a measurable shift in buyer interest. Two of my sellers observed an increase in showing times and this last week, another of my sellers received five offers on her new listing in West Round Rock. I negotiated a final offer of $35,000 above listing price. Simultaneously, for a buyer of mine, I discovered a rare opportunity from a Georgetown builder offering numerous incentives.
And moving forward?
I’m seeing a shift in consumer sentiment regarding real estate. While sentiment may seem more subjective than objective, it is actually quite measurable. For example, each month The Michigan Consumer Index (MSCI) surveys the consumer confidence levels in the United States conducted by the University of Michigan. The report gauges how individuals feel about their finances and the economy as a whole. When consumer sentiment is higher, people tend to be more optimistic. And it is this air of optimism that I am seeing and hearing from my clients. Maybe spring will arrive early this year in Texas. And with it perhaps a thaw in home sales.
In the meantime, builder incentives are real and substantial. Contact me. Let me introduce you to the sales representatives who will move aggressively on your behalf.