HAPPY NEW YEAR!
Last week I had an opportunity to meet with a group of a dozen commercial brokers who have been active in the Austin market for decades – some for just a few years and others for over 40 years! It was worth it just to sit and listen and learn as we navigate another downturn in the real estate market. Being in the business 10 years now myself, I still felt like a kid at the table. There were several commercial bankers present as well and we were able to ask lots of questions about the financial market, the Fed, and what the outlook for the first quarter moving into 2023 seems to hold.
A major indicator demonstrating the downward turn after the hot market of the last several years is seen in the number of homes being listed compared to the number of listings expiring or being withdrawn. In the last 30 days in the Austin MSA there have been 1,088 new residential property listings for sale and during the same period 1,111 withdrawn or expired. So new properties are coming on the market about as fast as they are coming off. Things are still selling. It is taking more time than a few months ago.
One of the factors of course has been the rise in interest rates. The quick back-to-back rate hikes affects buying power and the banks ability to approve and close loans before another change kicks things back to underwriting. Multiple deals have been delayed or fallen through completely due to the financial instability in the efforts to slow inflation.
Coupled with the fact that as things really heated up in 2022, we are not seeing prices drop as quickly as they rose. The market conditions have given none of the indicators that we were in a bubble, but instead proved that the real estate market in Texas has been undervalued for decades. However, with the slowing we have seen in the last few months, prices should be dropping., but sellers still want more! As a result, demand has slowed and current market prices are proving to be too high for the time being, so properties are being taken off the market or seeing pricing decreases.
The good news is that there are still hundreds of people moving to the area per month. Net migration to our area from 2020-2022 has been just short of 300,000 people. Medium to large business are moving here almost as fast, and that is supporting the real estate market on the commercial side. It is true that several local municipalities are fighting problems with infrastructure and a lack of foresight or preparedness for utility demands like power and water. That, and a more restrictive permitting process in Austin proper, is continuing to cause delays for many construction projects.
If we look at just the Samsung project in Williamson County, within the next 12 to 18 months they are planning to bring 1,500+ new employees and their families to the area. They have also announced that they want any vendors that will be working to support the chip making production be located within a 50 mile radius of their new plants. Again, that is only one company. There are others that while they may not be as large, they are going to continue to add people and property to the area. Businesses need vendors, and employees need housing.
With the Fed meeting again February 1 (and again in March and May), there is an expectation that rates will continue to be raised, at least 1/4 point each time, through the middle of the year. If things slow enough, we should expect to see rates start to drop slightly in the second half of 2023. Given the time frame for construction, the demand for space, and the expectations for rates the end of the year and going into 2024 should provide a busy time for business and residential real estate.
So, yes, things have slowed down. But it is true that we are in a much better position than most of the rest of the United States being here in central Texas. So GOD BLESS TEXAS! We haven’t hit bottom, but we can already see the rebound in the making.
The question is then, is now a good time to buy or sell? The answer is YES! Definitely! If you are worried about interest rates, remember that you can always refinance as things turn around. Prices will likely remain fairly steady, and real estate is not usually a quick turn around type of investment. That’s why it has been the most stable investment in the US for over 60 years. If you’d like to learn more drop us a line!
If you are buying, selling, leasing, or investing in real estate in Texas, we can show you the Way!
Phillip M Way, Broker/Owner
WAY REALTY GROUP
Commercial, Land, & Luxury Realtors
Serving All Texans, Native or New
