Too hot to handle

Austin ranks No. 2 among most overvalued housing markets in the U.S.

Austin homes: maybe not worth every red-hot cent?

Photo by Ariel Skelley/Getty

We all know that the Austin housing market is hot. But a new study suggests it’s entirely too hot.

A data analysis by researchers at Florida Atlantic University and Florida International University shows Austin ranks second among the most overvalued metro home markets in the country. Based on past pricing, homes in the Austin area are selling for 50.72 percent more than they should, the study says.

In July, the median sale price of a home in the Austin area soared to $480,000, up 37 percent from the same time last year, according to the Austin Board of Realtors.

In what seems to be a contradiction to the Florida study, WalletHub recently ranked Austin the second most attractive housing market in the U.S. The WalletHub study looked at 18 metrics, including job growth and appreciation of median home prices.

For their study, professor Ken Johnson of Florida Atlantic and professor Eli Beracha of Florida International combed through data from real estate platform Zillow and other publicly available sources. Their analysis puts Boise, Idaho, atop the list of the most overvalued home markets among the country’s 100 largest metro areas. They concluded that homes in the Boise area are selling for 80.64 percent more than they should.

“In the top 10 markets, potential buyers might want to consider renting and reinvesting money that they otherwise would have put into homeownership. Renting and reinvesting has been shown to often outperform ownership in terms of wealth creation,” Johnson, a real estate economist and associate dean at Florida Atlantic’s College of Business, says in a news release.

The analysis covers single-family homes, town homes, condos, and co-ops.

No other major metro area in Texas appears alongside Austin among the 10 most overvalued home markets:

Dallas-Fort Worth lands at No. 19, with homes selling for 31.57 percent more than they should.
San Antonio lands at No. 48, with homes selling for 20.99 percent more than they should.
Houston lands at No. 57, with homes selling for 17.99 percent more than they should.

“The data allows readers to quickly see the premium or discount that they are paying in their metro, on average, and further allows them to make more informed decisions about their real estate investments,” the researchers explain.

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Homebuyers can afford to be picky as Austin housing inventory rises

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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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