On the long list of selling points for moving to Central Texas, these current 105+ degree temperatures are likely near the bottom! Yes, the Dog Days of Summer are upon us—‘tis the season for family vacations, summer camps and escaping this unbearable heat; World Cup is over (and what an exciting one it was!), and we are stuck with meaningless summer soccer friendlies and baseball while we anxiously count down the days to the start of football season. The real estate market in Austin always seems to take a deep breath during July after the frenetic “busy season” between March and the end of June. So, what does the rest of 2018 hold in store?
Last month, the Fed raised the policy rate a quarter point. The only real surprise with their actions came with the number of rate hikes they indicated to expect between now and the end of the year. Prior to last month's meeting, the expectation was ONE more rate hike before the end of the year; now the revised expectation is TWO more increases this year and THREE more next year.
In general, when the Fed makes interest rate increases, it's a sign that the economy is growing and healthy. Most of the national economic indicators are positive--low unemployment and inflation rates are within healthy limits. Average 30-year-fixed interest rates have risen to around 5.0%. Many economists say that the market is finally correcting itself after nearly a decade of historically low interest rates, but that doesn’t make the current rise in rates hurt any less for Homebuyers. What does that mean for the Real Estate market in Central Texas?
In Austin, simple supply and demand continues to drive the market—reference my article from January 2018 for previous (and current) thoughts on this. With 150 people a day still moving to Central Texas, there’s not enough supply (inventory) to keep up with demand, and it’s reflecting in home prices continuing to escalate. Personally, I noticed a pronounced price jump this year starting in March when our annual “busy season” starting heating up. Between local economic factors and rising interest rates, there are real concerns among local economists and bureaucrats about housing affordability in Austin and Central Texas. The rising interest rates don’t seem to offset the supply issues nor slow escalating prices, so there’s a “double whammy” effect happening in our market currently, which is great if you’re a seller…but it makes being a Buyer that much more stressful!
So, if you’re a Buyer that has been waiting to time the market and see if it dips or declines, now might be the time to get off the fence before prices and affordability issues worsen. If you’re an investor, and you believe the market will continue trending in the same direction it has over the past few years, it’s a good time to consider a rental property purchase. If you’re a renter that is considering a home purchase, you might consider the cost of breaking your lease versus higher future interest rates. And if you’re a Seller, you’re in a great position…but it’s worth your investment to hire an experienced professional to help you navigate pricing strategy for maximizing your return, potential multiple offer situations, negotiating leasebacks, and how to manage the transition and timing if you are also trying to buy.
As the rest of the year progresses, expect another hot selling period in the market once school starts back up in September and through early November as the Holidays approach. But the most important takeaway is that when we discuss “slow” periods in the Austin/Central Texas market, it’s all relative—even our “slow” periods are better than the hottest periods in many other real estate markets across the US!