Will the Austin Housing Bubble Burst?

Are Austin Home Prices Heading Up or Down?

We now have a phrase for the past couple of years: The Pandemic Housing Boom. People began working from home in droves. Interest rates were low. The construction supply chain had not yet been severely impacted. And now we have a housing bubble in Austin.

Families wanted to upsize to accommodate home offices and home schooling space, enhanced entertainment and at-home workout gyms. Folks wanted larger kitchens as dining-in became the new not-going-out, and trying one’s hand at making bread and growing vegetables gained interest. They suddenly needed a larger yard and a dog to go in it.

The Housing Bubble During Covid-19

The home front was transformed almost overnight into the super center of family life, couples life, solo life, like it’s never been in our lifetimes. And families especially wanted larger homes, newer homes, nicer homes. As long as salaries stayed stable in the household, expenses declined for not spending on travel, parking, wardrobe, babysitting, coffee-to-go and lunch boxes. Thus, home prices skyrocketed.

A housing bubble, such as the one we’re experiencing in Austin, characteristically cannot sustain inflated home values and buyer bidding wars. Also, with mortgage rates having risen over the past several months, home sales have experienced some decline in volume, but not enough, especially in our area, to throw cold water on sales or the home building industry. The new home markets are impacted by labor and materials – shortages in fixtures, for example, raise prices, while sufficient inventory of things like cement and steel lower prices. That all gets factored into the final asking price. And for the moment, it’s somewhat fluid.

As demand has slowed, prices also have weakened from properties being overvalued to a more normal range, more consistent with national averages. In Austin, the strong job market, coupled with a significant Millennial population seeking to establish a home nest, bodes well for home prices to stay steady or rise a tad.

Baby Boomers, Millennials & the Housing Bubble

The current aging population, the Baby Boomers, are effectively downsizing at the same time, selling large homes and beautiful properties. However, according to, their exit from homeownership is not going to influence either prices or inventory on a large scale. Interestingly, the Millennials are now the largest living generation, having surpassed the ubiquitous Baby Boomers.

According to a July 2022 report by the Austin Board of Realtors, the number of home sales in the City of Austin and the three local counties [Travis, Williamson, Hays] declined from one year ago. Across the same year, median prices increased in all four places, and active listings also climbed.

Home Prices and The Current Economy

There are indications of a weakening economy and perhaps a recession, if we are not in it already. Yet the job market and consumer confidence remain strong. Inflation is a real concern, and the record high home prices have kept many buyers out of the market. There’s always that mantra: Buy low, sell high. In real estate, one needs a long-term strategy to realize that.

As long as homes for sale continue to rise, then inventory levels will remain plentiful and buyers will find more wiggle room with offers and negotiating power. While they say the best time to plant a tree is today, the best time to buy a house is when you are ready – with a sweet down payment, excellent credit rating, great career in place – or a super duper inheritance – and a sensible handle on what you can afford.

It’s easy to fall in love – with a house, a neighborhood, a tract of land on which to build, a view, or a sparkling new home with all the amenities you think you’ll ever crave. It’s much more challenging perhaps to put pen to paper, computer keys to a spread sheet or pencil on a paper napkin and look realistically at how the numbers work. Most likely, in our area, home prices will level out, dipping down in more of a correction than any significant drop. They are then more likely to rise next year than fall.

One of the best approaches is to engage with one of Habitat Hunters’ expert real estate professionals to guide you into the best place for your home investment, one you can comfortably enjoy for years — physically, emotionally and financially.