2023 HOME EDITION
TO BUY OR NOT TO BUY Local experts said there are advantages and disadvantages for homebuyers with regard to increased interest rates playing out in the market.
reaches completion through the construction phase, new homes are remaining on the market about 30 days longer than they did three months ago. substantial Coventry Homes, like many area builders, is providing customers with nancial incentives to encourage clos- ing on a home as opposed to o ering higher-end nishes or upgrades for the home, Werner said. “The main incentive is adding money towards closing costs or inter- est rate reduction,” he said. Homebuyers who previously would have chosen to move to Round Rock and P ugerville are choosing to pur- chase new builds in Hutto for a ord- ability as well as the incentives o ered by builders in the area. Rob Vance said he closed on his home in Hutto in August 2022, and he was able to do so because the in-house lending arm of his home- builder, D.R. Horton, was able to lock him in for a 4.75% interest rate. He said at that time other lenders were approaching 5.5%. “It was starting to get to the point where I was like, ‘I don’t know what to
do because if they keep climbing, we’re not going to be able to a ord the pay- ments,’” Vance said. Rising rates, less demand When the Federal Reserve began raising interest rates in March 2022, not only did home prices increase, but so did the cost of building a new home, said Clare Losey, a housing economist with the Austin Board of Realtors. Despite the area being desirable, Losey said builders are reacting to a slowing of demand due to high interest rates, high prices and an increase in the cost of lending. Mark Sprague, state director of infor- mational capital for Independence Title, said higher interest rates have slowed the purchase of homes slightly due to a large reduction in buying power, and this is not representative of a decrease in value. Sprague said the Austin-area real estate market remains in high demand, and it is unlikely the values of homes will meaningfully drop. There simply aren’t enough homes in the market for prices to decrease, he said. “We delayed new home starts the
ADVANTAGES
DISADVANTAGES
• As interest rates rise, the purchasing power of buyers decreases. • Reduced purchasing power can mean some buyers qualify for smaller homes. • Outside lenders may only be able to o er higher rates.
• Lower sale prices mean buyers can get a better deal. • Some builders may include upgrades to entice buyers. • Some builders are able to o er competitive interest rates. • Some builders are o ering nancial incentives to buyers.
SOURCES: CENTRAL METRO REALTY, COLDWELL BANKER, COVENTRY HOMES, INDEPENDENCE TITLE COMMUNITY IMPACT
most of any place in the nation,” Sprague said. “That’s because the builders were overbuilding. They released too much.” While Hutto saw a 65% decrease in the number of new single-family per- mits led from 2021 to 2022, Round Rock saw a 10% increase, and P uger- ville saw about a 50% reduction in the same time frame. So far in 2023, lower permit numbers are holding steady in all three cities. In addition to the limited number
of newly built homes available in the market, Sprague said consumers wait- ing to buy a new home, hoping interest rates will decrease, may also be con- tributing to the slowdown. Werner agreed with that assessment. “If rates dropped signi cantly, we would just be covered up with people trying to buy homes,” he said.
For more information, visit communityimpact.com .
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PFLUGERVILLE HUTTO EDITION • JULY 2023
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