Austin Real Estate Market Update Q3 2018

September 24, 2018 – 5 Minute Read


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Hello everybody,

So where are we in the market in the 3rd quarter of 2018? Pretty much tracking along as I’ve expected and shared with many of you recently but with a few new wrinkles I just learned of this past week.



Averaged across all price bands/sectors, market supply is at 3 months which is considered a low inventory/ high appreciating environment. However we’re only seeing appreciation in one main price band and even then at about a 5% annual rate vs 7-10% we would expect at 3 months supply. For context a 6 month supply (enough inventory to meet current rate of demand averaged over last 12 mths) is an equilibrium market. In that environment you’d normally see 4-6% appreciation annually in prices.

Why isn’t appreciation higher given supply overall is 3 months?

  • $0-$500k we are 2 months or less, severely undersupplied. and are on track for 5-6% appreciation,
  • $500k-$1M we’re at about 5 months supply. More of a balanced market and 3% or so appreciation. flat on appreciation or maybe 1-2 appreciation
  • $1m-$3m we’re at 10 months supply, oversupplied and seeing 3-5% depreciation
  • above $3m new construction is undersupplied but resale (especially if older than 5 years) is above 10 months and seeing 3-5% deprecitation.

So there is actually flat or declining progress between $500k-$3M but below or above is undersupplied. For context: 15% of sales in Austin MSA in last 12 months were above $500k, 2.7% above $1m and over 80% of sales were below $500k.

The reasons for whats happening in my opinion:

All this is playing out in the chart per below :

Looking Ahead:

I expect this to continue to be the environment through mid-year next year when I think the market will shift from what I consider to be a soft down-cycle last year and this year as:

  • Employment growth locally expected to tick up stronger after 2nd q 2019
  • Prices in $500k-$1m and $1m-$3m will have softened enough to see a more balanced and sustainable delta between appreciation and household income growth
  • Due to tariff laws what was starting to be leveling off in construction costs will cause another hike in build costs and force housing prices up.

Hope this was helpful and as always call us and we’ll be happy to discuss whats going on in your particular sector!