Happy New Year Austin homeowners and home buyers. Here are my top 5 predictions for the Austin real estate market for 2022 but first let’s review the real estate statistics covering 2021 for the Austin, TX MLS area. It was another great year for real estate in the area.
The number of sales was down 5.7% to 3,756 sales but up 2.9% sales for the year with 44,871 sales overall.
The average months of inventory remained at less than 1 month. That means if no additional homes come on the market, it would take less than a month for all the homes currently for sale to be sold. A real estate market with 4-6 months of inventory is considered balanced between buyers and sellers so we are still in a strong seller’s market.
The average sold price for December, 2021 for the Austin MLS area was $592,108, up 23.6% over December of 2020. For the year the average price increased 28.8% to $558,111.
The median sold price increased 30.5% to $469,950. That shows a shift of the entire market up $109,950. The median price for all of 2021 was $445,701.
The median sold price per square foot was 246, up 34.3% from December, 2020 and up 37.4% for the entire year.
The median days on market finished up at only 9 days, the same as December, 2020. Overall, for the year the median days on market was only 6 days.
The months of inventory dropped again in December. That means the market is going to start the year super-hot again as we have not seen the increase in listings we were expecting at the end of 2021. We are already seeing lines outside homes and multiple offers for listings.
The growth on the top end of the market has been incredible. In 2020 there were 1,903 homes sold for $1 Million or more. In 2021 there were 3,537 homes sold for $1 Million or more.
*Statistics courtesy of the Austin Board of Realtors and Independent Title.
Top 5 Real Estate Predictions for 2022
Just for fun here are my top 5 real estate predictions for the Austin area. As always, if I had a crystal ball, I would be writing this while drinking a Mai Tai with my toes dipped in the sand of my own private Caribbean Island.
The Market Will Start Hot Followed By More Listing Activity
Back in October we were talking about if you want to see where the market is going watch the number of active listings. Through early winter the number of active listings has not increased.
I predict the first quarter of the year to look very similar to last year with the low availability of homes and high buyer demand especially from buyers wanting to get a home under contract before interest rates go up.
Most experts are saying they expect we will be seeing more listing activity as we move into the year and that activity will be front loaded earlier in the year. The question sellers have to ask is do you want to sell when you are the only game in town or wait until you have lots of competition? As we get into the year follow the most important market indicators we talked about in previous editions, particularly the number of active listings and the days on market.
Property Tax Assessments Will Push Sellers Into The Market
If you think your property tax assessment and property taxes were high last year you haven’t seen nothing yet. Remember, your home’s tax value for 2021 was based primarily on sales from 2020.
When the 2022 tax values come out I expect they will push many sellers who were on the fence into selling. We are already selling 2 homes for sellers who are moving due to property taxes and the values haven’t even come out yet.
The 2022 values will be especially painful to investors who don’t have the advantage of a homestead exemption cap limiting how much their taxable value can increase per year. In addition, Bloomberg recently estimated home maintenance costs increasing 9.3%. That figure seems low around here if you have been shopping for a water heater or to get anyone to paint your house.
Those added costs will make it harder for many to justify keeping a property as a rental. One of the huge differences people forget when we compare ourselves to California real estate is our property taxes are so much higher.
In addition, anyone who has converted a primary residence into a rental property really has to crunch the numbers after all this appreciation and decide if you want to keep the property long term or sell when you can still qualify for the “2 in 5 exclusion.”
Property Tax Assessments Will Push Sellers Into The Market
Experts are predicting interest rates will increase to around 3.7% by the end of the year. As I write this we have already seen rates jump .25% in the last 2 weeks.
Interest rates are very important to both buyers and sellers because buyers can pay more for your home and keep their payment low and they have more urgency to buy. For every 1% increase in interest rates buyers lose about 10% of buying power. Buyers tend to buy based on their payment. Without a doubt some of the rapid real estate appreciation we have seen is a direct result of the lower payments from historically low interest rates.
