2021 Q3 Market Update

The Morshed Group Q3 Market Report 

Q3 2021 ended with the market finally experiencing price stabilization while values still moved up 3-4% and supply ended at 1.11 months.  20% over list to win a home in multiple offers finally subsided, the number of multiple offers banded down and terms loosened a touch for Buyers.  Buyers also saw a little more inventory across the market.  Not to be confused with a retraction, the frothiness is coming to an end yet we expect strong demand/appreciation and a low supply environment going forward.  The entry level and ultra high-end led the way in competitiveness and demand. 

• Tier-1 homes (priced right, no major flaws and wow factor) sold within days with multiple offers and average of 7-10% over list price and 5-7 offers compared to Q2 at 15-20% over list and 10-15 offers
• Tier-2 properties (mostly a Tier-1 but with one flaw such as needing cosmetic updates) averaged 2 weeks to 30 days on the market and 3-5% over list in multiple offers compared to 1 week on market and 10% over list in Q2

• Tier-3 (major issues or work) sat on the market 60-90 days and sold 5-10% below list price.

Currently:

End of Q3 and the first part of Q4 has seen robust activity so far during the shift to stabilization in our market.  While current supply is up by .5 mth supply compared to Q2, we’re still only at 4,100 homes on the market at 1.1 mths supply For context, a 6-month supply (enough inventory to meet the current rate of demand 6 months out) is an equilibrium market.  At a 6 month supply, the Austin market would have 18k homes available.   

The market currently is also not experiencing 15-20% price resets every few months in Q4 as we did in Q1 and first half of Q2.  This is a welcome reprieve to what was unsustainable growth. 

• $0-$500k We are at .5 months supply, about the same as Q1 and Q2  
• $500k-$1M We’re at a 2.5 month supply, also slightly up from Q2
• $1m-$2m We are seeing a 3.5 mth supply, also slightly up. 
• $2m+ – On a great looking product that is turn-key, it’s still red hot and running at 3 months. 

For Sellers, we are past the peak of maximizing premiums.  However, with inventory at 1.1 mths,  it’s still a very strong time to sell.  Don’t expect to receive 10-15 offers and price realistically.  You will sell quickly and still have a strong shot at multiple offers.  Additionally, finding your replacement home locally will likely start being solvable.  I strongly recommend selling now vs holding for more huge gains.

For Buyers, the intensity of terms favoring sellers, and being above list has started easing.  In the entry-level and high-end you will still experience tons of competition.  And Tier 2 properties are where you’ll find value.  You also won’t have to pay incredible premiums.  The market will maintain strong appreciation at this new normal, you should still buy now. 

Significant factors in the market:

The significant factors leading to the current market environment: 

• Nation Leading Job Growth  – Year to date Austin has seen Top 5 Job Growth in the country.  This is key to supply still only being at 1.1 mths in spite of the frothiness of the market coming to an end. 
• In-migration – While we will bump down closer to 60k people moving here this year, Austin is still #1 in population growth for metro populations over 1M.
• Supply Chain Issues – Improving but still tight.  Builder’s wait lists are shortening to 50-100 vs 200-300 due to being able to build a bit quicker.

Looking Ahead:

We see Q4 ending with 3% in appreciation and the year ending at 20% appreciation as a market-wide average.  Supply chain issues, while improving, likely won’t resolve until late 2022. In-migration numbers – while slightly lower – will still bring at least 55k people this year.  Finally we are on pace to add 35k jobs with 20k jobs having come from companies relocating already. All this points to ending at a still very low 2-3 month supply by the end of 2021.

Core sectors up to $6M will be extremely active in central and coveted areas such as Westlake. Within city limits (city limits but not suburbs) it’ll remain robustly active with high demand up to $2M. In the suburbs, up to $1M will remain healthy, yet premiums over list will level off to lower percentages than closer-in.  We also expect multiple offers to continue on Tier 1 properties, and premiums above list price will average 5-10% over list price. 

I hope this provided valuable insight as our goal is to provide irreplaceable value, always! For more regular updates between each quarter, sign up on our email list via our website and follow us on our Facebook, LinkedIn, and Instagram pages. As always, we’re happy to discuss what’s happening in your sector of town so don’t hesitate to reach out.