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Starter homes in Austin have all but disappeared, warns new report

Austin is one of the most difficult cities to buy a home due to a lack of inventory.

Photo courtesy of GoodLife Realty

It’s becoming increasingly difficult to own property in Austin. Not only is there a lack of housing availability but there’s also a lack of affordable options — and it’s only getting worse. A recent report from Trulia helps to outline exactly how bad the shortage is for the Capital City.

The real estate site looked at the 100 largest U.S. metros to dig deeper into inventory and home buying trends over the past four years. It seems that there is a strong correlation between affordability and availability, two factors going against Austin.

This is being played out most visibly with starter homes (typically the first house an individual or family can afford to purchase) and their scarcity. While 95 cities out of the 100 have shown a decrease in availability, Austin has witnessed one of the largest decreases in the nation.

From January 2012 to March 2016, the amount of starter homes available in Austin decreased by 82.9 percent, the third worst decrease in the entire country. To give some perspective, in 2012, Austin had 1,927 starter homes on the market, but as of March 2016, there were only 329 starter homes available.

Our Texas neighbors in San Antonio and Houston are also among the worst cities for prospective homebuyers. San Antonio had the second highest decrease in starter homes, at 86.2 percent. Houston, at No. 8, experienced a 74 percent decrease. The city that saw the largest decrease in starter homes was Salt Lake City, with an 87.9 percent decrease and an inventory of only 151 starter homes in 2016.

According to Trulia, the supply of starter homes is being affected by the increase of investor-owned property in Austin. This not only drives up prices of starter homes but also trade-up and premium homes, making those properties scarce as well.

It doesn't appear that inventory will get better any time soon. With more than 150 people moving to Austin each day, there’s added pressure for real estate opportunities in the city. So if you’re in the market to buy a home, you’ll want to hire a great agent — and prepare to act quickly — as 329 available starter homes makes for some steep competition.

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Homebuyers can afford to be picky as Austin housing inventory rises

Photo by Avinash Kumar on Unsplash

Housing economist Clare Losey said the most significant factor affecting home sales in Austin is high mortgage rates.

The latest real estate report from Unlock MLS and the Austin Board of Realtors (ABoR) has revealed housing inventory is still on a steady rise in the Austin-Round Rock-San Marcos MSA, creating more choices for potential homebuyers as they navigate a high interest rate market.

Residential home sales dipped by a mere 1.5 percent year-over-year from October 2023, amounting to 2,248 closed sales in the Austin-Round Rock-San Marcos MSA. Median prices have also dropped to $430,000, or 3.2 percent less than this time last year. More than 3,300 new home listings were added on the market — a 7.4 percent increase from 2023 — bringing the total number of active home listings to 11,599.

According to Unlock MLS and ABoR housing economist Clare Losey, Ph.D., October's mortgage rates stood at 6.4 percent and are showing no signs of a significant drop in the near future. Even heading into 2025, Losey says potential homebuyers who are biding their time in the hopes of seeing rates plummet "may be in for a long wait."

"In the meantime, sellers must recognize that bringing buyers to the table requires a more aggressive pricing approach," Losey said. "Even in a more balanced market, buyers with limited purchasing power are struggling to meet current price expectations."

As for the overall health of the Central Texas housing market, 2024 Unlock MLS and ABoR president Kent Redding labeled recent news reports that called Austin "ground zero" for a downturn as an "extreme over-exaggeration."

"Austin led the state and nation in record-breaking home price growth and sales activity during the pandemic," Redding said. "For three years, near-zero housing inventory, numerous offers above list price and a rapid-paced market raised home prices and left little negotiating power for buyers. During this record-setting growth, ABoR and Unlock MLS consistently emphasized the unsustainability of the rapid growth, and now, our market is working to balance those extremes."

Central Texas housing trends in October 2024

In Travis County, 979 homes were sold last month — a slight 2.5 percent increase from last year. Median prices remained flat year-over-year at $510,000. Active home listings continued growing to 5,702 homes, which is 9.4 percent more year-over-year.

In Williamson County, 807 homes were sold in October, with median prices steadily dropping to $420,000. There were 1,028 new home listings on the market, showing a 4.5 percent increase from October 2023, bringing the total number of active home listings to 3,369.

Residential home sales dropped by nearly eight percent in Hays County in October, totaling 315 sales. Median prices also fell 5.5 percent year-over-year to $359,000. Active listings rose 6.6 percent year-over-year to 1,740 homes with the addition of 534 new listings on the market.

Meanwhile, 114 homes were sold in Bastrop County last month, which is 4.4 percent more than this time last year. Median prices dropped by a single percentage point year-over-year to $355,000. There were 654 active listings on the market in October, and 152 new home listings, representing a 1.3 percent slip in new inventory when compared to last year.

Only 33 homes were sold in Caldwell County in October to reflect a near 14 percent decline year-over-year from October 2023. Median prices fell to $262,990, which was a 13.5 percent decrease from last year. There were 136 active homes on the market last month, and 40 new homes added on the market.

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