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Zonda named Austin, Texas, one of the 10 most interesting markets to watch in 2023 due to strong fundamentals, but lingering questions remain about how successful the year will be.

Austin was center stage nationally as the housing market rocketed in 2020 and 2021 and remained there as one of the markets that declined the most sharply in 2022. While employment growth remains strong, negative sentiment and affordability concerns have weighed heavily on the new-home market since spring 2022.

The tech outlook is murky over the short term, but the growing presence of companies such as Tesla, Apple, Samsung, Oracle, and Facebook is a long-term tailwind.

Strengths

The market slowed fast, and builders were willing and able to cut prices quickly, allowing for quicker price discovery than other markets. The market has incredible high-income job growth as well as offers an attractive culture, lifestyle, and relative affordability for migration buyers.

Weaknesses

The market got overheated with speculative buying and building, with uncertainty regarding where the market goes from here. Other challenges include traffic buildup with limited public transportation, significant multifamily development, and mortgage payments much higher than pre-pandemic levels.

Supply

In the Austin-Round Rock-Georgetown region, total residential building permit activity increased 25.6% year over year to an annualized rate of 45,030 units in April. In the 12-month period ending April, single-family building permit issuance increased 25.1% to 23,666 units, while multifamily permit issuance increased 26.2% to 21,364 units.

Sales

New-home sales in the area decreased 28.7% year over year to an annualized rate of 14,657 units in March. Over the past 12 months, 968 of sales were attached units, and 13,689 were detached. Existing-home closings for the 12-month period ending in March posted a year-over-year decline of 40.1% to an annualized rate of 35,783 units.

Prices

The median closing price for a new detached home in the metro area increased 2.4% from 2022 to $464,742 in March, while the median closing price for a new attached home decreased 17% over the same period to $308,706. Homes priced over $550,000 experienced the most closing activity over the past year. The new-home affordability ratio for a detached home reached 32.9% in March.

Economy

Total non-farm employment in the metropolitan statistical area increased 4.7% from the same period last year to 1,301,300 payrolls in February. The local unemployment rate decreased to 3.3% in February compared with 2.9% in the previous month. Zonda forecasts the region’s unemployment rate will finish the year at 3.1%.

Community

The population for the metro area is approximately 2,427,320 people and is projected to increase by 2.1% in 2023. Approximately 941,130 households are in the region, which is up 2% year over year. Incomes increased by 9.7% from the previous year to $100,254.