DAYS ON MARKET
A DROP IN AFFORDABILITY As the interest rate on a home loan increases, so does a homeowner’s monthly mortgage payment. The following graphic details how much a homebuyer can a ord at various interest rates based on a capped monthly payment.
In terms of the amount of time a property takes to sell, homes typically spend more days on market to start the year, then sell more quickly in the spring before the market cools again.
2018
2022
ROUND ROCK
PFLUGERVILLE
HUTTO
• 30-year xed loan • $1,200 annual insurance payment • $2.5% annual tax rate FIXED VARIABLES
JAN.
MARCH
INTEREST RATE
MONTHLY PAYMENT OF $2,780
MAY
IN JANUARY, HOMES IN ROUND ROCK SPENT 58 DAYS ON MARKET IN 2018 COMPARED TO 26 IN 2022.
IN FEBRUARY, HOMES IN PFLUGERVILLE SPENT 71 DAYS ON MARKET IN 2018 COMPARED TO 25 IN 2022.
IN APRIL, HOMES IN HUTTO SPENT 72 DAYS ON MARKET IN 2018 COMPARED TO 18 IN 2022.
3%
$400,000 $388,800 $373,500 $359,100 $344,700 $332,100 $319,500
JULY
3.5%
4%
SEPT.
4.5%
NOV.
5%
5.5%
0 20 40 60 800 20 40 60 800 20 40 60 80 DAYS ON MARKET
6%
SOURCE: AUSTIN BOARD OF REALTORS COMMUNITY IMPACT
SOURCE: WWW.MAXLEAMAN.COM COMMUNITY IMPACT
New home prices have dropped recently through- out the industry, but that was not necessarily due to higher interest rates, he said. “Homebuilders in general have reduced prices, but they were able to do that, one, because the market was more competitive, and two, because some of the materials costs were coming down,” Tiemann said. Sherwood said buyer fatigue also played a role in the slowing market. As home prices and demand exploded starting in late 2021 and early 2022, the sheer volume of competition for a property made the market inaccessible for most buyers. With so many properties receiving dozens of o ers at tens of thousands of dollars over the asking price, most buyers became weary, she said. “At some point, people just have to throw their hands in the air and say, ‘I don’t want to play this
home prices started soaring in 2021 and pretty much gave up trying by the end of 2022. “I’m not saying that I can’t, as a new homebuyer, break into the market,” Vickers said. “I just don’t know how long it’s going to take to do that. I guess the rate that I’m seeing, the market is going down now, but it’s going to go right back up. That’s what it does.” Vickers said he still sometimes looks at home-sell- ing websites, but he and his wife have become so discouraged by Central Texas home prices they are planning to move out of Texas. Max Leaman, who runs an Austin-based home lending company called LoanPeople, said even with home prices dropping, higher interest rates for peo- ple who nance homes have actually raised monthly mortgage costs. For prospective homebuyers, like Vickers, who were struggling to break into the market when rates were hovering around 3%, a modest dip in prices now—when rates are closer to 6%—is not going to change the cost situation for the better, Leaman said. As one example, he said a home loan of $500,000 at 4.5% interest would have amounted to a $2,534 monthly payment on principal and interest. At a 6.1% interest rate, which is about where the base rate
stood in early January, a $400,000 home loan would be about the same monthly cost. However, in addition to helping to lower home prices, he said rising interest rates have other bene ts for buyers, including more negotiating power. Leaman also said even though higher rates have scared o a lot of buyers and cooled the market, now is actually an ideal time to buy a home while prices are dipping. Homeowners can always re nance as rates come back down. Because the base interest rate for home lenders is in many ways connected to the consumer price index, which measures the overall rate of in ation, Leaman said interest rates will start dropping along with in ation. He predicts that will continue to hap- pen over the next couple of years. “As rates come down, you will see buyers lose negotiating power, and prices will go up,” he said. “The reason being that [is] as rates continue to fall, there will be more demand.”
game anymore,’” Williams said. A long-term return to normal
Austin resident Micah Vickers said he and his wife developed buyer fatigue when trying to buy a home in the area, including in Round Rock during the height of the COVID-19 pandemic. He said he became more and more discouraged as
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PFLUGERVILLE HUTTO EDITION • FEBRUARY 2023
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