"Austin's Real Estate Crash"? SFRs & Comm. Hit New Lows
As Austin real estate experiences lower sales prices in 2023, rumors of a "crash" are looming. Let's see what experts and data say about the near future.
Rumors of an impending real estate crash are making their way around Austin. SFRs (single-family residences) and commercial properties are both showing big potential for real estate investors in Austin. Home sales and home prices have declined since 2022, but 2023’s declines are setting records.
Popular real estate commentators are creating quite the buzz about an impending crash in Austin:
“Texas Housing Market JUST Collapsed” -John Williams (video)
“Why Home Prices Haven’t Crashed… YET” - Graham Stephan (video)
“Austin Housing Market Crash Rings Real Estate Alarm Bells” - Newsweek (article)
Austin and Travis County are still seeing overall job growth, and the demand for housing remains high. Commercial real estate might seem to be having a harder time, but there is also cause for optimism there. Even if the market falls from the heights it reached from 2020 to 2022, real estate investing in Austin will still present many excellent opportunities.
What’s happening with Austin residential real estate?
Image by Achim Thiemermann from Pixabay
The volume of residential real estate sales is declining in Austin. So are sales prices. Realtor.com painted a fairly grim picture in its 2023 forecast late last year. Many of those projections have come true, but not all of them. According to the Zillow Home Value Index, home prices in Austin dropped by over 10% from July 2022 to April 2023, one of the biggest changes in the country.
It’s tempting to look at this as a “crash,” but some experts believe it is more of a market correction. Dr. Clare Losey, the new housing economist for the Austin Board of Realtors (ABoR), made optimistic comments about the local economy in a discussion with Norada Real Estate Investments. She reportedly described the real estate market conditions of the past two years as an “extreme anomaly.” The COVID-19 pandemic and other unusual factors caused a spike in demand, followed by a massive increase in home prices.
The city continues to grow despite the conditions in the real estate market. Dr. Losey states that residential real estate added more than $1.5 billion to the local economy in April 2023 alone. Listings are on the rise, which she says indicates “seller confidence.” As for the job market, news of recent layoffs reportedly hasn’t affected the demand for housing.
The city is placing more emphasis on affordable housing, which could be good news for real estate investors interested in new construction. In late 2022, voters passed Proposition A by about 71% to 29%. This proposition provides $350 million in bond money for affordable housing.
Austin’s commercial real estate falls even further
Photo by Tomek Baginski on Unsplash
The term “commercial real estate” is a much bigger tent than residential real estate. It includes office space, retail locations, industrial properties, warehouses, and business properties like hotels and restaurants. When people talk about a decline in “commercial real estate,” they are usually referring specifically to office space.
The conventional wisdom is that office space is on the decline because people want to continue working from home. Austin is reportedly experiencing a higher rate of office vacancies than at any point since the Great Recession in 2008. Vacancies increased by almost 30% during 2023’s first quarter, resulting in a total vacancy of 19%. There were no new leases during that time for office spaces with more than 30,000 feet.
Another way to look at this issue is to see vast amounts of available space. Many major cities are looking at ways to repurpose vacant office space to make better use of it. Office-to-residential conversions are becoming popular, although they have yet to catch on in Austin. This may be an opportunity for investors to get ahead of the curve.
What does this mean for Austin real estate investors?
Suppose we have a real estate crash in Austin, and prices continue to come down. This means there will be more opportunities to buy low in Austin. Texas and Austin remain highly attractive places for both residential and commercial real estate investments. Texas has no state income tax. Austin and other major Texas cities attract people from all over the world, leading to innovations in business and technology. Even if home prices come down, homes in many other major cities around the country are still much more overpriced. Austin real estate investors have what it takes to survive a crash.
Jump on competitive deals with a hard money loan
When prices fall, investors buy.
Hard money loans enable Austin real estate investors to put less money down and close significantly faster than with a traditional loan from a bank. If Austin real estate sees sharp declines, investors may quickly jump on amazing new opportunities. You need a fast lender in your back pocket to compete and win on the best deals.
Capstone Capital Partners funds a variety of real estate projects in the Austin area. We’ve personally invested and lent through the highs and lows in decades past. contact us today to get started on a free pre-approval.