If rates rise gradually, we may see buyers take a brief pause, but then realize they still need to buy and might even get more motivated before rates go up even higher. Even if interest rates increase, we will still be at unbelievable rates from a historical standpoint. Keeping it in perspective, my first job in the real estate business was working for a mortgage company in San Antonio in 1995 when rates were 8%. Slightly higher rates are not going to cause a crash but it may reduce some of the buyer urgency and it’s that urgency that has been fueling buyers throwing an extra $25,000-$50,000 onto the price of a home. If you are selling you may not get that premium with higher rates.
The real danger is if rates go up too far too fast that will cause real problems with the entire economy that will trickle down to our real estate market.
My guess is we will see interest rates hit 4% before the end of the year. Looking forward I watched a presentation from Ted Jones who is the economist from Stewart Title and he said rates may reach 5% in 2024. If you are considering building that should motivate you to do that sooner than later since many builders are a year or more out from start to finish at this point.
The best advice I can give you if you’re considering buying, especially if you are buying your first home, is don’t allow yourself to get paralyzed by interest rates going up. It’s almost impossible to time any market and if your plan is to hold out until rates go back down you may be waiting forever.
25,000 Austin Board Of Realtors Members
The Austin Business Journal reported there are 19,000 members of the Austin Board of Realtors. Every week I get contacted by someone moving here who wants to work for our company. It seems like moving to the Austin area to get into the real estate business is the 2022 version of moving to Hollywood to become a movie star. I predict by the end of 2022 there will be close to 25,000 Realtors in Austin.
Here’s how that affects you as a consumer. The national statistic I saw in November was 60% of Realtors hadn’t sold a house all year. Combine that with also knowing the people who teach real estate don’t actually sell real estate and you have a recipe for disaster.
As a buyer or seller, you are at risk of taking advice from someone with no experience who was taught the real estate business by someone with no real-world experience. Now more than ever you want to come up with your criteria for how you will select the person to assist you with your real estate plans.
There’s a saying fake it until you make it. In 2022 you’ll need to protect yourself from hiring someone who is faking their experience. Austin area real estate prices have gone up so much these are huge amounts of money we are talking about. I remember that every time someone hires me that we are handling a large amount of their net worth when helping with a real estate transaction. There’s too much for you to lose by letting someone practice for the first time with your real estate transaction. In 2022 you’re going to want to be more careful about hiring an agent than just picking someone off Zillow or based on who responds in one of the Facebook groups about relocating to Austin.
Property Tax Assessments Will Push Sellers Into The Market
When I’m talking with friends, I often compare some aspects of real estate to dating. Much like I have to remind some single friends if they want to meet someone, they might actually have to do something to make it happen. Someone isn’t going to just magically appear at your door.
The same goes for real estate. If you goal for 2022 is to buy or sell real estate it’s going to take a plan and you’re going to have to take action.
The great news is you can do it. Everyone we helped in 2021 wound up in a better place by the end of the year. Especially our clients who decided to sell and buy a home. All of them sold for an incredible price and wound up finding another great home.
If your plans for 2022 include buying or selling real estate in the Austin area call or text us at 512-791-7473 and we can assist you to help make it happen this year.
As we start the new year, we will be returning to our in-person Free Home Selling Workshops. If you want to attend a workshop, get in touch with us and we will notify you when they are scheduled. As always you can check KopaWorkshop.com to see dates and times of our in-person and online Free Home Selling Workshops. For years home sellers have told me they benefited from attending our events. Sign up at KopaWorkshop.com.
The information on this page may have changed since we first published it. We give great real estate advice, but this page (and the rest of our site) is for informational use only and is no substitute for actual real estate, legal and financial advice. If you’d like to establish a Broker-client relationship, reach out to us and we’ll tell you how we can make it official. Sending us an email or reading this page alone doesn’t mean we represent you.
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