As The Economy Faces a Rocky Future, Pandemic Boomtowns Such as Austin Are Losing Value Fast

Staff Reports

During the COVID-19 pandemic, housing prices in the Austin area shot up at an alarming rate as big budgets moved in and bought up what was once firmly middle-class housing. However, with the pandemic in the rear-view mirror and the road ahead littered with potholes, the Austin real estate market is hitting the brakes — and hard.

According to new numbers from Redfin, the Austin real estate market’s year-over-year change in price per square foot has slid by 23 percentage points. The year-over-year change in price per square foot as of Feb. 2021 to the same month in 2022 was a whopping 24.2 percent. However, for the yearlong period between Oct. 2021 and 2022, the change was just 1.3 percent.

Austin’s precipitous fall in year-over-year prices per square foot beat out other pandemic boomtowns such as Phoenix; San Jose, California; Las Vegas; and Boise, Idaho.

Austin is just one location where home prices soared during the pandemic-era homebuying frenzy as remote workers flocked from expensive coastal cities to more-affordable Sun Belt destinations. Phoenix, Austin, and Las Vegas were all among the metros that gained the most new residents in 2021. Home prices have increased more than 30% over the last two years in Phoenix, Austin and Boise, with the typical home now selling for nearly $500,000 in all three. 

“The forces slowing the housing market, such as high mortgage rates, are having an outsized impact on places like Austin and Boise that saw home prices skyrocket over the last few years,” said Redfin Senior Economist Sheharyar Bokhari. “Home prices can only rise by double digits for so long before the growth becomes unsustainable. High rates and stumbling tech stocks are making it unsustainable quite quickly, especially in destinations popular with tech workers. Plus, many of the out-of-towners with big budgets who wanted to move into those places already have.”

Austin Redfin agent Maggie Ruiz said the pandemic homebuying boom drove home prices up so much that her area has become unaffordable for many locals, and she’s noticed migration into the area and investment purchases slowing significantly. 

“Even though affordability is a concern, in many ways we are in a buyer’s market,” Ruiz said. “Some first-time buyers finally have an opportunity to purchase a home without competing with out-of-towners and investors. Because prices and rates are high, a lot of buyers are offering below asking price, negotiating with sellers on a rate buydown, or considering new construction because many builders are offering significant incentives, including rate buydowns, to offload their inventory.”